With global economic growth expected to slow in the coming quarters, identifying high-quality shares with durable competitive advantages becomes even more crucial. These three growth stocks are well-positioned to dominate their respective niches, offering a compelling blend of innovation and financial strength. They have the potential to “bloom” in the coming months and deliver robust returns.
Intuitive Surgical (ISRG)
Our first growth stock, Intuitive Surgical (NASDAQ:ISRG), is the global market leader in the robotic surgery equipment space. The company’s flagship da Vinci product line remains the go-to choice for leading hospitals worldwide, facilitating a wide range of surgical procedures.
Intuitive Surgical’s fourth quarter 2023 financial results surpassed analyst expectations. Revenue increased 17% year-over-year (YOY) to $1.93 billion, with a significant portion (83%) coming from recurring sources. Net income jumped 86% YOY, reaching $606 million, or $1.69 per diluted share.
Contributing to this financial strength is a 21% growth in robotic “da Vinci” procedures over the past year. General surgery emerged as a particularly strong performer, demonstrating the versatility and growing adoption of robotic-assisted surgery. The company generates recurring revenue from every surgical procedure on its installed robotic systems, providing a stable and predictable income stream.
Meanwhile, the company announced an FDA filing for Da Vinci 5, the new version of its robotic surgical system. This next-generation robotic surgical system boasts 10,000 times more processing power than its predecessor for data collection and analytics.
ISRG stock has surged 19% YTD. Note that shares come with a premium valuation at 64 times adjusted forward earnings and 20 times trailing sales. Nonetheless, the 12-month median price forecast for the MedTech company stands at $423.50, offering the potential for a return of 8%.
SentinelOne (S)
The second of the growth stocks is SentinelOne (NYSE:S), which offers enterprises cybersecurity protection software and services. Its platform uses AI to prevent, detect and respond to cyber threats on devices, including malware, ransomware and phishing attacks.
On March 13, the company announced strong fourth quarter results, exceeding revenue and earnings estimates. Revenue grew 38% YOY to $174 million, translating into an adjusted loss of $.02 per share. The company’s momentum is evident in its 39% annualized recurring revenue growth and a stellar 115% net retention rate, indicating strong customer loyalty and expansion.
Meanwhile, CFO Dave Bernhardt emphasized the company’s progress toward profitability, highlighting 10 consecutive quarters of improving operating margins. In other words, SentinelOne could potentially reach profitability by year-end.
Setting itself apart from many peers, SentinelOne integrates generative AI into its endpoint protection platform. This proactive approach offers high detection accuracy against cyber threats. With the global AI-enabled cybersecurity market expected to grow at a 24.3% compound annual growth rate through 2030, SentinelOne is well-positioned to capitalize on this lucrative opportunity.
Yet, unlike many growth stocks within the tech sector, SentinelOne stock has declined 17% YTD. Shares are currently trading at 11.2 times sales. Finally, S stock presents a 25% upside potential, based on average analysts’ price target of $29
Western Digital (WDC)
The final name on our list of growth stocks is Western Digital (NASDAQ:WDC). The company develops flash and hard disc drive (HDD) technologies for data storage in most electronic devices. In October, the chipmaker announced plans to divide its HDD and flash memory businesses into two separate public companies. This spin-off will unlock significant value in the established hard drive segment.
Western Digital’s second quarter 2024 results outpaced revenue and earnings per share (EPS) projections, pointing to a significant recovery in the coming quarters. Revenue increased 10% quarter-over-quarter to $3.03 billion, driven by robust performance of the Cloud segment. The YOY loss narrowed significantly, from $1.40 per share to $0.87 per share, indicating improved operational efficiency.
Management sees multi-year growth ahead, fueled by Generative AI’s data-intensive nature. This “second wave” of AI adoption will drive a refresh cycle in client and consumer devices, boosting demand significantly. Western Digital is well-positioned to benefit from this trend as a leading provider of data storage solutions.
WDC stock has gained over 15% YTD and trades at an attractive 1.7 times trailing sales. Moreover, the 12-month median price forecast for WDC shares stands at $70, suggesting a 17% upside potential.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.