These growth stocks have generated impressive sales numbers.
Investors have rotated out of growth stocks in 2022 due to inflation concerns, Federal Reserve interest rate hikes and the potential for a U.S. recession. The higher interest rates rise, the less future cash flows are worth for growth stocks based on discounted cash flow valuation models. Growth stock investors are now taking a closer look at valuations rather than simply paying any price for the fastest-growing companies. For investors looking for growth stocks at reasonable valuations, here are eight stocks recommended by Morningstar analysts that have had at least 25% revenue growth over the past three years.
Amazon.com Inc. (ticker: AMZN)
Amazon has been one of the best-performing growth stocks in the world for more than two decades. While Amazon’s revenue growth has slowed from 37.6% in 2020 to just 14.7% in the third quarter, analyst Dan Romanoff says Amazon remains well positioned to continue to generate revenue growth in the long term. Romanoff says Amazon Web Services and Amazon’s advertising business are its two most critical growth segments for investors. The two segments grew revenue by 27% and 25% in the third quarter, respectively. Morningstar has a “buy” rating and $150 fair value estimate for AMZN stock, which closed at $98.49 on Nov. 14.
Nvidia Corp. (NVDA)
Nvidia produces high-powered graphics and mobile processors for personal computers, workstations, phones and other wireless devices. Nvidia’s revenue growth has slowed from 52.7% in 2021 to just 3% in the second quarter, but analyst Abhinav Davuluri says Nvidia still has a long-term growth runway, particularly in its data center segment and its “explosive” artificial intelligence business. Davuluri projects at least 40% sales growth for Nvidia’s data center segment in 2022, but he says recent U.S. government restrictions on data center sales to China create near-term uncertainty. Morningstar has a “buy” rating and $200 fair value estimate for NVDA stock, which closed at $162.95 on Nov. 14.
Meta Platforms Inc. (META)
The metaverse, an integrated online environment in which people live, work and play, is one of the biggest and most exciting potential long-term growth sources in the tech world today. Unfortunately, Facebook and Instagram parent company Meta Platforms recently reported that its Reality Labs metaverse unit lost $9.4 billion in the first three quarters of 2022. Meta’s shares are down 66% this year as of Nov. 14, the worst performance of any stock on this list. Despite those headwinds, analyst Ali Mogharabi says Meta’s revenue growth will accelerate starting in late 2023. Morningstar has a “buy” rating and $260 fair value estimate for META stock, which closed at $114.22 on Nov. 14.
Salesforce Inc. (CRM)
Salesforce is the world’s largest customer relationship management software services provider. Despite a growth slowdown at many tech companies, Salesforce posted impressive 21.7% revenue growth in its most recent quarterly earnings statement. The company recently reiterated its guidance for $31 billion in revenue for fiscal 2023 and $50 billion in revenue for fiscal 2026, and Romanoff says Salesforce remains one of his top stock picks. Romanoff says Salesforce will have a $290 billion total addressable market in 2026 compared with $248 billion in 2021. Morningstar has a “buy” rating and $240 fair value estimate for CRM stock, which closed at $158.66 on Nov. 14.
Advanced Micro Devices Inc. (AMD)
Advanced Micro Devices produces microprocessors and graphics cards used in computers, data centers and related products. In the second quarter, AMD generated 70% year-over-year revenue growth, but that growth slowed to 29% in the third quarter. Davuluri says AMD’s slowdown has been driven by softness in the PC market, but the company will continue to gain data center market share from Intel Corp. (INTC). AMD shares trade at just 20.1 times forward earnings, an attractive valuation for a stock producing nearly 30% sales growth. Morningstar has a “buy” rating and $115 fair value estimate for AMD stock, which closed at $73.53 on Nov. 14.
ServiceNow Inc. (NOW)
ServiceNow provides cloud applications used to manage and automate workplace processes and workflows. The company reported 30.5% revenue growth in 2021 and posted 21.1% growth in the third quarter of this year. Romanoff says ServiceNow has a long runway for organic growth, given its strength in workflow automation and its potential to further monetize existing customers as part of its land-and-expand strategy. He says ServiceNow’s growth has been particularly rapid and organic, making it a top stock pick in the software space. Morningstar has a “buy” rating and $640 fair value estimate for NOW stock, which closed at $400.40 on Nov. 14.
Moderna Inc. (MRNA)
Moderna is a biotechnology company that specializes in the nascent field of messenger RNA therapeutics. Almost all of Moderna’s exceptional revenue growth in the past two years has come from its COVID-19 vaccine. The vaccine drove a whopping 2,200% revenue growth for Moderna in 2021. Unfortunately, Moderna’s revenue dropped 32% year over year in the third quarter of 2022, as fewer people are getting vaccine boosters. Looking ahead, analyst Karen Andersen says she is bullish on Moderna’s broad respiratory vaccine pipeline and anticipates several product launches starting in 2024. Morningstar has a “buy” rating and $232 fair value estimate for MRNA stock, which closed at $179.03 on Nov. 14.
Fiserv Inc. (FISV)
Fiserv provides financial technology and services for banks, merchants and capital market firms. The company’s growth has slowed from 45.7% in 2020 to 8.5% in the third quarter, but analyst Brett Horn says the company’s 11% organic revenue growth remains impressive. Horn says Fiserv’s acquiring business is its primary growth driver, generating 14% organic revenue growth in the third quarter. Horn is particularly bullish on Clover, which reported 19% revenue growth in the quarter. Fiserv shares have also significantly outperformed the S&P 500 this year. Morningstar has a “buy” rating and $129 fair value estimate for FISV stock, which closed at $100.01 on Nov. 14.
8 growth stocks to buy at attractive prices:
— Amazon.com Inc. (AMZN)
— Nvidia Corp. (NVDA)
— Meta Platforms Inc. (META)
— Salesforce Inc. (CRM)
— Advanced Micro Devices Inc. (AMD)
— ServiceNow Inc. (NOW)
— Moderna Inc. (MRNA)
— Fiserv Inc. (FISV)
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8 Growth Stocks to Buy at Attractive Prices originally appeared on usnews.com
Update 11/15/22: This story was published at an earlier date and has been updated with new information.
