There are ton of high-growth stocks out there. Everyone talks about the FANGs all the time. There are also all the hyper-growth Chinese internet stocks, the class of digital retailers which are riding e-commerce tailwinds to super-charged growth rates, all those big-growth cloud companies and a ton more.
In sum, there are a bunch of high-growth stocks in the stock market. But not all of them are stocks you should buy. And not all of them are stocks you should buy here and now.
After all, when it comes to the stock market, timing is everything.
With that in mind, here’s a list of four high-growth stocks which could be big winners in July.
High-Growth Stocks To Buy In July: Alibaba Holdings Ltd (BABA)
China e-commerce giant Alibaba (NYSE:BABA) has morphed into the face of the booming China tech revolution. As a result of essentially becoming the Amazon.com (NASDAQ:AMZN) of China with a super-charged digital retail business and rapidly growing cloud business, Alibaba stock has gone from $60 to $200 over the past two-plus years.
But the stock has been stung recently by a plethora of headwinds, none of which have staying power or will materially affect the company’s still robust long-term growth narrative.
First up, there are the currency headwinds. There was a recent devaluation of China’s currency, and that creates foreign exchange risks for Alibaba. But as MKM Partners points out, such currency risks always created weakness in shares in the near-term, and never materialized into anything meaningful. As such, present currency headwinds should be viewed as a buying opportunity.
Second, there are also concerns about Alibaba’s profitability. Alibaba has long been a staple for both big revenue growth and healthy margin expansion. But the latter part of that narrative — the margin expansion part — has been lacking recently as big investments into New Retail and cloud have diluted the margin profile of the business.
This isn’t anything to freak out about. Alibaba is investing big for the future. Eventually, big investment businesses will turn into big growth, big margin businesses, and the overall profitability profile of Alibaba will improve dramatically.
Overall, then, the risks presently facing Alibaba stock are over-stated. With the stock now trading at under 30-times forward earnings against the backdrop of 60%-plus revenue growth, it looks like July could be a big bounce-back month for Alibaba stock.
High-Growth Stocks To Buy In July: iRobot Corporation (IRBT)
For all intents and purposes, iRobot Corporation (NASDAQ:IRBT) is the face of the global consumer robotics revolution.
iRobot is most famous for its robotic vacuum cleaner, but it also makes other household robots, such as a robotic pool cleaner and robotic mop. It is also rumored that the company is going to extend its product portfolio to soon include other robots, such as a robotic lawnmower.
From this perspective, iRobot is much more than just the company behind robotic vacuum cleaners. They are a company leading a household consumer robotics revolution which has a wide array of applications.
IRBT stock, though, doesn’t always act like this is the case. Over the past two quarters, IRBT stock has dropped like a rock because management has provided weak profit guides. But those weak profit guides are a direct result of the company investing into new products, which grow the company’s addressable market and add firepower to the long-term growth narrative.
Overall, then, such margin concerns are unnecessarily short sighted. It seems the market is starting to realize this, and IRBT has been bouncing back lately.
Second quarter earnings are due at the end of the month. Those number should be quite good as Google Trends for iRobot have remained quite favorable. Those strong numbers should affirm the recent bounce in IRBT stock, and send this stock back to all-time highs.
High-Growth Stocks To Buy In July: Shopify Inc (SHOP)
Much like Alibaba and iRobot, Shopify Inc (NYSE:SHOP) is a secular growth stock which has hit a rough patch recently.
At its core, Shopify is a company which provides omni-commerce solutions for retailers of all sizes. Namely, this involves providing uniform sales capability across multiple digital retail channels (social media, website, mobile, etc) to both digital retail entrepreneurs and huge enterprises. This business model falls in the overlap of two mega-trends (e-commerce and decentralization), and as such, Shopify’s growth has been huge and the stock has been a big winner.
But Shopify stock has dropped off its highs recently due to legislation. In a landmark decision, the Supreme Court recently ruled that states have the constitutional power to require collection of sales taxes from digital retailers. Many market watchers view this is a big negative for all of e-commerce, since it means higher prices will now get passed onto consumers. That could slow down the e-commerce revolution, and investors are selling Shopify stock as a result.
But that won’t happen. E-commerce’s benefits are multi-faceted, and stretch far beyond low prices. Namely, e-commerce offers a wide array of convenience benefits which are ultimately unaffected by the Supreme Court’s ruling.
Meanwhile, Shopify also thrives due to its exposure to the decentralization megatrend. That megatrend is hardly affected by recent legislation.
Overall, then, the robust Shopify growth narrative which includes powering the e-commerce and decentralization mega-trends remains largely in tact. Consequently, Shopify stock could have a huge bounce-back in July as negative sentiment from the Supreme Court ruling normalizes.
High-Growth Stocks To Buy In July: Adobe Systems Incorporated (ADBE)
Cloud giant Adobe Systems Incorporated (NASDAQ:ADBE) has long been one of my favorite stocks in the market.
This is a 20%-plus revenue growth, 20%-plus earnings growth company with a ton of visibility due to secular growth tailwinds in cloud adoption and mitigated competition in the professional creative solutions space. That lack of competition also gives Adobe a big runway for price hikes, which creates a powerful long-term margin expansion narrative.
That being said, Adobe stock got slightly ahead of itself from a valuation perspective in mid-June when it was trading above $250. That is why the stock dropped after the Q2 earnings report, despite strong numbers. The valuation was just too big, and needed to normalize lower.
Adobe stock dropped. Then it hit its 50-day moving average, which has served as a strong support for this stock for the past several years. Adobe stock bounced off that 50-day moving average, and is now back to rally mode.
This rally will persist because nothing is wrong with the growth narrative at Adobe. The stock just dropped due to valuation. It came back down, tested a key technical level, and is now rallying again. Thus, July could be a big month for this cloud giant.
As of this writing, Luke Lango was long BABA, AMZN, IRBT, SHOP, and ADBE.
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