This year is already shaping up to be a stock picker’s market. Not all securities are rising right now, forcing investors to choose wisely and pick stocks that are literally rising above the fray. But some great growth stocks are currently depressed and represent a terrific buying opportunity.
Investors would be smart to add these stocks to their portfolios before they rise sharply in the coming months. After all, these are companies and stocks that can’t stay down forever — the long-term case is simply too strong to ignore.
With that in mind, here are seven of the best growth stocks that are ready for the next leg up:
- Salesforce (NYSE:CRM)
- Alibaba (NYSE:BABA)
- Restoration Hardware (NYSE:RH)
- Goldman Sachs (NYSE:GS)
- McDonald’s (NYSE:MCD)
- Nvidia (NASDAQ:NVDA)
- Costco (NASDAQ:COST)
Let’s take a closer look at what makes each of these opportunities stand out from the rest of the names on the market.
Growth Stocks to Consider: Salesforce (CRM)
Salesforce is still a great company and a leader in cloud computing. The San Francisco, California-based company reached a milestone in 2020 when its stock was added to the Dow Jones Industrial Average and immediately became the third-largest holding in the index.
However, despite its pedigree and success, CRM stock has slumped since peaking on Sept. 1 of last year. Since then, Salesforce’s share price has slid 20% and has been struggling to gain traction. Still, it likely won’t be long before the stock rebounds and moves higher.
The reason CRM stock has fallen in recent months is the company’s pending $28 billion acquisition of Slack Technologies (NYSE:WORK). It’s the biggest acquisition ever for Salesforce, and while some analysts and media pundits have described the deal as “brilliant,” investors have had a negative reaction, sending the stock price 8% lower on the day it was announced.
But, regardless of the naysayers, once the deal is finalized, the Slack acquisition will give Salesforce access to real-time business communication and allow it to compete more aggressively against the likes of Microsoft (NASDAQ:MSFT) with its “MS Teams” platform and further diversify its revenue stream.
Alibaba (BABA)
At its current price, BABA stock is truly on sale. Deeply discounted, in fact. The Chinese technology and e-commerce behemoth has seen its share price drop ever since it was hit with the triple whammy of renewed U.S. threats to ban stocks of Chinese companies, the cancelled initial public offering (IPO) of affiliate company Ant Group by the Chinese government and the subsequent disappearance from public view of Chief Executive Officer Jack Ma.
All that drama has occurred since October, and it sent BABA stock down 30% from its all-time high of $319.32 a share.
The good news is that two of those issues that were impacting the stock have been resolved in recent weeks. The U.S. government, for now, has backed off its threats to ban Chinese stocks and Jack Ma has resurfaced in China. Those resolutions have helped BABA stock recover a bit in recent weeks, and it may now be on its next leg up.
The stock has inched up to $254.40 a share and has room to run. While it remains to be seen if the Ant Group IPO will proceed, recent media reports suggest all may not be lost on that front either.
Restoration Hardware (RH)
Restoration Hardware is a stock that investors should buy on weakness. The high-end retailer has been killing it, even amid the novel coronavirus pandemic, and it has some big backers behind it.
One of the more prominent Restoration Hardware shareholders is none other than Warren Buffett, who owns 1.7 million shares of the company’s stock. Analysts remain extremely bullish on RH stock. The median price target is currently $520 a share, with a high target of $650. Yet Restoration Hardware’s share price is currently sitting right around $480 per share, and is up only 8% over the past month.
RH stock has struggled since the company reported third-quarter earnings in December that handily beat analyst expectations. The conventional thinking is that investors are worried Restoration Hardware could be negatively impacted once the pandemic ends. The high-end home furnishings retailer has boomed over the past year as wealthy patrons decorated their homes while sheltering-in-place. How much better can things get? Some investors may also view the stock as overvalued after the share price doubled since last March. Profit taking may also be a factor. Whatever the reasons, investors should definitely buy the dip.
Goldman Sachs (GS)
Investment bank Goldman Sachs is a money machine. And GS stock had enjoyed a stellar breakout from late October through mid-January, when banking stocks galloped higher. In that period, Goldman Sachs stock rose a sensational 64% to a peak of $309.41 a share. Some analysts expected the stock to run further, but it has pulled back to $272 a share in recent weeks. And it appears to have formed a base at its current level, avoiding dropping under the $270 mark.
A consolidation and run back up could come in the next few weeks.
Analysts see the current dip as both temporary and a great buying opportunity for investors. Several people have pointed out the stock market volatility seen in recent weeks is typically the time when Goldman Sachs performs its best, deploying its traders and deal makers to take full advantage of depressed stock prices and market confusion. Indeed, the investment bank took full advantage of the Covid-19 pandemic over the past year, posting record profitability the last two quarters thanks to its trading arm and investment banking services.
This is a can’t lose company and stock.
McDonald’s (MCD)
McDonald’s is a cyclical stock in the truest sense of the term. MCD stock does well when the economy is booming and tends to slump when economic conditions deteriorate. This can largely account for the fact that McDonald’s share price has been flat lined for several months now, down 10% since last October and stuck around $207 a share. Sure, the company has managed to keep its drive thru windows going during the pandemic, but its sales have still suffered from a lack of in-store dining and decreased customer traffic.
The situation should improve markedly in the second half of 2021 as Covid-19 vaccinations become more widespread and the economy reopens in earnest. Plus, McDonald’s is a truly global company with robust operations throughout the world. The company and MCD stock should be propelled to new heights as economies ranging from Germany to China overcome Covid-19.
Analysts currently have a median price target on the stock of $241 a share, with a high estimate of $273. Better days are ahead for the golden arches.
Nvidia (NVDA)
Nvidia is still king of the microchip makers. But investors may not realize that given how NVDA stock has performed in recent months. After hitting a peak of $589.07 in early November, the company’s share price has deflated nearly 15% to $504.58. It has since bumped higher, but barely.
Nvidia stock is currently trading just under $520 a share. The slump has been due to growing speculation that Nvidia’s $40 billion acquisition of microprocessor company Arm is likely to be shot down by antitrust regulators around the world.
Once the Arm acquisition is resolved, either for or against Nvidia, NVDA stock should rally. It’s the uncertainty surrounding the Arm deal that is keeping the stock down currently. The Arm deal aside, Nvidia is still the largest microchip company in the world and demand for its chips continues to rise as devices ranging from 5G-enabled smartphones to new video game consoles come to market. There’s still plenty of upside to Nvidia’s future and its stock price.
The median price target on the stock is $600 and the high price is $700.
Costco (COST)
Costco’s stock price hasn’t been the same since the company issued a special dividend of $10 a share in December. Since then, COST stock has slid 10% to $352.43 a share. This fall came despite the company posting excellent financial results throughout the pandemic as consumers bought bulk groceries in droves. While the special, one-time dividend payment was initially cheered by analysts and investors, it seems to have taken the wind out of Costco’s sales. Could it be that investors have taken the money and run on Costco?
The main reason for Costco’s deteriorating stock price has been news that company’s sales growth slowed at the end of 2020 and heading into 2021. Sales continue to grow, albeit at a slower pace. That news has some investors heading for the exits, believing that Costco’s pandemic run has now peaked and COST stock is likely to under perform in the year ahead.
But not so fast. Costco still has a lot going for it. The company has consistently strong financial results and a stable dividend. Costco remains a quality stock in good times and bad, which makes it one of easiest growth stocks to recommend today.
On the date of publication, Joel Baglole held long positions in CRM, BABA, GS, NVDA and MCD.
