Investing in growth stocks has helped many investors create significant wealth in the stock market. Understandably, identifying the right companies to buy at the right time is easier said than done. Nevertheless, businesses that can grow faster than average for extended periods are often rewarded by the market, delivering lucrative returns to their shareholders in the process. Therefore today, I’ll discuss seven growth stocks to buy now to boost your portfolio.
Growth companies often boast innovative products or services that might gain market share in existing markets, set foot in new areas, or even create entirely new industries. To find top growth stocks, investors need to identify durable long-term secular trends as well as the companies best positioned to capitalize from them. In addition, the list needs to focus on those businesses with substantial competitive advantages as well as large addressable markets.
The coronavirus pandemic accelerated many trends, including e-commerce, online advertising, digital payments and cloud computing. The key to success for growth investing remains buying top companies as early as possible. The earlier a business is in its growth cycle, the longer it can continue growing rapidly. Fortunately, the most potent trends usually last for many years and even decades, providing investors plenty of time to claim their share of the profits.
With that information, here is a list of seven growth stocks to buy now, before the end of the summer, to energize your portfolio:
- Align Technology (NASDAQ:ALGN)
- Crocs (NASDAQ:CROX)
- Electronic Arts (NASDAQ:EA)
- Illumina (NASDAQ:ILMN)
- Match (NASDAQ:MTCH)
- Shopify (NYSE:SHOP)
- Upstart (NASDAQ:UPST)
Growth Stocks: Align Technology (ALGN)
52 week range: $289.52 – $714.15
Tempe, Arizona-based Align Technology is well-known for its Invisalign system, an alternative to traditional braces to cure a wide range of malocclusions that occur when teeth are misaligned. Additionally, the company offers intraoral scanners and digital services to support the customization of these liners.
Align Technology announced second-quarter results in late July. Total revenue increased 13% sequentially and 187% year-over-year (YOY) to a record $1 billion. Non-GAAP net income came at $242 million, or $3.04 per diluted share, compared to a net loss of $28 million in the prior-year quarter. Cash and equivalents ended the quarter at $1.09 billion.
On the results, CEO Joe Hogan cited, “I’m pleased to report our first $1 billion revenue quarter with record volumes reflecting continued momentum from both Clear Aligners and Systems and Services. … For Q2’21, Invisalign Clear Aligner volumes for teens were up 9.5% sequentially and 156.3% year-over-year to 181.0 thousand teens, representing one-third of total cases shipped, with strong growth from North America and EMEA orthodontists.”
As people eventually feel comfortable enough to go to orthodontist offices once again, Align Technology is poised to gain further momentum with its nine million patients. The inflow of deferred healthcare business could easily boost the company’s next few quarters of earnings. Align’s strong margins should drive profitability and generate significant cash.
Management recently authorized a stock repurchase program worth up to $1 billion. ALGN stock skyrocketed almost 140% over the past 12 months. It currently hovers at $705, up 32% year-to-date (YTD). The company estimates top-line growth for 2021 to reach 60%.
Forward price-to-earning (P/E) and current price-to-sales (P/S) ratios are 72x and 16x, respectively. With such upside potential, ALGN stock is expected to surge even higher. However, there could be some short-term profit-taking in the cards. Interested readers would find better value between $650 and $660.
52 week range: $36.84 – $147.31
Total revenue increased 93% YOY to a record $641 million. Operating income more than tripled, thanks to strong demand across key markets. As a result, adjusted net income grew 110% YOY to $144 million, or $2.23 per diluted share, compared to $69 million, or $1.01 per diluted share, a year ago. Cash and equivalents ended the quarter at $203 million.
CEO Andrew Rees remarked, “We continue to see strong consumer demand for the Crocs brand globally. On the back of record second quarter results and continued momentum, we are raising our full year 2021 guidance.” Analysts expect the company to report 108% earnings growth for the full year.
Crocs has a solid fan base, especially among young consumers. It posted an impressive 62% gross margin thanks to increasing prices and shifting demand toward its premium products.
Sales in its Americas segment went up by 136%. Yet, Asia, particularly China, is viewed as the most significant long-term growth opportunity, as revenue in the region currently makes up less than 20% of total sales.
CROX shares currently trade in $145 territory, up more than 130% so far in 2021. The shares trade for 26 times forward earnings and 5 times current sales. Potential investors could consider investing around $125, or even below.
Growth Stocks: Electronic Arts (EA)
52 week range: $110.15 – $150.30
Electronic Arts is one of the world’s leading video game publishers on consoles, PC, and mobile. The company owns a number of large franchises, including Madden, FIFA, Battlefield and Need for Speed.
Management issued Q1 2022 results in early August. Revenue increased 6% YOY to $1.55 billion. Net income was $204 million, or 71 cents per diluted share, compared to net income of $365 million, or $1.25 per diluted share, in the prior-year quarter. Cash and equivalents ended the quarter at $2.84 billion.
On the metrics, CEO Andrew Wilson remarked, “We’ve had a very strong start to the fiscal year with our incredible teams delivering experiences that continue to bring hundreds of millions of players together. Our new launches, leading games, and live services all had an outstanding quarter.”
Momentum is building on several fronts, including growth in EA Sports titles and prospects for big sales from the upcoming release schedule. In addition, the company recently acquired Glu Mobile for $2.1 billion to fuel its struggling mobile games division. The acquisition could bring in over 500 mobile developers and $500 million in trailing-12-month bookings.
EA stock is trading at $140 territory, roughly flat so far this year. Forward P/E ratio of 22.6 and P/S ratio of 7.1 are cheaper than those of Take-Two Interactive (NASDAQ:TTWO) and Activision Blizzard (NASDAQ:ATVI). Any further decline in EA shares would make them an attractive buy for long-term portfolios.
52 week range: $260.42 – $555.77
San Diego, California-based Illumina provides sequencing- and array-based solutions for genetic analysis as well as viral and cancer tumor screening tools. Its devices and services are used in analyzing genetic material with life sciences and clinical lab applications.
Illumina announced strong Q2 results in early August and CEO Francis deSouza remarked, “Illumina’s record second quarter revenue exceeded expectations across all regions.”
Revenue increased 78% YOY to $1.13 billion. Adjusted net income skyrocketed to $276 million, or $1.87 per diluted share, up 200% YOY. Free cash flow stood at $209 million. Cash and equivalents ended the quarter at $4.2 billion.
With a dominant market share, Illumina is poised to keep growing in this unique space. Analysts expect the DNA sequencing market to grow rapidly in the coming years. The company is also putting resources to its global expansion strategy.
Illumina recently surprised investors with the announcement of its Grail acquisition for $8 billion. Grail is a leading candidate to develop noninvasive early detection liquid biopsies for cancer patients. Yet, the acquisition announcement has put pressure on ILMN shares.
The stock hovers around $475, up almost 29% YTD. Forward P/E ratio and P/S ratios stand at 84.7x and 17.8x, respectively. The recent sell-off in ILMN stock offers a valuable buying opportunity for long-term investors.
Growth Stocks: Match (MTCH)
52 week range: $100.25 – $174.68
Dallas, Texas-based Match is a leading online dating company. Its portfolio includes Tinder, Match.com, OkCupid, PlentyOfFish, and Meetic.
Match released strong Q2 results in early August, even while facing significant headwinds from the pandemic. Total revenue grew 27% over the prior-year quarter to $708 million. Net earnings came in at $141 million, or 46 cents per diluted share, up from $75 million, or 36 cents per diluted share, in the prior-year period. Cash and equivalents ended the quarter at $236 million.
CEO Sharmistha Dubey said, “… every one of our major brands grew revenue in Q2, collectively delivering 27% year-over-year growth. And we have solid momentum as we enter the second half of the year.”
Match is gradually convincing more users of its dating apps to pay for extra services. Payers across its platforms grew 15% to 15 million during the second quarter. Analysts expect Tinder’s business to grow fast once the pandemic ends. Its emerging relationship-focused app, Hinge, is lately contributing to significant bottom-line growth.
MTCH stock hovers around $140, down 7.6% so far this year. Shares trade at 54 times forward earnings and 14.7 times current sales. Down almost 16% in the past month, the recent sell-off offers long-term investors the chance to buy a high-quality business at a discount.
52 week range: $839.40 – $1,650.00
Canada-based Shopify provides an e-commerce platform, primarily for small and midsize businesses. Its software helps merchants manage sales across physical and digital locations. It also offers merchant services, such as payment processing, discounted shipping and managed fulfillment.
Shopify released Q2 results in late July. Total revenue in the second quarter came at $1.12 billion, up 57% YOY. Adjusted net income was $284.6 million, or $2.24 per diluted share, compared to adjusted net income of $129.4 million, or $1.05 per diluted share, in the prior-year period. The group ended the quarter with $7.8 billion in cash and marketable securities.
On the metrics, CFO Amy Shapero cited, “Shopify fired on all cylinders in our second quarter, keeping our merchants well equipped to seize the opportunities presented in a post-pandemic retail era.”
CEO Tobi Lutke also commented, “In this new reality, our goal at Shopify is clearer than ever: we want to give entrepreneurs around the world the best chance to create their own certainty, to reach for independence and to seize opportunity that they uniquely see.’’
Shopify has solidified its position as a leading player in the e-commerce space. It has partnered with Walmart (NYSE:WMT), Pinterest (NYSE:PINS) and TikTok, opening new sales channels on its platform.
Moreover, it upgraded its point-of-sale software to simplify omnichannel commerce, enabling sellers to offer in-store and curbside pickup. It launched Shop App that helps consumers discover new brands, make purchases, and track orders from one location. It is now entering the payment processing space with Shop Pay.
While SHOP shares should maintain their momentum, growth is poised to slow down at some point. The stock, which hovers at $1,554, has surged 37% so far this year. It currently trades at more than 230 times forward earnings and 48 times current sales. The stock does not look cheap, leaving little margin of safety for new investors. A potential decline toward $1,400 or even more would improve the odds for long-term portfolios.
Growth Stocks: Upstart (UPST)
52 week range: $22.61 – $220.11
The final of our growth stocks today, Upstart provides credit services using its proprietary, cloud-based, artificial intelligence (AI) lending platform. The group partners with banks to offer personal loans using non-traditional variables, such as education and employment, to predict creditworthiness.
Management released Q2 2021 results in mid-August. Revenue increased by 1,018% YOY to $194 million. Adjusted net income came at $58.5 million, or 62 cents adjusted income per diluted share, compared to an adjusted net loss of $3.7 million, or 25 cents loss per diluted share, in the prior-year period. Cash and equivalents ended the quarter at $618 million.
CEO Dave Girouard remarked, “Our second quarter results continue to show why Upstart has the potential to be among the world’s largest and most impactful FinTechs.”
Upstart is rapidly gaining momentum as a potential disruptor in the banking industry. Analysts credits the platform’s potential for connecting borrowers and AI-enabled bank partners. The company recently partnered with NXTsoft to bring its platform more efficiently to any U.S.-based financial institution.
In 2021, Upstart’s valuation skyrocketed thanks to an impressive performance, and the stock hit an all-time high in recent days. UPST shares currently are hovering at $218, up 435% so far this year. But they look overvalued, trading at 35 times current sales. Potential investors would find better value around $180.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.