- Although growth stocks have faced significant setbacks, these seven robust shares should rebound in the coming months.
- Alphabet (GOOGL) (GOOG): Investors are looking forward to the stock split on July 15.
- Applied Materials (AMAT): Given its robust balance sheet and revenue generations, AMAT stock has the potential for a strong comeback.
- Chipotle Mexican Grill (CMG): A new investment venture could provide long-term revenue growth and technological innovation
- First Trust Nasdaq Semiconductor ETF (FTXL): The fund invests in leading semiconductor companies that will continue play a prominent role in technological developments.
- Invesco S&P 500 GARP ETF (SPGP): This ETF invests in equities that have been identified as high growth with attractive valuation levels.
- Lululemon (LULU): The apparel retailer’s newly outlined 5-year growth plan intends to double revenue by 2026.
- Salesforce (CRM): Recently announced software development platform could provide a new source of revenue from a rapidly growing industry.
Growth stocks faced significant challenges in the second quarter of 2022. Investors have hit the ‘sell’ button as profits could face serious headwinds while the Federal Reserve increases rates.
Effects of interest rate hikes on the markets are further compounded by ever-rising inflation and signs of a looming recession. As a result, the S&P 500 Growth Index has fallen more than 28% since the beginning of the year. Moreover, the Vanguard S&P 500 Growth ETF (NYSEARCA:VOOG) has dropped 27.8% over the same period.
It is also possible to compare the S&P 500 Growth Index and S&P 500 Index indices over various time spans. Then, we note that volatility of returns in growth shares is higher as growth stocks typically have betas (β) of well over 1.
Most of our readers would know that beta shows stock’s volatility relative to the broader market, such as the S&P 500 Index whose beta is accepted as 1. For instance if a stock’s beta is 1.30, it is assumed to be 30% more volatile the S&P 500.
Although current declines in share prices are significant in percentage terms, these headwinds are likely transitory. History shows us that bear markets come to an end and robust shares end up making new highs. When a new bull leg begins, growth stocks could potentially outperform the overall market.
With that information, here are the seven best growth stocks to buy in June:
Growth stocks: Alphabet (GOOGL, GOOG)
52-week range: $2,109.76 – $2,174.98
The tech giant announced first-quarter results on April 26. Revenue was $68.01 billion, up 23% year-over-year (YOY) growth. Diluted earnings per share (EPS) was $24.62. Free cash flow (FCF) for the period resulted in $15.32 billion.
Management expressed its intention to keep investing in growth opportunities worldwide. The board also approved to re-purchase $70 billion of stock.
Now, many investors look forward to the upcoming 20-for-1 stock split that should take place on July 15. If today’s price holds, GOOGL should at the time trade around $100.
Like many of its peers, GOOGL stock has been caught in the tech swoon and is down by 25% year-to-date (YTD). It recently hit a 52-week low.
The stock is trading at 19.3 times forward earnings and 5.45 times sales. For now, the 12 month price forecast stands at $3,200. However, after July 15, the price will change to reflect the stock split.
Applied Materials (AMAT)
52-week range: $101.33 – $167.06
Applied Materials (NASDAQ:AMAT) is known for its tools used in chip manufacturing. Like many other semiconductor names, it has been benefiting from recent technological developments and digitalization efforts worldwide.
AMAT released Q2 results on May 19. Revenue was $6.25 billion, up 12% YOY. Adjusted EPS was $1.85, up 13%. Cash from operations stood at $2.66 billion of cash, while $2.02 billion was returned to shareholders through stock repurchase and dividends.
Management highlighted that Applied Materials has been able to deliver results despite significant supply chain challenges. In addition, the manufacturer is likely to benefit from increased spending in wafer fab equipment.
However, AMAT shares have lost over a third of their value this year and just hit a 52-week low. Meanwhile, the current price supports a dividend yield of 0.92%.
This stock is changing hands at 13.12 time forward earnings and 4.02 times sales. Finally, the 12 month price forecast for AMAT is $140.
Growth stocks: Chipotle Mexican Grill (CMG)
52-week range: $1,230.91 – $1,958.55
Our next stock pick for today is the restaurant chain Chipotle Mexican Grill (NYSE:CMG). The popular Tex-Mex chain has around 3,000 restaurants stateside.
In late April, Chipotle reported Q1 metrics. Revenue increased 16% YOY to $2 billion. Adjusted diluted EPS came in at $5.70, up from $5.36 in the previous year. Cash and equivalents stood at $646.7 million.
Management recently announced the formation of Cultivate Next, a venture fund for investing in companies that strategically align with Chipotle’s mission. Investments in innovations can possibly lead to reduced costs and improved efficiency in Chipotle’s own restaurants.
CMG stock has lost almost 23% YTD and is flirting with 52-week lows. Shares are trading at 39.53 times forward earnings and 4.7 times sales. The 12-month median price forecast is at $1900.
First Trust Nasdaq Semiconductor ETF (FTXL)
52-week range: $56.80 – $83.10
Expense ratio: 0.60% per year
Our next discussion centers around an exchange-traded fund (ETF), namely the First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL), which provides exposure to U.S. chip stocks. The fund started trading in September 2016.
FTXL tracks the Nasdaq US Smart Semiconductor Index and currently has 30 holdings. With regards to sub-sectors, we see Semiconductors (78.78%) and Production Technology Equipment (21.22%).
Meanwhile, the top 10 stocks in the portfolio account for close to 55% of $94 million in net assets. Broadcom (NASDAQ:AVGO), Intel (NASDAQ:INTC); Texas Instruments (NASDAQ:TXN), Micron Technology (NASDAQ:MU) are among the most prominent holdings.
FTXL is down roughly 30% this year, trading near 52-week lows. Trailing price-to-earnings (P/E) and price-to-book (P/B) ratios are 18.01x and 4.04x, respectively.
Despite the recent declines in prices of chip shares, the outlook for the global semiconductor industry remains healthy. Therefore, many of the names in a fund like FTXL should start to recover in the near future.
Growth stocks: Invesco S&P 500 GARP ETF (SPGP)
52-week range: $80.44 – $97.90
Expense ratio: 0.36% per year
Our second fund, the Invesco S&P 500 GARP ETF (NYSE:SPGP), invests in securities that the fund managers have determined to be high growth names with attractive valuation levels. The fund, which started trading in June 2011, is rebalanced and reconstituted semi-annually.
SPGP currently has 77 holdings. Health care shares lead at 31.15%. Then come information technology (18.96%) and financials (19%).
The top 10 stocks in the portfolio account for almost a fifth of net assets of $829.9 million. Among them are the biotech name Vertex Pharmaceuticals (NASDAQ:VRTX); insurance providers Cigna (NYSE:CI) and Progressive (NYSE:PGR); and automated cybersecurity solutions company Fortinet (NASDAQ:FTNT).
SPGP has declined more than 12% YTD. As a result, the fund is trading at 15.84 times trailing earnings and 3.71 times book value. If you are looking for above-average growth businesses that are reasonably priced, SPGP deserves to be on your radar screen.
52-week range: $251.51 – $485.83
Lululemon (NASDAQ:LULU), our next growth stock, is a Canadian athletic apparel and fitness equipment group known for high-end yoga pants. Its reach has expanded to over 570 stores across 17 countries.
In late March, Lululemon announced Q4 FY21 earnings. Revenue was $2.1 billion, representing a 23% increase YOY. Adjusted diluted EPS increased from $2.58 in Q4 FY20 to $3.37.
Recently, management has provided details on a new 5-year growth plan, which calls for doubling annual revenue to $12.5 billion by 2026. The focus will be on growing the men’s apparel segment to increase current revenue and also quadrupling international revenue within five years.
LULU stock has dropped 28% YTD to trade at 52-week lows. Forward P/E and P/S numbers are 29 and 5.68, respectively. The 12-month median price forecast stands at $435.
Growth stocks: Salesforce (CRM)
52-week range: $154.55 – $311.75
Salesforce (NYSE:CRM), a member of the Dow Jones Industrial Average (DJIA), is the leading provider of customer relationship management (CRM) software. More than 150,000 companies around the world rely on the Salesforce platform.
In early March, the CRM company reported Q4 FY21 financials. Revenue increased 26% YOY to $7.3 billion. Diluted EPS was 84 cents. Cash and equivalents totaled $5.5 billion.
Salesforce recently announced the release of the Anypoint Code Builder, an integrated development environment (IDE). This new IDE, released by Salesforce subsidiary MuleSoft, is a platform designed to improve efficiency and lower development times for new software.
CRM stock has declined 36% YTD and has hit 52-week lows. Shares are trading at 33.67 times forward earnings and 5.78 times sales. At present, the 12-month median price forecast is at $354.
On the date of publication, Tezcan Gecgil is both long and short MU stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.