3 Growth Stocks That Have Strong Competitive Advantages

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  • Growth stocks to buy are again gaining attention now that the Federal Reserve is taking a more dovish stance this year.
  • Shopify (SHOP): The Canadian e-commerce giant holds several distinct advantages that set it apart in its industry.
  • Autodesk (ADSK): Autodesk, a global leader in computer-aided design software, serves various industries and has high switching costs due to its product complexity.
  • Global Payments (GPN): Global Payments offers payment technology and services to merchants, issuers, and consumers as a multinational fintech firm.
growth stocks to buy - 3 Growth Stocks That Have Strong Competitive Advantages

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Growth stocks to buy are again gaining interest following the Federal Reserve’s recent increase of the target federal funds rate by 0.25 percentage points.

While the central bank didn’t explicitly state that it anticipated further rate hikes, its year-end federal funds rate projections held steady at 5.1%.

After the release, Jerome Powell, the Chairman of the Federal Reserve, held a press conference. At the conference, he affirmed that the U.S. economy is experiencing disinflation. He also expressed assurance in the robustness of the banking industry.

Unsurprisingly, the current market conditions have caused people to focus on buying growth stocks. People are now investing in such stocks to gain higher returns now that the Federal Reserve is less hawkish.

This list focuses on businesses with a competitive edge over their rivals. By prioritizing companies with a long track record of competitive advantages, this list is tailored to identify stocks with the potential for sustained growth.

However, each stock on this list comes with its risk profile. So, it would be best if you judged which company is better for you and your portfolio.

Keeping this in mind, here are three prominent growth stock to buy worth considering for your portfolio:

Growth Stocks to Buy: Shopify (SHOP)

Shopify on the phone display.
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Shopify (NYSE:SHOP) has established a reputation as a modern-day Amazon (NASDAQ:AMZN) by equipping small businesses with the necessary resources to rival technology behemoths. Only a handful of other companies have been able to match Shopify’s level of execution.

Shopify’s expansion into various areas like FinTech, fulfillment, and partnerships with large companies demonstrates its commitment to horizontal growth. By diversifying its offerings and venturing into new sectors, Shopify is positioning itself for continued growth and success in the future.

In particular, operating in the e-commerce space gives Shopify a unique advantage as it grows.

According to Statista, the eCommerce market is set to continue growing. Revenue is projected to reach $4.11 trillion in 2023, with an annual growth rate of 11.51%. This will result in a market volume of $6.35 trillion by 2027. Users are expected to increase to 5.29 billion by 2027, with user penetration at 57.2% in 2023 and 66.6% in 2027. China is the leading revenue generator in the eCommerce market. Statista is projecting the country’s projected market volume of $1.487 trillion in 2023.

The optimistic figures suggest that the eCommerce market is on the brink of significant expansion in the coming years, and Shopify is positioned to reap substantial rewards from this growth.

Additionally, Shopify holds a specific advantage compared to Amazon, which is the big fish in the industry. Amazon is a giant online retailer with an extensive range of products. However, Shopify is a platform that helps small and medium-sized businesses establish and run their online stores.

In summary, Shopify is one of the best growth stocks to buy due to its competitive advantages.

Autodesk (ADSK)

Is Autodesk Stock Still A Buy At New Highs? 3 Pros, 3 Cons
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Autodesk (NASDAQ:ADSK) is the global industry standard for computer-aided design software. Autodesk’s products find application in many industries, ranging from architecture and engineering to construction and product design and manufacturing. Due to their complexity, they have high switching costs.

Autodesk’s fiscal year 2023, which ended in January of this year, was impressive overall. The company experienced revenue growth in all geographies, including an 18% increase in the United States.

Autodesk’s primary segments, namely architecture/construction, manufacturing, media, and AutoCAD, exhibited growth in sales. Additionally, the company demonstrated strong profitability, generating $2 billion in free cash flow for the full year.

Why are shares dropping, then? It’s because of the company’s lower-than-expected free cash flow guidance for the fiscal year 2024. Despite anticipating a year-over-year revenue increase of 7% to 9%, the management forecasts a decline in free cash flow generation to $1.2 billion. While this may be concerning at first glance and has caused the stock to fall, it is not a significant issue for long-term shareholders.

Autodesk recently moved from multi-year contracts, which collected cash up front, to an annual billing cycle. This change is now being implemented, resulting in a temporary decrease in the company’s cash collections for 2024. However, the company is still signing new deals with customers at an impressive pace.

If you are looking for growth stocks to buy, it makes sense to want a company that is not too red hot right now. Investors need to look at the dip in price as a potential buying opportunity. That is what made Warren Buffett an investing guru. Keeping that in mind, Autodesk presents a great opportunity right now.

Global Payments (GPN)

Global Payments office building in Brantford, Ontario, Canada. GPN stock.
Source: JHVEPhoto / Shutterstock

Merchant acquirers stand to benefit from the sustained expansion of credit card companies. These acquirers offer merchants credit card terminals, software, and related services. One such player in this space is Global Payments (NYSE:GPN), which enables its clients to accept various payment types, including cards, electronic payments, checks, and digital wallets.

Global Payments has been a formidable growth engine, registering a compounded annual revenue growth rate of 16% over the last ten years. The company’s impressive growth trajectory persisted in 2022, evidenced by its annual revenue of $8.976 billion, which marked a 5.3% upswing from the previous year (2021).

Furthermore, Global Payments Network reported an increase of 14% in adjusted earnings per share, or 17% in constant currency, rising from $8.16 in 2021 to $9.32.

Despite the obstacles, Global Payments achieved considerable growth in 2022 and anticipates similar double-digit growth in 2023.

Global Payments, a payments processor with a longstanding history, is adjusting to the current landscape of digital solutions. According to management, the company plans to take an assertive approach to mergers and acquisitions in the coming months, searching for undervalued digital payments firms.

In essence, Global Payments is a top-performing company experiencing growth in tandem with the expansion of credit firms over the past few years. With the stock down more than 26% over the last 12 months, the time is ripe to take advantage. Although a stable pick among growth stocks to buy, Global Payments possesses the attributes to pay back investors handsomely.

On the publication date, Faizan Farooque did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.


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