As we enter the final months of 2023, the stock market continues to face headwinds. Inflation remains stubbornly high, the Federal Reserve is still on its rate-hiking path, and recession fears linger. But there are always opportunities for savvy investors, even in turbulent times. And right now, some of the best opportunities can be found in beaten-down growth stocks.
Don’t get me wrong, the party is not over for many former high-flyers. Speculative stocks, especially in areas like AI, have yet to see huge declines. But this rally is concentrated among a handful of companies. Most growth stocks are still languishing at depressed prices.
Nonetheless, growth as an investing style is far from dead. There are still innovative companies out there poised for massive expansions. The problem is that many of these stocks have been tossed aside in the current environment, in which investors obsessed with profitability and shunning unprofitable growth, lest you say AI a dozen times in your earnings calls.
As a forward-looking investor, I think now is the perfect time to start building positions in select growth stocks trading at very reasonable valuations. Once the mood shifts back towards growth, as it always does, these stocks could deliver enormous upside. The key is finding companies with solid fundamentals and real paths to profitability, not just pie-in-the-sky stories. Snatch up some growth gems while Wall Street isn’t looking, and you could be handsomely rewarded down the road.
SmartSheet (SMAR)
At first glance, SmartSheet’s (NYSE:SMAR) forward price-to-earnings ratio of nearly 100-times might make value investors scoff. However, taking a closer look, one will see that this valuation is supported by impressive growth that prudent investors would be unwise to ignore.
This company is projected to grow its earnings per share at a a blistering 59% rate the next fiscal year, 82% the following year, and an astounding 98% by January 2027. Meanwhile, revenue growth is still cruising above a 20% compounded annual rate through fiscal 2027, despite marginally slowing down. Make no mistake, SmartSheet hasn’t missed an opportunity to beat on expectations for either sales or earnings yet.
In fact, it just posted a 19-cent profit, handily beating estimates by 11 cents. This wasn’t a one-off event either. Last quarter, it delivered a 7-cent surprise profit versus a 1-cent loss expected by the Street. Even on the top line, SmartSheet has consistently exceeded projections by 2-3%.
With this track record, I believe SmartSheet’s valuation will continue climbing higher from here. The consistent beats show analysts are still behind the curve in forecasting this company’s incredible earnings trajectory.
Once Wall Street realizes how much profit momentum is left in the tank, shares could easily double over the next 12-18 months. Therefore, I recommend prudent investors buy SmartSheet today before that re-rating.
Luminar Technologies (LAZR)
Luminar Technologies (NASDAQ:LAZR) has been on my radar for a while now. I’m convinced LiDAR technology has vast untapped growth left as costs rapidly decline. Most folks underestimate LiDAR’s game-changing benefits today because of its expensive price tag. However, prices are falling so fast that the technology’s benefits will soon decisively outweigh costs, creating a potential jackpot for early investors in this pioneering company.
Yes, you still pay a premium for Luminar’s offerings, but growth projections make the company’s lofty valuation seem reasonable. Fiscal 2023 sales growth is expected to hit 107%, with 2024 growth accelerating to 209%.
Meanwhile, analysts predict Luminar will reach profitability by Q4 2025. This company is leading a technological revolution that could penetrate virtually every new car by the 2030s. Therefore, LAZR stock presents a golden opportunity for investors to get in early before it really takes off.
Shares can provide triple-digit returns within a few years if Luminar successfully executes. I recommend investors buy now while Wall Street is distracted by misleading near-term headwinds. This is a chance to secure outsized returns over the long-run.
Data Storage Corp. (DTST)
Data storage and related industries have seen renewed investor enthusiasm lately. However, smaller player Data Storage Corp. (NASDAQ:DTST) has flown under the radar and offers huge upside potential due to these same tailwinds.
Remarkably, DTST stock still trades below 1-times sales despite outstanding recent results like 22.3% revenue growth last quarter. Analysts also expect robust profitability, with earnings per share potentially exceeding 20 cents next fiscal year.
Data storage demand is booming thanks to remote work, 5G, Internet of Things, artificial intelligence, and more. Data Storage Corp. provides cloud solutions, disaster recovery, and other services to capitalize on this trend. Its sticky recurring revenue business model leads to impressive growth and cash flow generation. Thus, shares could easily double over the next 12 months as Data Storage Corp.’s growth story gets discovered. I recommend buying DTST stock today before it’s too late.
On the date of publication, Omor Ibne Ehsan did not have (either 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.
