When it comes to investing, many investors continue to focus solely on growth.
Growth stocks, characterized by robust revenue and earnings growth, reinvest profits to fuel expansion. They may not offer dividends, but their potential for market outperformance is worth it over the long term. Indeed, over the past 15 years, this thesis has certainly proven true.
These economic advancements bode well for the stock market and the broader economy. These three growth stocks are positioning themselves for further innovation and product expansion.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) consistently leads in AI adoption. They invested in OpenAI’s ChatGPT and integrated it into Bing and Edge. Recently, they introduced Microsoft Copilot to enhance AI use across their products.
Microsoft boasts a P/E ratio of 32-times, which isn’t cheap. However, the company’s impressive results have driven this multiple, with Microsoft’s Q4 earnings coming in at $2.69 per share, exceeding estimates.
Also, MSFT achieved a 8.3% year-over-year (YOY) revenue increase to $56.2 billion. This definitely surpassed estimates by $710 million, with operating profits up 18% at $24.3 billion. Their intelligent cloud division, led by Azure, saw a strong 15% YOY revenue growth, contributing 40% to Microsoft’s total revenue.
Microsoft is making substantial AI investments, with its Azure segment experiencing robust growth. While its stock at $317 isn’t inexpensive, it promises long-term rewards. Additionally, it offers a 0.94% dividend yield. Compared to other tech giants, Microsoft stands out for stability and steady growth.
Zoom (ZM)
Zoom (NASDAQ:ZM), despite falling from its pandemic peak, remains a strong contender for digital classrooms.
As the dominant videoconferencing software with over 50% market share in 2022, it benefits from stickiness in this sector. Once a school or workplace adopts Zoom, switching to a different platform across their educational setup is challenging.
Despite slowed growth, Zoom’s Q2 revenue rose by 3%. Analysts project a gradual uptick to 11.7% in 2027 and double-digit earnings per share growth by 2028. Trading at 15.6-times forward earnings, Zoom’s diversification and strong financials offer a compelling opportunity to patient investors.
The company’s Asia expansion efforts are gaining momentum, possibly yielding results next year. Also, the travel boom might slow, driving tech-savvy users to connect on Zoom.
Restaurant Brands (QSR)
Restaurant Brands (NYSE:QSR), the force behind huge fast food chains and franchises such as Popeye’s, Burger King, and Tim Hortons, has delivered impressive growth and a 3.3% dividend yield.
Led by Patrick Doyle, formerly of Domino’s, the company is achieving notable results. That includes a 9.7% revenue rise in May, 10% global comparable sales growth in Q1, and a 15.6% jump in adjusted EBITDA to $588 million.
Restaurant Brands posted sturdy Q2 results with a 10% sales increase YOY, surpassing EPS and revenue estimates. Burger King’s same-store sales surged by 10.2%, outperforming expectations of 5.3% growth. Over the past year, QSR stock has gained 14%.
I think the company’s defensive positioning and future growth prospects make this a stock worth holding during periods of economic uncertainty, such as the one we’re in now.
On the date of publication, Chris MacDonald has a LONG position in QSR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
