In the current market environment, the stars are aligning for growth stocks to buy. The macro outlook is positive and the Federal Reserve is dovish.
On the macro front, the data continues to be impressive. Economic growth is robust, coming in at 3.2% in the fourth quarter of 2023 and unemployment is low. Particularly encouraging is that leading economic indicators have bottomed and no longer suggest recession.
Another catalyst for growth stocks is the Fed’s dovish stance. We just heard from the Federal Open Market Committee, which highlighted the strength of the U.S. economy. What’s more, their Summary of Economic Projections indicated three rate cuts this year.
Considering this backdrop, these growth stocks to buy can outperform. According to their financials, these companies grew sales by over 10% quarter-over-quarter in their latest report. And they will grow EPS by 20% annually over the next five years.
Booking Holdings (BKNG)
After a 10% decline from all-time highs, Booking Holdings (NASDAQ:BKNG) is one of my favorite growth stocks to buy. The leading online travel agency dominates its industry through Priceline, Booking.com, Rentalcars.com, Agoda, KAYAK and OpenTable. These properties position it to benefit from a resurgence in international tourism.
Indeed, since revenge spending became a thing after lockdowns ended, Booking has reported impressive results. It achieved revenue growth of 61%, 55% and 25% in 2021, 2022 and 2023, respectively. 2023 was a year of records for gross bookings and revenues, with the company hitting the 1 billion room nights booked milestone.
Due to its impressive margins, revenue growth has flowed directly to the bottom line. The company recorded adjusted EBITDA margins of 31% in 2022 and 33.3% in 2023. As a result, the company has had a lot of cash to spare. Management put it to good use, repurchasing shares worth $9.8 billion last year, shrinking the share count by 9.2%.
There is still more fuel in the tank for this stock to run. CEO Glenn Fogel believes travel will grow faster than GDP across Booking’s core markets. This secular tailwind, plus its connected trip vision, integrating AI technology and increasing alternative accommodations, will fuel growth.
MercadoLibre (MELI)
MercadoLibre (NASDAQ:MELI) is a faster-growing play on the growth of e-commerce. It’s worth noting that e-commerce adoption in its key markets—Brazil, Argentina and Mexico — is lower than in developed markets. Thus, as adoption rates accelerate, the stock will thrive.
From an investment standpoint, MercadoLibre is one of the top growth stocks to buy. A one-time charge led to an earnings miss in the latest quarter. As a result, the stock declined over 10% from the Feb. 22 close of $1,817. It is an opportune time to take advantage of this market short-termism.
Fundamentals are still in excellent shape, given MercadoLibre’s dominance in Latin America. According to Wall Street estimates, the e-commerce giant will grow sales by over 20% in 2024 and 2025. And the consensus EPS estimate for fiscal year 2025 is $44.93. Thus, as of this writing, MELI stock trades at 35 times 2025 earnings.
In my view, MercadoLibre will exceed expectations going forward. The company’s Q4 2023 results highlighted its potential. It gained market share in most of its operating countries and accelerated growth in its largest market, Brazil.
Last, the company has other growth drivers. Its fintech business grew 34% year-over-year in Q4 2023. Another new business — advertising — continued momentum, growing above 70% year-over-year for the seventh consecutive quarter. MercadoLibre is a growth engine that should be in your portfolio.
ServiceNow (NOW)
In today’s market, no one can escape the incessant artificial intelligence (AI) buzz. Unfortunately, the fear of missing out on this transformative moment is fueling the market, leaving few bargains. However, corrections like the one ServiceNow (NYSE:NOW) has experienced provide an opportunity to invest in the trend.
This IT giant has the most ambitious roadmap in generative AI software. The firm has developed domain-specific large language models (LLMs) for customers. In September 2023, it announced the Vancouver release to deliver comprehensive automation on the Now Platform.
ServiceNow has been a strategic partner to Nvidia (NASDAQ:NVDA) since last year. Both companies are working to deliver various generative AI use cases across various industries. ServiceNow is also accelerating enterprise productivity and innovation for customers.
Recently, it released Washington DC, which features intelligent automation through Now Assist and Workflow Studio. It also improves the modern digital workplace and enhances performance and scalability.
Due to these innovative products driving productivity, growth has accelerated for four straight quarters. Analysts think the company is a leader in AI and have 31 “buy” ratings on the stock. Last, the average price target of $852 presents 10% upside, making NOW stock one of the best growth stocks to buy.
On the date of publication, Charles Munyi did not hold (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.
