The Nasdaq lists thousands of publicly traded companies. Investors have plenty of choices, but some of the picks in the famed market are better than others. Selecting the right Nasdaq stocks to buy now can help investors outperform broad market indices and reach their financial goals sooner.
Investors should look for revenue growth, profit margins and competitive moats. Those three factors can help a corporation outperform the stock market and reward its shareholders. Taking a long-term perspective with stocks is also important, so you are less likely to make investing decisions based on your emotions. These are some of the top Nasdaq stocks to consider.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) has established itself as the premiere online marketplace and cloud computing leader. The stock has also outperformed the stock market with a 24% year-to-date gain and an 82% gain over the past year.
Wall Street analysts are optimistic that the rally can continue. The stock is rated as a “Strong Buy” among 41 analysts with a projected 13% upside. The highest price target of $230/share implies the stock can rally by an additional 24% from current levels.
Investors have plenty of reasons to feel encouraged about the stock. Amazon recently reported 14% year-over-year net sales growth in Q4 2023. The company generated $170.0 billion in the quarter due to strong domestic and international sales. Amazon can generate additional revenue and higher profit margins through advertising, video streaming and artificial intelligence.
Amazon looks poised to reward long-term investors who hold onto their shares for several years instead of a few months.
Duolingo (DUOL)
Duolingo (NASDAQ:DUOL) is an educational technology company that is gobbling up market share and generating profits. The company recently flipped the switch from steady net losses to positive net income. Duolingo reported a 45% year-over-year increase in revenue along with $12.1 million in net income. Those figures are from Q4 2023 results and reflect a significant change with net income. The app lost $13.9 million in the prior year quarter.
More people are downloading the Duolingo app to learn new languages and develop their skills in other subjects like math and music. The company reported 88.4 million monthly active users, which is a 46% year-over-year improvement. The stock has received a “Moderate Buy” rating from Wall Street analysts with a projected 17% upside.
Valuation is the stock’s only weakness. Profit margins are rising significantly, which can make this weak point less meaningful in the future. However, investors have to accept that the stock currently trades at a 130-forward P/E ratio. Investors have to pay a premium for the best companies. Duolingo certainly has great potential to deliver meaningful returns for long-term investors. People who are nervous about the valuation may want to stay on the sidelines for now and enter at a more optimal price point.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is the world’s most valuable company and will likely retain that crown for several years. The company has a dominant market position in key industries like cloud computing, business software, cybersecurity, artificial intelligence and gaming. The tech conglomerate reported 18% year-over-year revenue growth and 33% year-over-year net income growth in Q2 FY24.
Microsoft Cloud is the main growth driver and reported 24% year-over-year revenue growth. This segment contributed $33.7 billion of Microsoft’s $62.0 billion in revenue for the quarter.
The stock has consistently outperformed the stock market and is a large component of many funds. Shares are up by 14% year-to-date and have gained 46% over the past year. The stock’s 5-year gain of 242% is even more impressive. Microsoft trades at a 38 P/E ratio and offers a 0.71% dividend yield. The stock is currently rated as a “Strong Buy” among 35 analysts and has a projected 12% upside.
On this date of publication, Marc Guberti held a long position in AMZN and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
