Most of the narrative among equity investors right now centers on growth stocks. Questions about whether interest rates will decline, how robust spending will be, and the AI boom apply to a wide range of higher-growth companies in specific industries. This dynamic hasn’t really changed over the past decade or so, but it’s also a trend that appears to be accelerating.
In June, we received plenty of data to suggest that job growth (at least in the U.S.) remains strong, and macro data is pointing to a “good news is bad news” type of setup for interest rate cuts. While the market is pricing in one to two cuts this year, it’s clear that higher for longer is indeed here to stay.
If that’s the case, investors may want to focus on companies with the most robust growth prospects that can be sustained in any environment. These are three growth stocks that fit the bill.
Shopify (SHOP)
Shopify’s (NYSW:SHOP) stock price has certainly fluctuated greatly over the past year, with the stock taking a recent hit after the company announced earnings. Despite robust growth and stable financials, many seem to view Shopify as more cyclical (which makes sense). With interest rate cuts pushed out, this is an e-commerce play many aren’t viewing as favorable right now.
Revenue continues to grow, as does the company’s user count. With notable technological improvements, including the introduction of new AI features, Shopify’s growth trajectory could improve in the coming quarters. The company’s consistent growth in recent years can be tied to strong trends in the global e-commerce space, which is forecasted to grow at an 11.2% pace annually from 2023 to 2027.
For those who believe in the long-term secular growth catalysts underpinning this sector, Shopify remains a top pick to consider because of its double-digit growth rate and ability to see valuation multiple expansion if macro conditions improve.
Nvidia (NVDA)
Some of the most notable news around semiconductor giant Nvidia (NASDAQ:NVDA) is that it just surpassed Apple (NASDAQ:AAPL) in market capitalization, surging above the $3 trillion mark. Its share price surged to more than $1,200 per share (pre-split) driven by expectations of continued growth driven by AI investments from the company’s growing list of clients. Nvidia now trails only Microsoft (NASDAQ:MSFT) in terms of valuation and could theoretically eclipse the software giant’s valuation if this kind of stock price appreciation continues.
Of course, trees don’t grow to the sky, but Nvidia’s recent revenue and earnings growth has been off the charts. The company has provided investors with triple-digit growth on both the top- and bottom-lines, and the demand underpinning this growth appears very robust.
The company’s H100 AI processor, introduced in 2022, costs between $25,000 and $40,000 and remains in high demand. The successor, Blackwell B200, cost $10 billion to develop and is expected to be four times as powerful, priced at $30,000 to $40,000. Despite high share prices and skepticism around its valuation, Nvidia consistently outperforms expectations. The AI catalysts we’re seeing are very real for companies like Nvidia, and this is a stock investors looking to play a growth-driven rally during this cycle should be in.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is a prominent trillion-dollar mega-cap company with quite the turnaround over the past couple of years. Last year’s focus on efficiency has translated into strong fundamentals, and investors continue to see this growth continue into Q1 of 2024. Meta posted a net income that doubled year-over-year and revenue growth of 27%. Those numbers alone speak to the efficiency story the company is chasing.
The company is now increasingly focusing on monetizing messaging apps by introducing free AI chatbots on WhatsApp. Meta CEO Mark Zuckerberg continues to evolve his strategy around monetization with its suite of apps, integrating AI into the company’s portfolio in a way that makes sense. Over time, I expect these moves to generate strong revenue growth and improved monetization, which could mean we’re still in the early innings of this fundamentals-led rally in META stock.
The launch of AI-driven ad targeting on WhatsApp has signaled a significant shift. This approach leverages user behavior from Facebook and Instagram for optimized message delivery. This approach is crucial for businesses paying for messages to reach receptive users. For those bullish on the long-term prospects of the social media space and Meta’s ability to continue to integrate AI and improve its monetization efforts, this is a company that looks reasonably valued relative to its growth outlook.
On the date of publication, Chris MacDonald 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.
