Growth stocks to buy on the dip have the potential to significantly outperform the stock market. Some of these assets can accumulate generational returns and get passed down to your heirs. However, these same stocks often experience declines on the way to new highs. Stock dips are common, and it’s important not to panic.
According to the Fear & Greed Index, panic may be setting in. The latest reading of 41 suggests that fear is partially driving the stock market, but not to a strong degree. When you invest in any asset, including stocks, you sign up for dips. These dips offer buying opportunities since they let you buy your favorite companies at discounts.
Knowing which growth stocks to buy on the dip will leave you better prepared. Investor should narrow their search to companies that exhibit high revenue growth and rising profit margins. These are some of the growth stocks to buy on the dip to consider for long-term growth investors.
Crowdstrike (CRWD)
Crowdstrike (NASDAQ:CRWD) has been a juggernaut in the cybersecurity industry. The firm continues to grow while its competitors cite headwinds as reasons for slower revenue growth. Crowdstrike reported 33% year-over-year revenue growth in Q1 FY25 and closed out the quarter with $3.65 billion in annual recurring revenue.
Cybersecurity will remain an essential service for many years. Businesses put a lot of their information online, and they also store customers’ information in their databases. Hackers try to get into these databases and access a company’s private files. Furthermore, the cyber criminals are using artificial intelligence to scale their attacks. This use of AI demonstrates how innovative technology can become dangerous if it falls into the wrong hands. Luckily, Crowdstrike is also upping its defenses with the help of artificial intelligence.
Cybersecurity is becoming a battle of AI vs. AI, and it’s been beneficial for long-term investors. Crowdstrike stock has gained 54% year-to-date and is up by 427% over the past five years.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has been crushing the stock market for many years as businesses rush to run advertisements and rank higher on the company’s search engines. The stock has gained 29% year-to-date and has more than tripled over the past five years. A 28 P/E ratio and a strengthened focus on profit margins makes the stock attractive at current levels.
Wall Street analysts seem to agree with that assertion. Alphabet is rated as a “Strong Buy” with a projected 10% upside from current levels. The highest price target of $225 per share suggests that Alphabet can gain an additional 25%.
Most of the company’s revenue comes from advertisements, but more than 10% of its revenue comes from cloud computing. Alphabet can continue to diversify its revenue with artificial intelligence and other initiatives. Overall revenue increased by 15% year-over-year in Q1 2024 while net income surged by 57% year-over-year. Alphabet wrapped up the first quarter with a 29.4% net profit margin.
Chipotle (CMG)
Chipotle (NYSE:CMG) has been on a tear. Shares are up by 43% year-to-date amid a stock split and have gained 342% over the past five years. Higher prices haven’t stopped Chipotle’s customers from regularly buying food at its venues. Revenue increased by 14.1% year-over-year in Q1 2024 while net income was up by 23.2% year-over-year.
Chipotle should continue to grow its revenue and net income based on its recent expansion. The restaurant chain opened up 47 new restaurants with 43 of them including a mobile pickup drive-thru window. The company remains on pace to open 285-315 restaurants this year. Comparable sales growth of 7% year-over-year indicates that many of its restaurants continue to generate traction, so growth isn’t entirely reliant on the company opening up new locations.
The stock is currently rated as a “Moderate Buy” among 27 analysts with a projected 3% upside. The highest pre-split price target of $3,888 suggests a potential 21% gain from current levels.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) also has a lot of analysts behind it. The stock is rated as a “Strong Buy” and has a projected 6% upside. The highest price target of $593 per share suggests that Facebook’s parent company can gain an additional 20%. The stock is up by 43% year-to-date and has gained 159% over the past five years. Meta Platforms trades at a 28.5 P/E ratio and is valued at $1.26 trillion.
The social media firm recently offered a dividend. Investors currently get a 0.40% yield, but shareholders should expect the company to maintain a double-digit dividend growth rate for several years. Profit margins are north of 30% as the company continues to refine its business model with a focus on efficiency.
Net income more than doubled year-over-year in Q1 2024 while revenue still marched forward to the tune of a 27% year-to-date gain. Meta Platforms also has a healthy balance sheet which features $58.12 billion in cash, cash equivalents, and marketable securities.
HubSpot (HUBS)
HubSpot (NYSE:HUBS) has been generating more buzz amid acquisition rumors. Alphabet has been rumored to be making an offer for several months, but now there’s competition. An unnamed company appears to be in the mix for acquiring the $30 billion customer relationship management software firm.
Although this speculation is helping the stock price, HubSpot hasn’t needed the rumor mill to generate returns for investors. The stock is up by 6% year-to-date and has more than tripled over the past five years. Many businesses use HubSpot to communicate with their customers more effectively and increase their conversions. HubSpot has many monthly and annual subscriptions available which results in steady recurring revenue.
HubSpot continues to report strong financials amid its recurring revenue model. Total revenue increased by 23% year-over-year in the first quarter to reach $617.4 million. GAAP net income came in at $5.9 million compared to a net loss of $36.6 million in the same quarter last year. Rising revenue and profit margins create a good opportunity even if an acquisition doesn’t pan out. However, an acquisition can result in a surging stock price and one last hurrah for investors before a big tech firm adds the company to its product mix.
Cintas (CTAS)
Cintas (NASDAQ:CTAS) has more than one million customers in various industries. The firm provides business supplies, safety equipment and other resources for businesses. Cintas generates steady revenue from its customers since many businesses need supplies and safety equipment in order to function properly. A lack of safety equipment can bring production to a halt and make them non-compliant.
Cintas has been outperforming the stock market for several years. Shares are up by 20% year-to-date and have more than tripled over the past five years. The $72 billion firm trades at a 49 P/E ratio and offers a 0.76% yield. Cintas has maintained a double-digit dividend growth rate for several years and has raised its dividend for more than 40 consecutive years.
A high dividend isn’t the only positive attribute for this stock. Cintas reported solid financials, including 9.9% year-over-year revenue growth in Q3 FY24. Net income jumped by 22.0% year-over-year to reach $397.6 million.
Synopsys (SNPS)
Synopsys (NASDAQ:SNPS) is on of the stocks to buy on the dip that have been outperforming the stock market. Shares are up by 21% year-to-date and have soared by 370% over the past five years. The corporation has a $93 billion market cap and trades at a 66 P/E ratio.
Synopsys has been in business for more than 35 years and generates over $5 billion in annual revenue. The company’s chips are used in self-driving cars, machine learning devices, 5G technology, and other devices. Synopsys also generates revenue from its software which results in healthy profit margins.
The firm reported 15% year-over-year revenue growth in Q2 FY24 which was at the high-end of guidance. Net income increased by 7% year-over-year. Synopsys closed out the quarter with a 20.1% net profit margin.
Wall Street is optimistic about SNPS, and believe it is one of the growth stocks to buy on the dip that has more room to run. It is rated as a “Strong Buy” among 10 analysts and has a projected 7% upside. The highest price target of $675 per share suggests that the stock can gain an additional 10%.
On this date of publication, Marc Guberti held long positions in CRWD, GOOG, and SNPS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
