CPNG - Hot Stocks: 3 Unstoppable Growth Machines for Massive Returns
2024-07-11 09:00:00 ET
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The good news keeps piling up for growth stocks . While speaking at a panel discussion at the European Central Bank’s monetary policy conference, Federal Reserve Chairman Jerome Powell admitted that inflation was slowing . Consequently, expectations for a rate cut in September have increased, which is a welcome boost for growth stocks.
Given their participation in key secular tailwinds, the following stocks are well-positioned for multi-year growth. So far, these companies have posted some of the highest growth rates in their respective industries. According to Finviz data, each achieved over 15% annual revenue growth in 2023.
That said, we buy stocks for future prospects, not past performance. In that regard, these three companies have a great outlook, considering their growth story is in the early innings. From now on, these three growth stocks can maintain double-digit top-line growth. Moreover, over the past two years, they have materially improved margins and free cash flow.
SentinelOne (S)
Organizations are prioritizing cybersecurity in their IT budgets due to a surge in cyber and ransomware attacks. Furthermore, the U.S. Securities Exchange Commission disclosure rules passed last year mean that cyber spending is almost mandatory. These two factors will benefit one of the best growth stocks in the cyber universe, SentinelOne (NYSE: S ).
This security provider was among the first to offer an AI-powered cybersecurity platform for enterprise-wide protection. As a result, it has become one of the fastest-growing companies, registering 93% annual sales growth over the past five years. Although growth has slowed, it still reported an impressive 47% sales growth in fiscal year 2024.
While revenue growth has been stellar, profitability has lagged peers. However, management is addressing this issue and operating margins have improved from -54% in FY2021 to -6.9% in FY2024. Moving forward, management has committed to sustained profitability. Notably, Q1 FY2025 was the first quarter ever of breakeven non-GAAP EPS.
As of this writing, SentinelOne presents a balance between improving profitability and stellar growth. Chief Financial Officer Dave Bernhard predicts a positive operating income by the end of the year. On the growth end, management expects over 30% revenue growth in FY2025, sealing the bull case for this growth darling.
Nu Holdings (NU)
Banking is going digital, benefiting Nu Holdings (NYSE: NU ), Latin America’s largest digital bank. It has adopted a revolutionary approach to banking based on pure digital infrastructure. Nu has no physical branches, which has given it a cost advantage over incumbent banks.
The digital bank has anchored its business model on fast customer expansion, expanding revenue per customer and efficient operating costs to tremendous success. In Q1 2024, it became the first digital banking platform outside of Asia to achieve the 100 million customer milestone .
In its largest market, Brazil, Nu Holdings continues to show impressive growth, averaging 1.3 million net monthly customer adds. Mexico has been another remarkable growth market. In Q1 2024, it added 1.5 million customers.
These impressive customer additions have translated into industry-leading revenue growth. For instance, in Q1 2024, revenue surged to $2.7 billion, increasing 64% year-over-year. Meanwhile, monthly average revenue per active customer increased 30% YOY to $11.4. What’s more, it achieved positive earnings, delivering a net income of $443 million.
This showcase of growth and profitability reinforces why Nu Holdings is one of the top growth stocks to buy. Shares offer a healthy risk-reward balance at 33 times forward earnings.
Coupang (CPNG)
Coupang (NYSE: CPNG ) is one of the top e-commerce retailers in Southeast Asia. It has the dominant market share in South Korea and has expanded into Taiwan. These markets provide a multi-decade growth runway due to the low e-commerce penetration.
Based on its growth, this e-commerce retailer has shown why it is one of the top growth stocks. Over the last five years, it has compounded revenues at a 43% annual rate. Still, more growth lies ahead through geographic expansion and market share growth.
According to UBS analyst Jennifer Han , Coupang is the market leader in the $124 billion South Korean e-commerce market, with a 29% market share. She predicts that the retailer can capture a 43% share by 2026.
In addition to its growth story, she expects adjusted EBITDA margin improvements. Management agrees and has outlined a plan to expand margins going forward. They see expansion through a larger contribution from higher margin categories, operational efficiencies and supply chain optimization.
As e-commerce penetration grows in Asia, Coupang will accrue substantial benefits. Furthermore, new segments like Eats and Fulfillment and Logistics by Coupang (FLC) are gaining momentum. For instance, FLC reported a 130% YOY increase in units sold in Q1 2024. Lastly, its WOW membership will continue enhancing its value proposition, driving customer growth and increasing spending among existing cohorts.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article .
Charles Munyi has extensive writing experience in various industries, including personal finance, insurance, technology, wealth management and stock investing. He has written for a wide variety of financial websites including Benzinga, The Balance and Investopedia.
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