These are the top growth stocks to buy for the remainder of 2021.
As markets enter the final months of the year, 2021 has largely been defined by macroeconomic factors like a recovering jobs market, the impact of fiscal stimulus and easy-money monetary policies, the rise of inflation, and slow but steady progress against the pandemic. These variables have helped stimulate asset prices and stocks are having a good year, with the S&P 500 up 21% to date. That said, some growth stocks have been pressured by rising rates, leading some to question whether growth investing will finally take a back seat to value investing. No company is immune from larger economic forces, but the following companies all have robust and improving businesses that look primed to thrive long-term — irrespective of how the pandemic progresses or how interest rates move. Here’s a look at seven of the best growth stocks to buy.
Shopify is a great example of a growth stock that’s long traded for rich multiples — and still managed to reward shareholders with equally impressive returns. Shopify stock is, at a fundamental level, a bet on the continued growth of e-commerce. It provides merchants with ready-to-go and customizable online stores through its platform, operating through a lucrative subscription model that brings in reliable, recurring revenue. As the second-biggest e-commerce player next to Amazon.com Inc. (ticker: AMZN), Shopify has grown revenue at a remarkable 70% compound annual growth rate over the last five years. It’s only natural for that rate to decelerate, but last quarter sales still grew at a remarkable 57% clip. The pandemic accelerated e-commerce adoption in 2020, but globally, online sales still accounted for just 18% of retail revenue last year, leaving SHOP plenty of room for impressive growth in the years ahead.
If the second-biggest name in e-commerce is good enough to make the best growth stocks list, why not also include the best in class? Not only is Amazon‘s scale unmatched — the company is hiring 150,000 workers just to meet demands for the holiday season — but it’s got an entirely distinct segment of its business differentiating it from the consumer-focused retail space. Amazon Web Services, the company’s cloud computing arm, is probably the single most valuable segment of Amazon’s empire, and certainly is the most profitable. At this point, it’s vital to the global economic infrastructure, with many of the world’s largest corporations, including illustrious financial institutions and U.S. military operations, heavily reliant on AWS. Despite accounting for just 12.8% of revenue in the first half of 2021, AWS hauled in 50.4% of the company’s operating income.
An integral part of the semiconductor sector for decades, Applied Materials is a dominant supplier of industrial machinery and software used by some of the world’s largest chipmakers. The semiconductor shortage and the pandemic-fueled acceleration of the digital economy drove Applied Materials to set company records for revenue, operating margin and earnings per share in its fiscal third quarter. Revenue jumped 41% and net income surged 104% year over year. Even though shares are up more than 110% in the last year, the economy is on far more certain footing entering 2022 than it was in 2020, and AMAT is priced somewhat conservatively at just 23 times trailing-12-months earnings. Revenue growth is expected to decelerate in 2022, but for the price, AMAT represents a compelling opportunity.
Top-tier chipmaker Nvidia is now one of the 10 largest U.S.-listed public companies, with markets valuing it at more than half a trillion dollars. Nvidia’s relentless focus on innovation, high quality and large end markets with high growth potential has helped it rapidly usurp former heavyweights like Intel Corp. (INTC). As with many growth stocks, investors will be paying a premium for Nvidia’s growth prospects, at more than 48 times forward earnings, but the necessity of Nvidia chips in areas like artificial intelligence, autonomous driving, cryptocurrency mining and competitive gaming will keep the company relevant for years. The commitment to innovation that Nvidia embodies is illustrated nicely in the company’s investment in research and development: Last fiscal year, NVDA’s R&D spending was up 168% from four years earlier, while Intel’s rose just 6% over the same period.
Fiverr International Ltd. (FVRR)
Do you believe the gig economy is here to stay? If so, Fiverr may be the growth stock for you. It runs a platform connecting — largely digital — gig workers to employers and takes a handsome cut of the business it facilitates. On a job a gig worker — or service seller — lists for $100 on Fiverr’s platform, the service buyer pays a $5.50 premium to Fiverr, while the seller of the gig ends up getting $80. As Fiverr scales and can spread its costs over a larger and larger revenue base, profitability is expected to skyrocket. The company lost more than $1.10 per share over the last 12 months, but analysts expect Fiverr to earn about $0.55 per share in 2022 before earnings per share rockets to $1.57 in 2023.
Customer relationship management heavyweight Salesforce has been a force in enterprise software for years, but last year it officially entered the big leagues in a sense, joining the illustrious Dow Jones Industrial Average. As one of the elite companies, worth upward of $250 billion, that still reliably grows revenue by more than 20% annually, Salesforce’s high-margin, recurring-revenue business model allows it to invest heavily in sales, marketing and acquisitions — a formula that’s been tremendously rewarding for long-term shareholders. If you bought the stock five years ago, you’d be up 290%. The company’s recent $28 billion acquisition of workplace productivity and messaging software leader Slack Technologies LLC promises to help keep revenue growth above 20% for years to come.
Last but not least among the best growth stocks to buy is Square, the payments fintech run by Twitter Inc. (TWTR) CEO Jack Dorsey. Not only does the company have a commanding presence in brick-and-mortar retail with its chip readers and point-of-sale software, but the company’s Cash App platform is also a rapidly growing mobile-based digital payments platform that now offers users the ability to buy stock and bitcoin. Cash App gross profit surged 94% in the fiscal second quarter to $546 million. Although overall revenue growth is destined to decelerate, analysts expect Square’s modest margins to take off in the coming years, with earnings per share surging from 84 cents in 2020 to $3.20 in 2023.