During these volatile and unpredictable times—while also being the case historically—the market has become a battleground where growth and value investing clash. Okay, so why growth stocks?
Value stocks have solid balance sheets and low prices, but cheap pricing doesn’t guarantee long-term worth. Also, value stocks don’t tend to have much impact on the overall market. In contrast, growth stocks show expanding revenue and have the potential to conquer the industries they’re in. Profits are reinvested into research and development, and growth stocks prioritize share price appreciation over dividends. Either way, we investors crave wealth-creating returns, and this is a way to make it happen!
Considering all market sectors, I’ve landed on three outstanding growth stocks that deserve credit for their excellent upside potential. Let’s look at these massive profit opportunities:
PayPal Holdings Inc (PYPL)
The optimism of analysts and investors surrounding fintech favorite PayPal (PYPL) has waned in recent years. Having ended its partnership with eBay, PYPL’s Vemmo platform has had to contend with Cash App and similar applications. Even tech giants such as Apple (AAPL) and Alphabet (GOOGL) have transitioned to using their own payment services. However, there is still hope for PYPL. Despite these recent challenges, PYPL saw a 55% revenue increase from $17.7 billion in 2019 to $27.5 billion in 2022. This tells us that PYPL has been growing and is poised for a comeback. The metrics impress.
With its stock down by 15.46% YTD, PYPL just hit its 52-week low, showing quite a chart dip. PYPL has TTM (trailing twelve-month) revenue of $28 billion at $2.36 per share, from which it made a $2.7 billion profit. At its MRQ (most recent quarter) earnings report, PYPL beat analysts’ EPS and revenue forecasts and showed year-over-year growth in critical areas such as revenue (+8.59%), net income (+56.19%), EPS (+43.82%), and net profit margin (+43.82%). PYPL has $3.42 billion in free cash flow and a 10-day average volume of 19.42 million shares. Analysts give PYPL a median price target of $92, with a high of $160 and a low of $58; this represents a potential 165% jump from current pricing. Buy and Hold.
ETSY Inc (ETSY)
A global leader in an exciting niche-like sector, ETSY Inc. (ETSY) brings sellers and buyers together through its online marketplace to swap vintage and handmade arts and crafts. ETSY has been popular in this area since its founding in 2005. As ETSY’s customer base expands, its marketplaces grow in value for merchants. With more shoppers, there is a greater demand for ETSY’s unique and handcrafted goods listed by sellers. As more sellers join, the selection of items increases, as does their value for buyers.
ETSY has been trading near the bottom of its 52-week range, and its stock is down by 28.59% year-to-date. However, ETSY’s Q1 2023 results exceeded Wall Street’s expectations, beating analysts’ EPS and revenue projections by 7.61% and 3.21%, respectively. Also notable is that ETSY’s active buyers increased by 1% to 89.9 million, marking the first quarterly growth in that area since Q4 2021. ETSY shows year-over-year revenue growth (+10.64%), primarily driven by transaction fees and improved “Etsy Ads” products. For the 2nd quarter, ETSY is forecasted to show $619.2 million in sales at $0.43 per share. ETSY has a median price target of $120, with a $170 high and a $46 low, representing an almost 99% leap from its current price. Analysts are warming back up to ETSY, telling us to Buy and Hold.
Constellation Energy Corp (CEG)
A grower for sure, Constellation Energy (CEG), a Baltimore-based clean energy company, has recently expressed its desire to utilize its unallocated capital for mergers and acquisitions. If the Inflation Reduction Act limits such opportunities, CEO Joe Dominguez stated that CEG’s focus would mainly be on share buybacks. CEG has already implemented a $1 billion share repurchase program and has doubled its shareholder dividend compared to last year. CEG’s stock is down slightly year-to-date but boasts a solid 0.98 beta, making it safe from volatility compared to the broader market.
For its most recent quarterly earnings call, CEG reported $7.56 billion in revenue vs. $5.73 billion predicted by analysts, making for a 32.06% surprise; during the same time, it showed year-over-year revenue growth (+35.31%). CEG, for the current quarter (Q2 2023), is forecasted to post $4.5 billion in sales at $0.74 per share. CEG has an annual dividend yield of 1.35% and a quarterly payout of 28 cents ($1.12/yr) per share. With a 10-day average trading volume of 2.4 million shares, CEG has a median price target of $96, with a high of $115 and a low of $81, representing a potential price upside of over 37%. With momentum on its side and a bright future growth outlook, bullish analysts recommend that we buy CEG.
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