Growth stocks can offer above-average earnings/revenue growth and exceptional returns. However, established growth stocks often carry higher valuations compared to other stocks based on metrics like P/E, price-to-sales and price-to-free cash flow. The best growth stocks strike a balance between reasonable valuations and long-term growth potential.
This June, it’s important to keep an eye out for stocks with the potential to show strong growth in the medium-to-long term. Here are three top growth stocks that I’ve been watching closely.
Zoom Video (ZM)
Zoom Video (NASDAQ:ZM) has become virtually synonymous with remote work and virtual communication during the pandemic, and its popularity is not likely to fade anytime soon.
Zoom Video, often regarded as the pandemic stock, can be a contentious choice when seeking the best bargain stocks to invest in. Many investors are reluctant to consider Zoom Video, and this sentiment is widely shared. Despite this, the stock still sits at 87.94% below its all-time high, having experienced a significant decline of nearly 90%. However, it’s worth noting that Zoom Video was profitable and generated positive free cash flow both before and after the pandemic.
Zoom’s CEO, Eric Yuan, conveyed optimism regarding the company’s performance and the potential to elevate the fiscal year 2024 outlook. Alongside financial growth, Zoom remains dedicated to artificial intelligence (AI) investments that enhance interactions and communication effectiveness. During a video meeting with analysts, Yuan reiterated Zoom’s steadfast commitment to AI, underscoring ongoing efforts in this domain.
Moreover, Zoom is proactively improving business operations and embracing AI advancements. Their recent launch of Zoom Smart and Meeting Summary, leveraging GPT-3 and machine learning, exemplifies this dedication. Zoom Smart facilitates multiple video feeds in conference rooms, while Meeting Summary, Zoom IQ and Zoom Virtual Agent utilize AI to enhance the user experience.
Teladoc Health (TDOC)
Teladoc Health (NYSE:TDOC), a telemedicine company, has faced significant setbacks amid the pandemic. Despite soaring to impressive heights, with its stock reaching nearly $300 per share in February 2021, the company has witnessed a sharp decline of 92% over the past two years. In the last six months alone, the stock has retracted by 12.23%. A lack of profitability as the world emerges from pandemic restrictions have contributed to Teladoc Health’s challenges.
Teladoc has revamped its strategy to achieve growth, profitability and improved margins. This includes streamlining operations through job and office space reductions. These efforts have yielded positive outcomes, with first-quarter consolidated revenue and adjusted EBITDA surpassing expectations. BetterHelp, the mental health business, experienced double-digit revenue growth that exceeded projections, while the Integrated Care business achieved revenue at the upper end of Teladoc’s guidance.
Teladoc Health remains in high demand for its virtual medical appointments, especially in the field of specialist consultations, ensuring consistent revenue growth. The company is now prioritizing profitability, implementing measures like job cuts and office closures to enhance operational efficiency. These proactive steps are expected to bolster Teladoc Health’s future performance and potentially drive the upward trajectory of TDOC stock.
Shopify (SHOP)
Shopify (NYSE:SHOP) has undergone significant transformations in the past year, fueling investor optimism for its future beyond the pandemic. The stock has surged over 71.38% since the beginning of 2023, reflecting the positive sentiment surrounding the company’s prospects.
Shopify had an impressive year in 2022, with over 500 million customers making purchases from Shopify-powered stores. The company holds a substantial market share, with 22% of global e-commerce websites built on its platform and a 10% share of the thriving U.S. e-commerce market. It’s worth noting that the U.S. e-commerce market is one of the largest and fastest-growing globally, projected to reach a valuation of $1.6 trillion by 2027.
While short-term market fluctuations are uncertain, Shopify has a strong foundation and the potential for growth in the long term. With its robust platform and expected 20% annual revenue growth, the company is poised for success. Additionally, Shopify is working towards achieving profitability ahead of expectations, further enhancing its 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.