Until recently, growth stocks have badly struggled. Not just in 2023, but for all of 2022, and many struggled in 2021. It’s been anywhere from 12 to 24-plus months of poor price action. But now we’re seeing some positive price action for bulls, which has investors looking for the top growth stocks to buy in May. I’m talking about cream-of-the-crop stocks in growth – not just a few names that could enjoy a short-term pop.
Investors want businesses that are doing well now, but will be doing even better a few years from now. It’s easy to lose track of these stocks in this kind of environment. They’ve been beaten down for so long that there’s been no reason to chase them.
Investing in growth stocks when they have no momentum presents a risk of short- and intermediate-term losses. However, when they’re down and out is when there is the most long-term opportunity.
Sort of in the middle of those two scenarios now, let’s look at the best growth stocks to buy in May.
The Trade Desk (TTD)
The Trade Desk (NASDAQ:TTD) is giving investors a gift with its post-earnings reaction. Shares gyrated after the report in mid-May. At one point, shares were up 5% and then down 6.8%, before ultimately finishing lower by less than 1%.
The stock has slowly but surely crept higher since the report, now up about 5.5%. However, that’s hardly a robust response given the top- and bottom-line beat The Trade Desk delivered. Or the fact that revenue grew more than 21% year over year and that guidance for next quarter (“at least” $452 million in revenue) significantly topped consensus expectations of $445.6 million.
Simply put, this firm continues to deliver robust results. It’s a profitable growth stock, and was so before the pandemic started. That’s hard enough to find. However, The Trade Desk has stayed profitable while continuing to churn out strong growth.
I think this is a company to bet on when there’s no momentum present, considering its long-term potential.
Snowflake (NYSE:SNOW) is another name to consider when thinking of growth stocks to buy. Unlike The Trade Desk, Snowflake has not reported earnings yet, so it will be interesting to hear what the firm has to say. Those results are slated for May 24.
In the meantime, though, this has been one of the best growth stocks to buy in May. Shares suffered a 3.9% dip at this month’s low but are now up 25% so far in May. From this month’s low, the stock is up nearly 30%.
While the stock still boasts a high valuation, it’s nowhere near the valuation it commanded shortly after going public in the second-half of 2021. When a good business has a high valuation, investors usually have to wait for a price correction or be patient for the business to catch up. In this case, we’ve had both factors working in our favor.
Despite Snowflake still being down about 60% from its all-time high, growth estimates remain robust as the firm shoots for profitability.
At one point, Shopify (NYSE:SHOP) seemed like one of the most-hated growth stocks out there. The stock suffered a peak-to-trough decline of 86.6% while falling in nine out of 10 months. Put simply, this one went from growth stock darling to dud in less than a year.
That said, it’s been one of the top growth stocks to buy in May. At this month’s high, shares were up more than 35%. Currently though, the stock is still up 28% from the close on the last trading day in April.
A bulk of those gains were fueled by a top- and bottom-line beat, which featured almost 26% sales growth, an improvement in free cash flow, and jobs cuts.
I don’t know if these gains will last in the short-term, but over the long-term, Shopify could see continued momentum. The company has an excellent platform, while analysts expect about 20% annual revenue growth for the foreseeable future. Plus, expectations call for the company to continue to push for profitability sooner than expected.
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Source: Investor Place