When many investors often think of growth stocks, it’s the mega-cap tech giants that dominate the discussion. That’s for good reason. Many top tech stocks have outperformed the market for a long time. So, investors are loading up on market cap weighted index funds to capture these returns.
However, plenty of high-growth opportunities extend beyond the tech sector. Whether in healthcare, finance, or other sectors, they share a defining characteristic. It’s their ability to sustain higher-than-market average growth over a period of time.
Many of the stocks on this list are ones I’d consider to be overlooked and potentially lucrative undervalued growth stocks. And, some have already seen notable appreciation in the past five years. Let’s examine these attractive companies for investors looking for substantial long-term gains.
Matterport (MTTR)
Matterport (NASDAQ:MTTR) is a major player in the virtual reality/digital twin sector. It offers 3D cameras and software for building virtual models. Thus, it presents a compelling opportunity for investors in the expanding digital mapping landscape.
The company experienced a meteoric rise post-IPO in 2021, driven by metaverse optimism. However, after peaking at over $30, the stock plummeted to just above $2. That was largely due to waning metaverse interest and the 2022 tech stock downturn, compounded by lackluster performance.
Matterport, once soared around the time of Meta Platforms’ (NASDAQ:META) rebranding (we’ll get to Meta in a minute). Recently, it faced a sharp decline to $2.15 amid the end of quantitative easing and a broader tech sell-off.
Despite challenges, Matterport presents an intriguing opportunity given its steady revenue growth, expected to reach $159 million this year. This number implies a 36% compound annual growth between 2019 and 2023. Additionally, narrowing losses and improving margins could boost the case for sooner-than-expected profitability. And that could be a huge driver for this stock over the coming years.
Li Auto (LI)
Li Auto (NASDAQ:LI) has impressed investors with robust growth. It is targeting over 40,000 car deliveries in the current and upcoming months. Li achieved 284,647 cumulative deliveries by October.
Also, the company’s transition to mass production of fully electric vehicles (EVs). Since garnering over 10,000 pre-orders, it’s a promising outlook. So, the company’s market share prospects are worth pricing into this stock.
Indeed, unlike most U.S.-listed Chinese stocks, Li has bucked the trend of negative returns this year. In fact, LI stock has almost doubled on a year-to-date (YTD) basis on this optimism.
However, I think more upside may be likely, given the company’s recent results. Li’s positive third-quarter results showcase a remarkable 271% year-over-year (YOY) revenue surge and a 196% increase in annual vehicle deliveries. Notably, the company achieved a shift from negative to positive cash flow, marking a substantial milestone.
In Q3 2023, Li Auto achieved exceptional growth by selling 105,108 units, marking a remarkable 296.3% YOY increase. Further, Q3 revenue hit 34.68 billion yuan and a record-breaking 40,422 vehicles sold in October.
Also, the company solidified its position as China’s best-selling premium SUV brand above RMB300,000. Chairman Xiang Li emphasized Li Auto’s consistent leadership in this segment, showcasing its prominence in China’s EV industry.
Meta Platforms (META)
In 2023, Meta Platforms, renowned for its social media realm, prioritized efficiency. In Q3, it surpassed expectations, boasting a 23% YOY revenue surge to $34.1 billion. It also saw a notable 168% rise in diluted earnings per share to $4.39.
The company’s Family of Apps segment, encompassing its umbrella of social media platforms, flourished. That showed a 24% revenue increase and an 87% surge in operating profit. Additionally, Meta’s primary income source, advertising revenue, soared by 23% to $33.6 billion. This came as the company leveraged its extensive user base, while also streamlining its cost profile.
I believe much of the concern around Meta’s metaverse-related losses aren’t worth the attention. The company’s primary driver remains its core advertising/social media business. And that’s not likely to see profitability growth slow down any time soon. For long-term growth stocks to buy and hold, META remains a top pick of mine right now.
— Chris MacDonald
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Source: Investor Place