Companies with strong top-line growth coupled with improving margins and cash flows
The beginning of the year is the best time to accumulate quality growth stocks that can do wonders for the portfolio. However, the markets continue to offer attractive opportunities. Investors should brush aside any potential setbacks or missed opportunities in 2023 and focus on building a strong portfolio for next year.
The truth is that macroeconomic conditions will be challenging. This blue-chip stock will remain in focus as investors seek capital protection and regular cash flow through dividends. However, at least 30% to 40% investment in fundamentally strong growth stocks can be considered.
In a large economy, some sectors will perform well even if the broader economy faces challenges. Therefore, investors need to identify quality growth companies in these sectors for potential multibagger returns.
So, let’s discuss three growth stocks to buy that represent companies delivering great financial performance.
draftkings (NASDAQ:dkng) The stock is up nearly 250% year to date (YTD, However, the stock is trading at heavily oversold levels, and the rally does not mean the upside in 2024 will be limited. Supported by positive financial metrics, DKNG stock could double from current levels by the end of next year.
First, the total market for iGaming and online sports betting is expected to grow to $30 billion in 2028, compared to $20 billion this year. And these numbers only represent the current status of active DraftKings positions. The broad, addressable market will ensure a strong revenue growth trajectory.
Second, profitability is a major goal. DraftKings is reporting strong revenue growth. However, the company remained in loss at EBITDA level. For the current year, DraftKings has guided for an EBITDA loss of $105 million (mid-range). But, for 2024, DraftKings expects positive adjusted EBITDA of $350 to $450 million. As margins expand, DKNG stock is likely to rise. And, given the large market size, operating leverage will ensure that margin expansion is sustained beyond 2024.
riot platform (riot)
Source: RafaPress / Shutterstock.com
riot platform (NASDAQ:riot) The stock offers an excellent entry point at $10.5 after a significant correction over the past four months. forward, along Bitcoin ,btc-usd) In the upward trend, RIOT stock is likely to double or triple over the next year.
Investors are bullish on RIOT for two reasons. First, the Bitcoin miner has strong fundamentals with zero debt and a cash buffer of $488 million (including the value of digital assets). With high financial flexibility, Riot is in a position to make large investments for growth.
Second, Riot has already guided for a multiple-fold increase in hash rate capacity. As of Q3 2023, the company’s deployed capacity was 10.9EH/s. Riot expects capacity to increase to 36.3EH/s by 2025. With a three-fold increase in capacity, the company is poised for strong revenue and cash flow growth. Thus, if Bitcoin moves higher in the next year following the halving event, the growth metrics will increase.
Li Auto (LI)
Source: Robert Way / Shutterstock.com
Don’t miss the upcoming big rally Lee Auto (NASDAQ:Took) because it provides concrete numbers. Chinese electric vehicle makers continue to report strong delivery growth. This is coupled with aggressive retail network expansion, along with the introduction of new models.
Furthermore, growth momentum is likely to be sustained in 2024 due to two factors. First of all, Li Auto focuses on China. And with a cash buffer of $12.13 billion, aggressive retail network expansion will continue.
Second, Li Auto has unveiled LI MEGA. Within two hours the company has given information about more than 10,000 bookings. Commercial deliveries of the model will begin in February 2024, which will help maintain the growth momentum.
Additionally, Li Auto reported free cash flow of $1.8 billion for the third quarter of 2023. This would mean an annual FCF potential of $7.2 billion. As the company’s financial resilience remains strong, investing in innovation will provide an edge in a competitive industry.
On the date of publication, Faisal Humayun did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication Guidelines,
Faisal Humayun is a Senior Research Analyst with over 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has written over 1,500 stock specific articles focusing on the technology, energy and commodity sectors.