Growth stocks are an excellent way for investors to create generational wealth in the stock market. The world constantly evolves, meaning new companies will continue to emerge to solve its most pressing problems.
Technological advancements in energy, cybersecurity, and artificial intelligence provide tremendous opportunities for outsized returns. Choosing the right growth stocks can be both complex and overwhelming. It is undoubtedly more difficult than choosing your standard ETF or mutual fund, as you must keep up with the company’s quarterly earnings reports. While investing in growth stocks is generally more risky, the potential for life-changing returns is much greater.
Below are my top 3 growth stocks to buy right now.
Spotify (SPOT)
Spotify (NYSE:SPOT) is a European streaming company headquartered in Stockholm, Sweden. Founded in 2006, Spotify has emerged as one of the largest streaming companies in the world. The company boasts 574 monthly active users and over 220 million paid subscribers. Additionally, they hold just under ⅓ of music streaming subscribers worldwide.
Spotify has been in the music streaming business for nearly two decades now. They were one of the pioneers of the new digital streaming era, making the peer-to-peer process more seamless and user-friendly. The company is now hitting a critical inflection point, with solid revenue growth and higher gross margins driving profitability.
On October 24th, they reported their Q3 2023 financial results. While many analysts were forecasting a loss for the quarter, Spotify declared a surprise profit of 0.33 per share. Monthly active users were up 26% to 574 million, with premium subscribers up 16%, respectively. Gross margins also remained robust, up 166 BPS in the quarter.
Spotify’s liquidity remains strong, with $3.8 billion in cash and short-term securities. With profitability being a key driver, Spotify is the top growth stock to buy for 2023.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ:SMCI) is a semiconductor company that develops end-to-end solutions for enterprise cloud, data center, and HPC markets. The company’s products are integral to meeting the growing global demands of AI network infrastructure. Over the last 5 years, the company’s revenue and EPS has skyrocketed, driven by increased demand for its GPU servers.
Supermicro’s products include a wide range of GPU servers, twin servers, blade servers, and storage servers. This also includes high-end building blocks from motherboards, networking hardware, server chassis, and accessories.
From FY fiscal 2018 to FY fiscal 2023, revenue doubled from $3.36 billion to $7.12 billion. During the same period, EPS skyrocketed more than 1000% from 0.89 per share to $11.43 per share. Supermicro continues to increase market share in the AI server market, growing nearly 5X faster than its peers. They expect their next-generation liquid cooling GPUs to continue driving revenue growth for FY fiscal 2024. The company expects FY fiscal 2024 revenue in the $9.5 billion to $10.5 billion range, representing 33%-37% growth.
While growth might be priced in with the stock up more than 200% YTD, investors should not ignore Supermicro’s long-term FCF and EPS growth potential. As demand for AI-driven network infrastructure accelerates over the next decade, Supermicro is one of the best high-potential growth stocks to buy.
ELF Beauty (ELF)
ELF Beauty (NYSE:ELF) is an American cosmetics company that has flown under the radar. Their products include makeup, skincare products, and accessories. The company is widely known for its 100% cruelty-free products.
ELF’s stock has returned nearly 1000% to its shareholders over the last 5 years. This was primarily driven by strong top-line growth and profitability. The company has averaged annual EPS growth of nearly 160% over the last 3 years. While their recent Q1 2024 fiscal earnings results saw massive improvements, growth will likely continue.
In their Q1 2024 fiscal financial results, ELF’s revenue grew 76% YOY to $216.3 million. Gross margins increased by 280 BPS to 71%, as a result of incremental cost improvements. As operating income and FCF continue to rise, ELF has the potential to grow EPS by triple digits for the third consecutive year. If you’re looking for a promising growth stock to buy in 2023, ELF Beauty should definitely be a consideration.
On the date of publication, Terel Miles 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.