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2 Top Growth Stocks Still Worth Buying

By Daniel Sparks - Feb 10, 2021 at 6:05AM

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Despite how these stocks soared over the past 12 months, they still look attractive today.

After the market's bullish run seemed to stall out earlier this year, many growth stocks are once again picking up steam. As of this writing, the S&P 500 is up 4% year to date.

While this market optimism is great for investors' portfolios, it makes finding good stocks to buy more difficult. After all, by paying higher prices for stocks, investors are likely to get lower returns over the long haul than if they were able to buy them at a discounted price. But a close examination still reveals some high-quality companies whose stocks continue to look attractive -- even after their recent moves higher.

A line chart with three lines -- one of which is rising up and to the right faster than the other two.

Image source: Getty Images.

1. Apple

One surprising stock that is still worth buying after decades of massive share price appreciation is Apple (AAPL 2.32%). The company's most recent earnings report showed how -- despite its $2.3 trillion market capitalization today -- this company remains in growth mode. During the holiday period, which is Apple's first quarter of fiscal 2021, revenue jumped 21% year over year to $111 billion. Earnings per share soared 35% to $1.68. 

But even these headline financial figures don't fully capture Apple's momentum. Consider its momentum in its newer segments, services, and wearables.

Apple's services segment, which has a gross profit margin that's about twice what the tech giant earns on its hardware sales, is growing even faster than the company's consolidated top line. Services revenue during the holiday quarter rose 24% year over year. This segment's strength is key, as it includes sales from the App Store, Apple's native subscription services, AppleCare, and other software and services that are good sources of recurring revenue for Apple.

Then there's Apple's "wearables, home, and accessories" business -- a hardware segment that includes sales of AirPods, Apple Watch, HomePod, and other accessories. This segment saw revenue surge 30% compared to the year-ago period.

If you think Apple's growth days are behind it, think again.

2. Pinterest

One smaller company that's growing far faster than Apple is Pinterest (PINS 3.39%). The visual search and media platform is increasingly looking like an advertiser's dream platform. Highly engaged users spend their time on the platform searching for products and perusing photos. What more could an advertiser want from their target audience?

It's no surprise that advertisers are flocking to the platform, particularly since user engagement keeps improving. Supported by a 37% year-over-year increase in Pinterest's monthly active users in Q4, its advertising-driven revenue soared 76% year over year

Of course, investors have to pay a premium to get in on a growth story like this. Pinterest has a market capitalization of $51 billion despite generating just $1.7 billion in trailing-12-month sales. Keep in mind that this top-line figure is changing quickly. On average, analysts expect 2021 revenue of $2.5 billion and 2022 revenue of $3.4 billion. 

These two established tech companies are arguably still worth their premium prices. Volatility, of course, should be expected. But five to 10 years from now, we'll likely look back and consider even these elevated levels to represent good entry points into these growth stocks.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$143.78 (2.32%) $3.26
Pinterest Stock Quote
$19.54 (3.39%) $0.64

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