Please ensure Javascript is enabled for purposes of website accessibility

2 Hot Growth Stocks to Buy Right Now

By Will Ebiefung - Feb 24, 2021 at 10:08AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors are flocking to these two companies. Here's why you should consider joining the hype train.

Palantir Technologies (PLTR 5.03%) and Zynga (ZNGA) have enjoyed a surge in interest among retail investors over the last few weeks related to partnerships and the potential for partnerships. Both companies currently rank among the top 100 most widely held on investment platform Robinhood and have seen their share prices jump by 15% and 17%, respectively, in 2021.

Let's explore the reasons why the bull run for these two hot growth stocks could just be getting started.

1. Palantir Technologies 

Palantir Technologies is an atypical software company that provides data analytics software to high-profile government clients like the FBI, CIA, and Department of Homeland Security. The stock has performed exceptionally well since its IPO at $10 a share in September (shares are now worth around $25). Management hopes to keep the momentum going by partially pivoting to commercial clients.  

Soaring stock on fire.

Image source: Getty Images.

Data analytics involves examining large amounts of data to uncover hidden patterns and help inform decision-making. Analysts expect the market for such services to expand at a compound annual growth rate (GAGR) of 12.3% until 2027 because of rising digitization and complexity in the economy. Palantir is benefiting from this long-term trend.   

In fiscal 2020, full-year revenue rose 47% from 2019 totals to $1.1 billion. The company's commercial unit, which deals with private clients, grew 107% year over year to make up 44% of sales, while the government-focused business grew 77% to represent 56%.

In February, Palantir inked a partnership agreement with technology firm IBM (IBM 1.86%) to create a hybrid cloud data platform to help businesses maximize large amounts of data. Dubbed the "Palantir for IBM Cloud Pak," this software boasts use cases ranging from finance to telecommunications. And it could help boost growth in Palantir's private sector business. Management expects greater than 30% annual revenue growth over the next five years.

2. Zynga 

Mobile games developer Zynga is hugely popular among retail investors -- perhaps because of its iconic Facebook games like Farmville and Words with Friends. Those legacy titles have since declined in popularity. But Zynga is still a great way to bet on the video game industry because of its acquisition-driven strategy, which involves scooping up fast-growing independent studios. 

Analysts expect the mobile gaming market to expand at a CAGR of 14% through 2025 as smartphone penetration and improving technology power growth in the industry. Zynga and its rival Glu Mobile are two of the few publicly traded pure plays in this space -- but Glu Mobile will soon be taken off the market after accepting a takeover offer from diversified gaming giant Electronic Arts in February. 

Some wonder whether Zynga could become the next buyout target for a larger company. In the meantime, it is making acquisitions of its own to help power growth. 

In 2020, Zynga bought Turkish developer Peak Games (the maker of Candy Crush) for $1.8 billion and hyper-casual game maker Rollic for $180 million. These assets will help the company achieve its revenue guidance of $2.6 billion in 2021, which represents 32% growth from the prior year. Zynga expects an adjusted EBITDA of $450 million but a net loss of $150 million because of contingent outflows related to its 2020 acquisitions. 

Sometimes the crowd is right

Momentum can be a tricky thing. We all remember the legendary short squeezes of late January when investors flooded into mediocre stocks with fundamentals that didn't justify their rallies. That story didn't end well.

But Palantir Technologies and Zynga are not part of that trend. Both companies can potentially deliver market-beating growth because of their strong fundamentals and compelling expansion strategies. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Palantir Technologies Inc. Stock Quote
Palantir Technologies Inc.
$8.36 (5.03%) $0.40
International Business Machines Corporation Stock Quote
International Business Machines Corporation
$136.89 (1.86%) $2.50
Zynga Inc. Stock Quote
Zynga Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.