If you're looking for growth despite the market's recent weakness, you're in luck. There are plenty of great long-term prospects out there, with many of them now available at deeply discounted prices. Here's a rundown of three of the top growth stocks to buy right now, even if none have hit their final bottom just yet.
If you've been following Lyft (LYFT 3.86%) at all, you likely know shares plunged more than 30% on Wednesday in response to lackluster guidance. On its face, earnings brought good news: First quarter revenue of $875.6 million represented a 44% year-over-year improvement from the year-ago period, and EBITDA swung from a year-earlier loss of $73 million to a gain of $54.8 million. Both those numbers topped earlier expectations for the first quarter. But, Lyft adjusted current guidance to make lighter forecasts moving forward. Whereas Wall Street analysts had predicted second quarter revenue to hit $1.02 billion, Lyft forecasted numbers closer to $950 million.
The market may be reading more into the forecast than Lyft intended, however. Largely being lost in all the noise is the fact that Lyft is already generating operating profits, and should continue to do so with relative ease. Analysts are projecting a $0.62 per-share profit this year and $1.46 for next year.
Still, following earnings, investors were understandably worried about the fact that Lyft intends to spend more on drivers incentives than it has in the past, crimping future profits. But I'd argue that the added expense of better recruiting and retaining drivers will ultimately pay for itself.
See, while Lyft says it's going to spend even more on drivers, know that last quarter's cost of revenue (which is mostly driver pay) was only about 50% of revenue itself. In comparison, rival Uber Technologies (UBER 0.47%)spent nearly 60% of its sales on driver pay. The ride-sharing business essentially comes down to a question of cost and demand: is stalled revenue due to riders balking at too-high prices or due to a lack of available drivers at popular times? If Lyft were to offer a little more money to drivers, it could very well reveal that tepid rider demand isn't the company's primary headwind. In that case, money spent to incentivize drivers to work shifts at the busiest times would actually increase the company's top line.
2. Palo Alto Networks
Most stocks are currently priced well below their January peaks: The S&P 500 (^GSPC 0.07%) is down 13% from that high and within easy reach of multi-month lows. Not every name is in dire straits, though. Shares of cybersecurity outfit Palo Alto Networks (PANW 3.73%) have remained surprisingly resilient, well up from their late-December peak and only down modestly from their record-high reached just last month.
That strength has everything to do with the company's business. Protecting digital infrastructure is a must-do at all times, even when macroeconomic trends bring other industries to a grinding halt; cybercriminals don't slow down during recessions. To this end, while Palo Alto offers a wide array of cybersecurity tools, it excels on the data loss prevention (DLP) front for enterprise-level clients.
The company's offers the industry's first cloud-delivered enterprise DLP, allowing complex organizations to secure specific digital data, monitor networks for unsafe transmission of sensitive data, and enforce corporate policy about how certain information is protected. Palo Alto Networks is also building unique tools specifically meant for 5G connections, which introduce a whole new type of cybersecurity concern now that the era of ultrafast wireless connectivity is here.
These are solutions to problems that are only going to grow as the world increasingly relies on cloud-connected networks too. Research firm Cybersecurity Ventures estimates that cybercrime will cost the world more than $10 trillion per year by 2025. No organization can afford to be part of that statistic. That's a big part of the reason Palo Alto's earnings are projected to grow from last year's $6.14 per share to $7.29 this year to $9.02 per share next year.
3. Unity Software
Finally, add Unity Software (U 2.62%) to your list of growth stocks to buy right now. It's not a household name...at least not yet. But, there's a good chance you or someone in your household has benefited from its tech. Unity's software is used to develop video games, computerized animations, and engineering designs. All three are growth drivers for the company, which is on pace to see revenue growth of nearly 35% this year and 29% in 2023.
Though not yet profitable, its sales growth should push Unity Software out of the red in 2024. However, the market could reward progress made toward that end zone before 2024, making Unity Software a healthy bet right now. The stock's 68% slide from November's high only bolsters the bullish argument.
There's another brewing movement that favors Unity Software in a way that's not yet fully reflected in its stock price. That catalyst is the advent of the metaverse, which relies entirely on digital visualizations that allow users to interact with a virtual world. Plenty of enterprises want to build their own online worlds, and they all need a platform to make it happen.
Unity is one such a platform. Its software allows computer coders to easily construct the virtual three-dimensional models seen by people wearing 3D glasses and goggles that either augment what they're seeing in the real world, or whisk them away to a digitized version of another.
Of course, what exactly the metaverse looks like and which companies will play major roles in it remains unclear for the time being. Unity, though, is one of the purer plays poised to plug into what some analysts believe could be nearly a $1 trillion market by 2030. That estimate is based on a forecasted annualize growth rate of 38% between now and the start of the next decade. The key is just being patient. Unity Software could -- and should -- be a multi-year position.