Some top stocks haven't started 2023 on the right foot. But here's the good news: That offers an investment opportunity. Buying on the dip often allows investors to get in on a fabulous long-term story at a bargain price. These particular stocks may not deliver for you right away. But they offer potential for explosive growth over time.
So, which high-potential stocks should you buy on the dip right now? I've got two great candidates. One is a retailer that's launched a second growth plan after meeting all of the goals of its first plan. And the second is a global leader in robotic surgery that's been generating billions of dollars in earnings. Let's check out these promising stocks now.
1. Lululemon Athletica
Lululemon Athletica (LULU -0.03%) has the brand strength and loyal fans to help it meet the goals of its latest growth plan. How can I be so sure? Let's look at what the maker of yoga-inspired clothing has done so far.
While many retailers suffered during parts of the pandemic, Lululemon connected with fans online. And when they couldn't shop in a Lululemon store due to lockdowns, they opted for Lululemon's online shop. Lululemon has actually grown from pre-pandemic days through today. In the third quarter, net revenue rose more than 100% when compared to the same period in 2019. And diluted earnings per share doubled.
The company now aims to double revenue from its 2021 level to more than $12 billion by 2026. Lululemon plans to do this by doubling sales of the men's line and the digital business, and quadrupling international sales.
The company already did all of this once during its earlier growth plan launched in 2019. And it carried this out during difficult times: the start of the pandemic followed by today's period of economic woes. So, I'm confident Lululemon is up to the task this time, too.
Lululemon stock trades at 26 times forward-earnings estimates. That's down from more than 40 last year. This looks cheap considering Lululemon's progress so far and the latest five-year growth plan. If Lululemon can keep up its earnings momentum, the stock could skyrocket.
2. Intuitive Surgical
Intuitive Surgical (ISRG -0.55%) is the global leader in robotic surgery, with market share of nearly 80%. And that's not about to change for two good reasons.
First, surgical robots represent million-dollar investments. This means, if all is going well with the device, hospitals probably won't shift to another provider. And second, most surgeons train on Intuitive's flagship da Vinci product. So they likely favor using this robot they know so well.
The leadership position is one big thing to like about Intuitive. Now here's a second: Intuitive doesn't only generate revenue through the selling or leasing of its robots; it makes sales through the selling of instruments and accessories used for da Vinci procedures. This means that each da Vinci sold or leased represents recurrent revenue for the company every time procedures are done.
Intuitive has seen slowdowns in revenue and robot installations at certain times during the pandemic. Another headwind has been the impact of foreign currency exchanges weighing on the value of international sales.
In spite of these pressures, Intuitive's procedure volumes and revenue continue to rise. In Q4, they increased 18% and 7%, respectively. And Intuitive has been investing in its business. The company completed $1 billion in share repurchases in the quarter. That's a great sign of confidence about what's ahead.
Intuitive shares trade for 46 times forward-earnings estimates compared to more than 60 just a few months ago. But the stock may not stay at these levels for long. The worst of COVID-19 headwinds may be in the past; as earnings pick up more momentum, Intuitive shares could take off.
