Let me get right to the point: Growth stocks are back -- and some remain killer bargains. Indeed, with nearly a third of 2023 already in the books, growth stocks have easily outperformed their value counterparts.
Growth stocks, as measured by the Vanguard Growth ETF, are up 16% year to date, while value stocks, as measured by the Vanguard Value ETF, are essentially unchanged.
Even so, many growth stocks haven't participated in this year's growth rally, or even if they have, they remain well off their all-time highs. Let's have a closer look at three stocks I think are ready to surge higher.
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1. Lululemon
The company is still more than 20% off its all-time high of $477.91, so Lululemon (LULU 0.04%) shares remain a no-brainer buy. The reason is simple: Lululemon's growth remains unstoppable.
Over the last five years, quarterly revenue growth averaged 26.6%, as overall revenue skyrocketed from $2.8 billion to $8.1 billion. Earnings, too, have grown like a weed. Net income has surged from $303 million to $855 million.
One thing is clear: People can't get enough of Lululemon's comfortable, stylish, and pricey athleisure gear. Despite some analyst concerns that rising inventories would bring drastic price cuts in the all-important fourth quarter, Lululemon delivered its best quarter ever in March, helping shares climb about 19% year to date.
Investors looking for colossal growth that is still more than 20% off its all-time high should keep Lululemon in mind.
2. Airbnb
Truth be told, Airbnb (ABNB -1.17%) probably had one of the worst-timed initial public offerings (IPOs) of all time. The company debuted in late 2020, as the COVID pandemic was raging.
Nevertheless, its shares held steady for about a year before the bottom fell out in late 2021. Today, you can pick up shares of Airbnb for more than 46% below its all-time high. And for growth investors, Airbnb is a great long-term buy-and-hold candidate.
Consider this: More than a year after many travel-related metrics returned to their pre-COVID levels, the company grew quarterly revenue at a 24% year-over-year rate. In other words, it's not just pent-up travel demand driving Airbnb's revenue higher -- Airbnb is just executing its game plan. In 2022, gross booking value (GBV) and total bookings exceeded Airbnb's prior highs set in 2019.
So, while Airbnb bears insist that disaster is just over the next hill, the company keeps chugging along, posting impressive earnings results with each successive quarter.
Investors willing to ignore the bearish chatter might see something exciting in Airbnb: A well-run company with a resilient business model -- sporting a share price that's undervalued to my eye.
3. Amazon
If I had to name one growth stock that looks like a coiled spring, it might be Amazon (AMZN -1.14%). This tech mega-cap still tips the scales at over $1 trillion in market cap; however, it's more than 42% below its all-time high. Whether the cause is new CEO Andy Jassy, last year's stock split, or something else, Amazon has clearly lost its mojo.
Nevertheless, the expectations of future growth remain. Despite its eye-popping revenue of $514 billion over the last 12 months, analysts expect the company to grow sales by 8% in 2023 and a further 12% in 2024.
That sort of growth cannot be -- or at any rate, shouldn't be -- ignored. Amazon now trades at a price-to-sales (P/S) ratio of 2.1. That's well below its 10-year average P/S ratio of 3.1.
With its potent combination of e-commerce, cloud computing, and digital advertising, Amazon remains a corporate titan. Long-term investors would be wise to snap up shares now -- while its stock remains in the doghouse.
