Growth stocks gave investors a wild ride over the last few years. After soaring for most of the last decade, the Nasdaq Composite fell hard in 2022. While the index is up 29% this year, many growth stocks are still selling well below their previous highs.
This is a good time to put some money to work in some of these beaten-down growth stocks. Market leaders like Airbnb (ABNB 0.75%), Imax (IMAX -1.77%), and Lululemon Athletica (LULU 1.31%) reported strong revenue increases this year, fueled by solid demand for their services. These companies have bright prospects for more growth.
Indeed, it wouldn't be surprising to see these stocks deliver market-beating returns through 2030, given their above-average revenue growth and fair valuations.
1. Airbnb
Airbnb stock is down about 14% since its initial public offering a few years ago. But it's starting to climb after falling hard in 2022.
Year to date, the stock is up 45%. Airbnb has continued to report strong growth on the top and bottom lines. Revenue has nearly doubled over the last two years. Most importantly, the business is becoming more profitable as it expands, with the company reporting a record profit margin of 26% in the second quarter.
Airbnb has plenty of tailwinds. Guests are booking stays for longer durations, which means more service fees for hosts and more revenue for Airbnb. As travel demand rises, more hosts are listing their properties on the platform to make money. This in turn drives more guests to Airbnb, driving a lucrative growth cycle.
Airbnb has emerged as leading platform in a growing travel industry. With long-term growth in the industry projected at a mid-single-digit rate, Airbnb's faster rate of growth means it is absorbing a large share of the opportunity, which will make it a rewarding investment over the next decade.
Considering prospects for double-digit growth and healthy margins, the stock's forward price-to-earnings (P/E) ratio of 31 seems fair.
2. Imax
Imax experienced a blockbuster summer with strong box office numbers from Oppenheimer. The company recently reported its highest-grossing July in history. The stock has not fared well over the last decade, down around 28% from where it traded in 2013. But it's up 32% year to date, as the future is looking very bright for the leader in movie systems technology.
It was a strong start to the year, with revenue up 38% year over year in the first half of 2023. More moviegoers are choosing to see movies at Imax, and that's largely because of the blockbuster films that are being made to take advantage of the superior audio and imaging technology showcased at Imax theaters.
When you buy stock in Imax, you're basically buying a royalty for future Hollywood blockbusters. Imax says it grabbed 20% share of global receipts for the opening weekend of Oppenheimer.
In an era of jumbo-sized TVs, moviegoers want something they can't get at home, which spells opportunity for Imax. The company has a long runway of growth ahead to install more Imax systems in international markets and grow its tiny share of 3.3% of the global box office. Specifically, Imax is looking to capitalize on the demand for local language content, which is exploding and is a strong catalyst for long-term growth.
With these tailwinds, the stock looks attractive at a forward P/E of 23, which is a discount to the market's average P/E of 25. As Imax continues to sign more system installations and upgrades around the world, the stock could soar through 2030.
3. Lululemon Athletica
Shares of the emerging global athletic wear brand are up 180% over the last five years. But with the stock stagnating over the last two years, now might be a great time to consider starting a position or buying more shares.
Lululemon has posted high growth for many years. The athletic apparel industry has been one of the more consistent growing clothing markets for a long time. This is primarily due to the expanding global penetration of leading brands, and the long-term trends toward healthier lifestyles.
Lululemon's trailing-12-month revenue of $8.5 billion is a fraction of the combined revenue of global sports giants Nike and Adidas. This suggests a long runway of growth ahead. Lululemon was founded more than 20 years ago but is still growing strong. It reported a 24% year-over-year increase in revenue in the most recent quarter.
While international markets reported strong growth of 60% in comparable sales last quarter, it's very telling of Lululemon's global growth potential that comparable sales in North America also grew at double-digit percentages.
Given the company's record of growth and opportunities for international expansion, the stock looks fairly valued at a forward P/E of 32. At this valuation, the shares should deliver returns consistent with the growth of Lululemon's business, and considering Lululemon's double-digit growth, that should earn investors market-beating returns through 2030.
