Investors love growth stocks for their ability to power their investment portfolio to new heights. If chosen right, such stocks can steadily grow your portfolio through capital gains as they continue to post higher revenue and profits. That said, such stocks usually come with higher valuations as they are boosted by optimism and could fall sharply if expectations are not met.
Hence, you must look for characteristics that ensure these stocks can recover from short-term challenges and post steady long-term growth. Ideally, you want to buy stocks that command strong market share in the sector they are in, are run by a capable management team, and possess sustainable tailwinds that enable them to post robust growth. It is not unusual for growth stocks to double or even triple your money in two or three years. This crop of three stocks has the right attributes to possibly lift your portfolio's value by five times or more in the next few years.
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1. Meta Platforms
Meta Platforms (META 0.43%) is a social media behemoth that owns the social media site Facebook, chat program WhatsApp, and picture and video-sharing site Instagram. The company saw a surge in the number of users during the pandemic as digitalization and border closures pushed more people to communicate with one another via social media. Although growth has since normalized, CEO Mark Zuckerberg declared 2023 a "Year of Efficiency" as the company refocuses on profitability. This focus is showing in Meta Platforms' financial numbers as its second quarter of 2023 saw the company posting 11% year-over-year revenue growth to $32 billion, along with a 16% year-over-year jump in net income to $7.8 billion.
If you thought that Meta Platforms shifted its priority away from growth, then you would be wrong. Zuckerberg appears to be maintaining a good balance between growth and profitability, as evidenced by Facebook's daily and monthly active users and some of the company's other products. For starters, daily active users rose 4.9% year over year to 2.1 billion, while monthly active users recorded a 3.3% year-over-year increase to 3 billion. Its new video-sharing service Reels taps into artificial intelligence (AI) to deliver suitable content to users, with more than 200 billion Reels playing daily across both Facebook and Instagram. Monetization is accelerating for Reels, with annual revenue run-rate clocking in above $10 billion, more than triple the $3 billion last fall.
AI is also powering other monetization tools within Meta Platforms' portfolio of products through automated ads, with the latest AI Sandbox offering generative AI functions to generate backgrounds and crop images. Over at the business-to-business side, around 200 million Whatsapp Business users can now create click-to-WhatsApp ads without needing a Facebook account. These new features showcase the company's wide slate of products, including recently launched Threads, a Twitter-like service that can potentially be monetized in the future.
2. Lululemon
Lululemon (LULU 1.31%) is the apparel brand of choice for yoga and fitness enthusiasts, with the company's patented material enjoying a cult following and strong loyalty.
Back in 2019, the company unveiled its five-year "Power of Three" strategy to double men's revenue, double digital revenue, and quadruple international revenue. The strategy was a resounding success -- Lululemon achieved all its targets earlier than anticipated. The yoga apparel specialist also posted strong revenue and net income growth over the past three fiscal years. For the fiscal years 2021 to 2023 (Lululemon has a Jan. 31 fiscal year-end), net revenue nearly doubled from $4.4 billion to $8.1 billion, while net income surged from $588.9 million to $854.8 million over the same period. This momentum has carried on into the first quarter of its fiscal 2024, with revenue climbing 24% year over year to $2 billion and net income rocketing up 52.8% year over year to $290.4 million.
Lululemon has announced its ambitious new follow-up "Power of Three x 2" strategy to once again double revenue by 2026 to $12.5 billion. Aside from this overarching target, the company once again intends to double men's revenue in 2021 within five years, double its digital revenue in the same period, and quadruple its international revenue. Lululemon will activate the same three pillars that helped it to achieve success in the first round -- product innovation by leveraging its Science of Feel, improving customer experience by building strong physical and digital connections, and expanding into new countries within Asia-Pacific and Europe, with plans to open its first stores in Spain and Italy. The company also launched a new initiative called Further, a new first-of-its-kind ultramarathon for women, to help build a larger customer base and endear more people to its brand. Armed with a strong brand following and a clearly communicated strategy, Lululemon looks set to once again achieve its trio of objectives.
3. CrowdStrike
CrowdStrike (CRWD 2.03%) is a market leader in cybersecurity and offers its Falcon cloud platform to clients to manage corporate security along with threat and identity protection services. The company was recently awarded an accolade by research firm Frost & Sullivan for being a leader in posting consistent growth that surpassed its larger competitors.
CrowdStrike also happens to be in the right place at the right time. With digitalization surging due to the pandemic and a sharp increase in the number of cyberattacks, threats, malware, and ransomware scams, demand for cybersecurity services should remain high for the foreseeable future, allowing all players within the industry to benefit.
CrowdStrike has posted impressive growth over the three fiscal years ended Jan. 31, 2023. Total revenue nearly tripled from $874.4 million to $2.2 billion from fiscal 2021 to 2023. In addition, the cybersecurity company generated positive free cash flow for all three years. Growth has stayed robust for its fiscal 2024's first quarter, with revenue jumping 42% year over year to a new record of $692.6 million, while annual recurring revenue also rose 48% year over year to $2.6 billion. CrowdStrike is also tapping on generative AI by introducing its Charlotte AI product that can improve threat surveillance and response through human feedback loops. The company is also working with Amazon Web Services to develop new generative AI applications that can enhance its platform and deliver improved security through the cloud. With tailwinds on its back, CrowdStrike identified a potential total addressable market of $158 billion by 2026 that should see it continue to steadily grow both its revenue and free cash flow.
