After a painful stretch of trading last year, the stock market has enjoyed a strong rebound in 2023 -- and it could be in the early stages of a new bull market. For growth-focused investors, now could be a good time to steadily build positions in companies with massive long-term expansion potential.
If you're on the hunt for growth stocks capable of delivering next-level returns, here's a look at two category-leading technology specialists that have what it takes to be huge winners.
1. Roblox has under-appreciated performance drivers
Roblox (RBLX +0.14%) operates an online virtual world that houses thousands of different games and social experiences. The company's share price fell last month following second-quarter results that showed sales and earnings that fell short of Wall Street's targets, but BTIG analyst Clark Lampen thinks the stock will bounce back and deliver big gains before long.
NYSE: RBLX
Key Data Points
Among Wall Street analysts, Lampen is currently the most bullish on Roblox and has a one-year price target of $54 per share on the stock. With Roblox stock currently trading at roughly $28.50 per share, the analyst's price target implies a potential upside of about 90% over the next 12 months.
Despite Q2 results missing the market's expectations, bookings still rose 22% year over year to reach $780.7 million. Average daily active users also rose 25% to reach 65.5 million in the quarter.
Thus far, Roblox's primary revenue source has been the sale of the virtual currency that's used to purchase goods and content creation tools on its platform. But the company is starting to roll out advertisements on its platform, and Lampen believes this new monetization stream will be a game changer.
Whether or not the stock can hit or exceed the analyst's price target within the next year remains to be seen, but Roblox looks like a worthwhile buy for risk-tolerant investors seeking explosive growth plays. The company already has a sizable audience of highly engaged users, and the combination of continued expansion for its user base and advertising opens the door for potentially massive growth over the long term.
2. Nvidia's AI-powered growth is just getting started
Nvidia's (NVDA 0.28%) second-quarter report delivered performance and forward guidance that crushed the average analyst estimate, but the semiconductor specialist's stock has actually lost ground following the results. While the company delivered a blowout quarter across the board, some investors have adopted a more cautious stance on the stock following incredible gains this year. Rosenblatt Securities analyst Hans Mosesmann isn't one of them.
NASDAQ: NVDA
Key Data Points
Following Nvidia's incredible Q2 report, Mosesmann raised his price target on the stock from $800 to $1,100. With the stock currently trading at roughly $485 per share, the graphics processing unit (GPU) leader would deliver gains of 127% if it were to hit the analyst's target. It's not hard to see why Mosesmann is so excited about the company.
While Nvidia stock has already skyrocketed 232% year to date, the company appears to be entering a massive new growth phase. Demand for processing hardware and services to power artificial intelligence (AI) applications pushed the chip specialist's revenue up 101.5% year over year to hit $13.5 billion in Q2. Even better, this tailwind pushed earnings per share to $2.70 and net income to roughly $6.2 billion -- up 843% compared to the prior-year period. These results crushed the average Wall Street analyst's call for earnings per share of $2.09 on sales of roughly $11.2 billion.
Most Wall Street analysts also seem to have underestimated the business's near-term growth trajectory. While the average analyst target had previously expected Nvidia to guide for roughly $12.6 billion in sales in the current quarter, Nvidia wound up targeting approximately $16 billion in revenue for the period.
NVDA PE Ratio (Forward) data by YCharts
In his post-earnings write-up, Mosesmann cheered the company's virtually unprecedented sales, earnings, and guidance beats. He also stated that rising demand for accelerated computing capabilities was likely to continue driving transformative growth for the GPU leader's data center segment.
Trading at roughly 45 times this year's expected earnings, Nvidia's current valuation already factors in some strong performance. But the company has been blowing past Wall Street's expectations lately, and it's positioned to be one of the key drivers and beneficiaries of the AI revolution.
