The market as a whole might seem shaky right now, but the right growth stock is capable of standing up to that. The very best of them can push right through marketwide headwinds, in fact.
Here's a closer look at three growth stocks that are screaming buys right now despite the wobbly market environment. While all of them could remain volatile from day to day, they're all worth a look as potential long-term additions to the growth portion of your portfolio.
1. Shopify
Shopify (SHOP 1.23%) shares are up for the past year, recovering from their huge post-pandemic sell-off, but the recovery is unreliable. The stock is down 13% in just the past three weeks, repeating a familiar pattern that's been in place since late last year.
NASDAQ: SHOP
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The bigger-picture bullish thesis remains the same, though: Businesses increasingly want to build an e-commerce presence, but they decreasingly want to rely on Amazon (AMZN +2.05%) to do it.
Using Shopify's e-commerce tools, merchants and manufacturers can build their own online stores their own way, handling the entire customer experience from start to finish, and owning any customer data created by the purchase. That's crucial in the current consumerism environment; in many regards, third-party sellers using Amazon as a sales platform are fueling their fiercest competitor.
The numbers back up this bullish argument. Shopify's revenue is projected to grow 24% this year, pushing last year's per-share profit of $0.04 up to $0.49. Next year's expected top-line growth of 19% should drive the bottom line up to $0.74 per share.
Shopify abandoned its budding logistics business earlier this year, suggesting it has its own headwinds to deal with at a time when Amazon continues to expand its own third-party delivery and logistics operation.
Don't read too much into Shopify's decision, though. With the presence of Amazon, FedEx, and UPS, it was always going to be tough to reach enough scale to sustain an in-house delivery system. Getting out of the experiment sooner than later just makes good sense.
In the meantime, the fact that subscribers to Amazon Prime will soon be able to use their Prime credentials to buy directly from Shopify's sellers suggests it's actually Amazon in need of new ways to grow its business. Perhaps the $55 billion in sales Shopify's clients made last quarter alone has something to do with Amazon's willingness to partner up with its fast-growing competitor.
2. Leidos
It's likely that nobody in your household has ever even heard of Leidos (LDOS 1.78%). But there's a very good chance you or someone living in your house has been affected by what this $13 billion company does.
In simplest terms, Leidos uses artificial intelligence (AI) to make life better with something practical -- and marketable. That's vague, but it fully captures the fact that this company can use all sorts of data in a variety of ways. Air traffic control, energy management, law enforcement, hospital management, and environmental protection are just some of the solutions it's able to offer.
Its clients include utility company Nashville Electric Service, the U.S. Department of Energy, John F. Kennedy International Airport in New York City, and the U.K. Atomic Energy Authority's waste-handling arm, to name a few.
OK, it stretches the definition of "growth stock." This year's and next year's expected revenue growth is only around 5%, with projected earnings growth in the same ballpark. And the stock itself is still priced right around where it was in late 2019 despite lots of volatility since.
NYSE: LDOS
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Don't be too deterred by the lack of meaningful progress, though. This stock is well undervalued given what the company itself is doing. At its current price near $93 per share, Leidos is 22% below the consensus target of $114.23, with the lowest suggested price target of $100 per share.
3. Adobe
Last but certainly not least, add Adobe (ADBE 2.00%) to your list of growth stocks that are screaming buys right now.
Yes, the software company's stock stumbled last week following the release of its third-quarter results, but there's more to consider.
NASDAQ: ADBE
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A closer look at the numbers shows revenue of $4.9 billion was up 10% year over year, topping estimates. Per-share operating earnings of $4.09 were up 20% year over year, also higher than expectations. Profit guidance of $4.10 to $4.15 per share for the current quarter beats the $4.06 analysts were expecting -- and it will beat the $3.60 per share in the year-ago quarter.
The only sticking point was revenue guidance. The $5 billion midpoint of Adobe's expected sales range for its fourth quarter is merely in line with the analyst consensus. That's still up 10% from the year-ago comparison of $4.53 billion, though, and in this challenging economy, this consistent growth is incredibly impressive.
The key to this consistency is the business model itself. Adobe is still the name behind popular software titles like digital image editor Photoshop and document-management platform Acrobat. It doesn't outright sell a whole lot of this software these days; instead, it rents access to cloud-based versions of them through its Digital Media platform. This translates into reliable recurring revenue.
It's also sticky revenue: Once a consumer or corporation starts paying for access to these tools, it's difficult to simply turn access off since they often become crucial to workers' day-to-day functions. And for users, this option is also often cheaper than making a one-time purchase of software that's soon outdated anyway.
Adobe's Digital Media platform now generates recurring revenue at an annualized pace of $14.6 billion, up $464 million from just a quarter earlier. For perspective, that figure represents more than 80% of last year's entire top line, and three-fourths of the $19.4 billion worth of sales analysts expect to company to generate this year.
Adobe's only real challenge is bringing new customers into the fold, which it's able to do thanks to its cost-effective cloud-based software.
