Apple has been one of the market's greatest growth stocks. Its shares soared 46,650% over the past two decades as the iPod, iPhone, and iPad revolutionized the digital music, smartphone, and tablet computing markets, respectively. Apple continued growing after Steve Jobs' death in 2011, and it expanded its ecosystem of subscription-based services while rolling out fresh products like the Apple Watch, AirPods, HomePod, and Vision Pro.
But this year, Apple might be due for a breather as its iPhone sales slow down. Analysts expect its revenue and earnings to rise just 3% and 7%, respectively, in fiscal 2024 (which ends this September) -- and those growth rates seem a bit low for a stock that trades at 28 times forward earnings.
Apple CEO Tim Cook. Image source: Apple.
Apple might still be a good long-term investment, but investors shouldn't be too surprised if its rally stalls out this year. Therefore, investors looking for some beefier gains should consider buying these three higher-growth stocks -- PDD Holdings (PDD 2.80%), Celsius Holdings (CELH 2.12%), and On Holding (ONON 2.66%) -- instead of Apple in 2024.
1. PDD Holdings
PDD, more commonly known as Pinduoduo, is the third-largest e-commerce company in China after Alibaba and JD.com. However, it's growing a lot faster than both of those market leaders.
From 2018 to 2022, PDD's revenue rose at a compound annual growth rate (CAGR) of 78%, and analysts expect it to continue expanding at a CAGR of 46% from 2022 to 2025. PDD also turned profitable in 2021, and its net profit nearly quadrupled in 2022. Analysts expect its net profit to increase at a CAGR of 41% from 2022 to 2025. Those are jaw-dropping growth rates for a stock that trades at just 19 times forward earnings.
PDD initially carved out a high-growth niche with its discount marketplace, which encouraged China's lower-income shoppers to team up and score steep discounts on bulk purchases. It then capitalized on its popularity to build an online agricultural platform that allowed farmers to directly ship their fresh produce to consumers.
The company also recently expanded into the U.S. and Europe with Temu, a shopping app that allows its Chinese merchants to reach overseas shoppers. As PDD has expanded, its profitability has improved as its scales up its business and phases out its lower-margin first-party marketplace.
PDD's valuation is being compressed by the market's aversion to Chinese stocks, but it could rally much higher if the regulatory headwinds dissipate and more investors recognize its explosive growth potential.
2. Celsius Holdings
Celsius sells sugar-free energy drinks made from natural ingredients like green tea, ginger, and amino acids. It claims its drinks have "thermogenic" properties that accelerate metabolism and burn body fat during workouts.
That health-conscious approach enabled Celsius to grow rapidly over the past few years and become the third-largest energy drink brand in the U.S. after Red Bull and Monster Beverage. Celsius also signed a U.S. distribution deal with PepsiCo in 2022, which should significantly boost its retail presence and brand recognition. The company still generates most of its revenue from the U.S. market, but it plans to gradually expand internationally over the next three to five years.
From 2018 to 2022, Celsius' revenue rose at a CAGR of 88%. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) turned positive in 2019 and grew at a CAGR of 160% over the following three years.
From 2022 to 2025, analysts expect its revenue to expand at a CAGR of 53% as its adjusted EBITDA increases at a CAGR of 91%. Those are stunning growth rates for a stock that trades at 53 times next year's adjusted EBITDA.
3. On Holding
On is a Swiss maker of athletic footwear and apparel. It's a lot smaller than Nike and Adidas, but it's growing at a much faster rate. From 2019 to 2022, its net sales rose at a CAGR of 66%. Analysts expect it to continue growing at a CAGR of 34% from 2022 to 2025.
On's shoes use its proprietary CloudTec cushions, which expand while a foot is airborne and lock down for a firmer foundation when it hits the ground. The popularity of its shoes -- along with endorsements from famous Swiss athletes like Nicola Spirig and Roger Federer -- enabled On to dominate the Swiss footwear market and gain footholds in the U.S. and Chinese markets.
On turned profitable in 2022, and analysts expect its net profit to grow at a CAGR of 63% from 2022 to 2025.
On, like athleisure leader Lululemon Athletica, sells its products at premium prices, tightly limits its markdowns, and is aggressively expanding its direct-to-consumer (DTC) channel to boost its gross margins and reduce its dependence on wholesale retailers. That sounds like a recipe for long-term success, but its stock still trades just a few dollars above its initial public offering price and looks like a screaming bargain at 30 times forward earnings.
