With the market hovering near its all-time highs, it might seem like the right time to pivot from high-growth stocks toward more conservative value plays. That would be a prudent move, but investors who hastily ditch all of their growth stocks could miss out on some big long-term gains.
So instead of shunning all growth stocks, investors should focus on the ones that can support their rising valuations and still have plenty of irons in the fire. I believe these three stocks fit the bill: Shopify (SHOP 1.48%), PDD (PDD -0.36%), and Carvana (CVNA 1.51%).
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Shopify
Shopify's self-service e-commerce platform allows merchants to set up their own online stores, process payments, fulfill orders, and manage their own marketing campaigns. That one-stop shop makes it an appealing choice for merchants who don't want to join a big third-party marketplace like Amazon. It's a popular choice for businesses that sell their products on social media platforms like Meta Platforms' Instagram, but it's also been locking in larger merchants with its Shopify Plus platform.
Shopify tethers its merchants to its own Shop Pay platform for digital payments, its Shopify Capital platform for loans, and its consumer-facing Shop app. Its merchants can also fulfill orders through Amazon's fulfillment network with its integrated "Buy with Prime" buttons.
Shopify's growth accelerated significantly during the pandemic, but has slowed down over the past three years. However, it turned profitable again in 2023 after it divested its logistics unit, laid off thousands of employees, and executed other cost-cutting measures. In 2024, its earnings per share (EPS) rose another 50% as it expanded its higher-margin subscription services and continued cutting costs.
From 2024 to 2027, analysts expect Shopify's revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to grow at a compound annual growth rate (CAGR) of 21% and 33%, respectively, as it locks in more merchants amid a warming macro environment. Its stock might seem a bit pricey at 76 times this year's adjusted EBITDA, but it could remain a leader in the growing market for independent e-commerce services for the foreseeable future.
PDD
PDD is China's third-largest e-commerce company after Alibaba and JD.com. It initially carved out a niche with its discount marketplace, which targeted lower-income shoppers across China's lower-tier cities, and it subsequently launched an online agricultural platform that allowed farmers to sell their fresh produce directly to consumers. It also expanded overseas with Temu, which connected its Chinese merchants to overseas customers in the U.S. and other markets.
PDD grew a lot faster than Alibaba and JD.com, and it gained ground in China's top-tier cities as it expanded Temu overseas. Moreover, China's tighter antitrust restrictions against Alibaba's e-commerce business -- which were implemented in 2021 -- made it easier for PDD, JD.com, and other smaller e-commerce marketplaces to expand.
From 2024 to 2027, analysts expect PDD's revenue and adjusted EBITDA to grow at a CAGR of 13% and 9%, respectively. Its business is gradually maturing, but it still looks like a screaming bargain at 8 times this year's adjusted EBITDA. If the U.S. and China reach a favorable trade deal, it could easily beat analysts' expectations and command a higher valuation as investors pivot back toward Chinese stocks.
Carvana
Carvana is an online marketplace for used vehicles that aims to disrupt brick-and-mortar dealerships with its streamlined buying process. Instead of haggling with dealers, its customers can complete the entire buying process online, then have the cars delivered to their homes or collect them from its "vending machine" towers.
Carvana's unit sales surged in 2020 and 2021 as the pandemic disrupted the production of new cars and drove more consumers to buy their used vehicles online. Stimulus checks and near-zero interest rates generated additional tailwinds for its business. But in 2022 and 2023, it sold fewer vehicles as it lapped those gains and interest rates rose again.
In 2024, Carvana's unit sales surged 33% as interest rates declined and the used car market warmed up again. The recovery was buoyed by the online auction platform ADESA, which it acquired in 2022, and its growth in monthly unique website visitors -- which grew by more than 5 million year over year to 20 million at the end of 2024. From 2024 to 2027, analysts expect its revenue and adjusted EBITDA to grow at a CAGR of 25% and 33%, respectively. Those are stunning growth rates for a stock that trades at 24 times this year's adjusted EBITDA -- and it could soar a lot higher over the next few years as the automotive market heats up again.
