Following a robust start to the year, growth stocks to buy are in a decline of late, and the reasons behind this decline are understandable.
Although inflation was subsiding for a while, recent data indicates a negative trend. Consequently, the Federal Reserve has reinforced its stance on increasing interest rates and taking action to extinguish the inflationary blaze.
Incorporating growth stocks from both large and small businesses is essential for a sound financial portfolio due to their capital appreciation potential over time. I’m going to highlight three growth stocks to buy which have run nicely this year, and suggest why they could have more room to run.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) ranks among the first companies that spring to mind when considering growth stocks to buy with the greatest potential in the artificial intelligence (AI) realm. As an established player in this field, Microsoft made headlines for elevating its involvement with OpenAI, the entity responsible for the inception of ChatGPT.
This tool has genuinely showcased the remarkable capabilities of AI. ChatGPT has been used to write texts, essays, speeches and even an episode of South Park. Microsoft just invested more than $10 billion in this innovative company, a huge boost from its initial $1 billion investment 2019 and an indication of the company’s dedication to the development of AI.
For a secure bet on AI technology, Microsoft is a wise choice. The company has established itself as a pioneering force in the industry by integrating AI into its Bing search engine. As time progresses, Microsoft will likely introduce advanced AI capabilities into other core products, such as Microsoft Word, effectively reshaping the standard features of the Windows work environment. Also, Microsoft has their Azure cloud-based platform which is ideal for providing the computational capacity needed to operate AI. Microsoft is primed to succeed on several fronts as AI solutions continue to gain popularity and implementation.
In 2023, the stock experienced a notable 14% surge. The company exhibits a strong growth trajectory, evidenced by an impressive three year sales growth rate of 16.5%-plus. Furthermore, investors can enjoy a moderate dividend yield of 1%. Based on a 12-month forward price-to-earnings ratio of 26.4 times, this stock may be an attractive addition to any growth-focused investment portfolio.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) offers complete privacy and infrastructure services to various industries. This includes smaller firms, public sector companies, intelligence service companies, big corporations and telecom services. Each company’s specific demands are met by its customized digital solutions which safeguard them from online dangers. With existing customers that are diverse in terms of sectors and companies, Fortinet is a dependable ally for all communications and cyber protection requirements thanks to its significant expertise and knowledge in the field.
As a leading player in the cybersecurity realm Fortinet is a wise investment choice. They have demonstrated impressive market resilience in the past year. Even amid a challenging spending environment, the company is posting robust market returns. These returns have surpassed those of its software industry counterparts by a wide margin. This attests to the enduring strength of cybersecurity expenditure, and the market’s outlook for the company and its peers.
With a year-to-date gain of over 30%, Fortinet’s impressive performance reinforces its position as a top cybersecurity stock to consider. Fortinet’s impressive sales growth, achieved amidst the challenges of an inflation-burdened economy and tight infrastructure budgets, has garnered the attention of investors.
Network security is an essential function that cannot be scaled down even in challenging market conditions, and Fortinet’s robust performance in this area is particularly noteworthy. The company’s strong profit margins also set it apart from other cybersecurity providers, making it a desirable investment option.
Lululemon (LULU)
Lululemon (NASDAQ:LULU) is a distinguished company that designs, distributes and retails lifestyle-inspired athletic apparel and accessories. The company has two primary segments, which are company-operated stores and direct-to-consumer sales. Its athletic apparel comprises pants, shorts, tops and jackets specifically crafted for promoting a healthy lifestyle.
Lululemon has experienced a boost in sales due to affluent shoppers continuing to purchase its premium-priced clothing. This contrasts with the trend of cautious customers reducing their spending on non-essential items due to inflation concerns. According to Raymond James analyst Rick Patel, Lululemon successfully attracts more customers to its brand by introducing new products, such as tennis and hiking apparel, which capture a more significant share of consumers’ spending.
As per Refinitiv IBES statistics, Lululemon expects its sales for the calendar year 2023 to be between $9.30 billion and $9.41 billion, above the annualized rate of $9.14 billion provided by experts. In addition, the business expects full year earnings of $11.50 to $11.72 per share versus experts’ projections of $11.26.
Lululemon has released optimistic predictions for its first-quarter results and has exceeded fourth-quarter expectations. If these numbers pan out, investors could be getting this company for a cheaper multiple than they think.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.