Stocks Poised for Massive Growth in 2024?

Although growth stocks plummeted in 2022, many of them bounced back in 2023 and so far this year has been pretty good for the iShares S&P 500 Growth ETF (NYSEARCA: IVW), which has rallied more than 14%.

Growth stocks are usually attractive to investors on the hunt for market-beating returns and willing to tolerate bigger downward swings as a result. Among the potential candidates that fit the bill for the remainder of this year are Zoom Video Communications (NASDAQ: ZM), Peloton Interactive (NASDAQ: PTON), and Roku (NASDAQ: ROKU).

Zoom Video Communications 

The wild 2020-21 era didn’t simply ignite Zoom’s share price but appears to have permanently boosted its user numbers and revenues.

Zoom hasn’t rested on its laurels and continues to expand its services in video communications and beyond as hybrid work environments remain popular. For example, the company recently launched Zoom Workplace, an artificial intelligence-based open-contribution workspace, and new AI Companion extensions to expand collaboration opportunities in the workplace.

In the enterprise market, Zoom has improved its features and security, as well as compliance to target large organizations. Acquisitions like Keybase for security and enhanced services, and partnerships with other firms like Dropbox and Slack, have made Zoom’s services the de facto standard in video communications.

Zoom also bought Workvivo in April of 2023 to expand the functionality of the firm’s collaboration platform. The acquisition provides clients with more ways to keep their employees informed and engaged.

In the most recent quarter, Zoom reported revenue of $1.14 billion, reflecting a 3.2% year-over-year increase driven by strong demand for its communication solutions and an expanding customer base.

Non-GAAP net income for the first quarter was $426.3 million, or $1.35 per share, compared well with last year’s figures.

Somewhat surprisingly, metrics show approximately 3,883 customers contributing more than $100,000 in trailing 12 months revenue, up approximately 8.5% from the same quarter last fiscal year.

Also, it had approximately 191,000 Enterprise customers and a trailing 12-month net dollar expansion rate for Enterprise customers of 99%.

With all its new product expansions and acquisitions, Zoom has the opportunity to broaden its distribution, generate higher revenues per customer, and enter new customer segments.

While the heady days of Zoom’s share price in 2020-21 are long gone, the future offers hope with analysts expecting a price to surge more than 28.5% over the next 12 months to $75.87 per share.

Among analysts, 21 out of the 30 rate the stock now as a ‘Hold.’

Peloton Interactive

Although Peloton began as a cycling platform, it has diversified its brand portfolio to add more product varieties such as treadmills and expanded internationally too.

Those initiatives have generally been well-received and translated to the profit-and-loss statement with the company reporting revenues of $717.7 million in the most recent quarter. That’s a 4% decline compared to the same quarter last year.

This fall was attributed to supply chain challenges and a slowdown in demand following the surge experienced during the 2020-21 heyday.

The ongoing concern for investors is that yet again management reported a net loss, this time of $167.3 million for the quarter, compared to $275.9 million in the prior-year quarter.

The executive team claimed 3.06 million Connected Fitness subscribers, almost unchanged from the same period last year. Even though the growth rate of new subscribers has slowed in recent years, the company is in a good spot to grow over the long term.

With that said, customer retention is notoriously difficult in the fitness game and so, to retain and expand the subscriber base, Peloton is broadening its selection of new products and services as well as improving its digital content offerings.

Cutting costs is also part of the overall plan to boost margins. The hope is that management can turnaround the company over the long-term and re-ignite a growth trajectory based on innovation, product differentiation, and geographic expansion.

So far, Peloton shareholders have been left holding the bag with the stock down 36% so far this year and 62% over the past twelve months. Nonetheless, the share price has been hovering in the $3 range for some time and that might well be close to the floor. If so, the $4.75 per share consensus target that analysts have in place may well be quite lucrative for new investors stepping in.

Roku

Roku rose to popularity in recent year and commands a large market share but it’s never stopped expanding and evidence of that trend continuing can be seen in launch of The Roku Channel, an ad-supported revenue generator for the firm.

New initiatives have been paying off with Roku’s revenue for the first quarter coming in at $882 million, a year-over-year increase of 19%.

Streaming households totaled 81.6 million globally for the quarter, a number so high that it can only be achieved if customers stick around. Such high retention also translates to lots of streaming hours, which totaled 30.8 billion, a rise of 5.7 billion hours year over year. Users are not only sticking around but are engaging more, the sign of a compelling product offering.

Roku’s average revenue per user stands at $40.65 on a trailing 12-month basis, and that’s a weak spot for the firm given that it hasn’t moved much recently.

Still, management is confident in the firm’s ability to broaden the suite of offerings and remain relevant. The company’s new technology to improve advertising products, explore new content providers, and enter new and underserved markets are all testament to its willingness to evolve.

While Roku has struggled on the bottom line, hopes are high that the number of active users, extended hours for streaming, and increased average revenue per user indicate will translate to a higher share price in the medium term.

Speaking of which, analysts see upside opportunity to $72.86 per share while a 10-year discounted cash flow forecast analysis paints a more optimistic picture and assesses fair value at $86 per share.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.