Growth stocks had been badly hammered last year as the pandemic receded and interest rates surged.
It didn’t help that many technology companies also announced layoffs in a tacit admission that they had been too exuberant over their prospects.
However, I will argue that several companies still have what it takes to deliver growth amid these challenging conditions.
Investors need to latch on to businesses with strong franchises and possess dominant market positions within their respective sectors.
These attributes, along with quality management, will make the stock a sure-fire winner.
We feature four US growth stocks with lots of fuel in their tank to enable their earnings to continue increasing.
And when the business does well, we are confident that its stock price will naturally follow.
Meta Platforms (NASDAQ: META)
Meta Platforms is a social media giant with products such as the chat program WhatsApp, the video and photo-sharing platform Instagram, and the social media app Facebook.
The company reported a downbeat set of earnings for 2022.
Revenue dipped 1% year on year to US$116.6 billion while operating profit slid 38% year on year to US$28.9 billion.
Net profit plunged 41% year on year to US$23.2 billion.
There’s a silver lining, though.
CEO Mark Zuckerberg has deemed 2023 as the Meta Platforms’ “Year of Efficiency” and vowed to take cost-cutting measures to make the company a “stronger and nimbler organisation”.
The social media giant has made good on its promise, with more jobs expected to be axed this week after a first round of layoffs announced in March which will see 10,000 jobs eliminated.
Meanwhile, Meta Platforms is also pursuing growth in the field of generative artificial intelligence (AI) to use it to create ads for different companies by the end of 2023.
At the same time, the company is also opening its Horizon Worlds metaverse to teenagers in the US and Canada in the coming weeks as part of a trial to retain more users within the space.
If all goes well, the company’s metaverse ambitions can continue while the business right-sizes itself to prepare for ad growth this year.
Netflix (NASDAQ: NFLX)
Netflix offers streaming TV services and is one of the largest players in its industry.
The company is off to a slow start for the first quarter of 2023 (1Q 2023), with revenue growing 3.7% year on year to US$8.2 billion.
Operating margin rebounded strongly to 21%, up from the previous quarter’s 7%, but was down from 1Q 2022’s operating margin of 25.7%.
Consequently, net profit fell by 18.3% year on year to US$1.3 billion.
Investors have reason to cheer, though.
Paid memberships continued to rise to a new record of 232.5 million, up 4.9% year on year, adding another 1.75 million members to Netflix’s database.
Management expects roughly the same paid additions for 2Q 2023 and then a jump in 3Q as new member enhancement initiatives along with paid sharing kick in.
Netflix also quoted figures from Nielsen that showed it had a market share of 2% to 4% in markets such as Brazil, Mexico and Poland, suggesting that it has plenty of opportunity to capture more market share.
Adobe (NASDAQ: ADBE)
Adobe is a multimedia and software company that offers several software-as-a-service (SaaS) products delivered via cloud computing.
The company’s offerings include Creative Cloud, Document Cloud and Experience Cloud which deliver a range of services including digital signatures, image libraries, and customer relationship management.
Adobe announced record revenue for its 1Q 2023 ending 3 March 2023.
Revenue hit US$4.66 billion, up 9% year on year, while net profit dipped slightly by 1.5% year on year to US$1.25 billion.
The company also generated a free cash flow of US$1.59 billion for the quarter.
Adobe projects that its earnings per share for fiscal 2023 (FY2023) will rise by 8.9% year on year to end at US$11.
The company should also enjoy a long-term earnings boost from its US$20 billion acquisition of Figma back in September last year.
That is, if the acquisition is approved by authorities.
Although the transaction will lower earnings per share in the first two years after closing, management expects Figma to break even in year three and be profitable from then onwards.
Tractor Supply Company (NASDAQ: TSCO)
Tractor Supply Company is one of the largest rural lifestyle retailers in the US.
The company operated 2,066 Tractor Supply stores in 49 states as of 31 December 2022 and 186 Petsense stores in 23 states.
The rural lifestyle specialist reported a strong set of results for 2022, with revenue increasing 11.6% year on year to US$14.2 billion.
Net profit increased by 9.2% year on year to US$1.09 billion, and a total of US$3.68 in dividends per share was paid out, a sharp increase from the US$2.08 paid out a year ago.
The company’s Neighbors Club loyalty program has seen membership rise to 28 million, up 47% in the past two years.
Tractor Supply projects that revenue can hit between US$15 billion to US$15.3 billion for 2023, and that the company can enjoy comparable store sales of positive 3.5% to 5.5%.
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Disclosure: Royston Yang owns shares of Meta Platforms, Adobe and Tractor Supply Company.
