Investing in the top growth stock picks will always be thrilling in the financial space. A dynamic contrast paints the stock market canvas in 2023 with growth stocks, traditionally a powerhouse of returns, and encountered steep declines from the prior year. However, growth stocks have traded similar trading patterns to value stocks, with their price-to-earnings ratios notably below average.
The economic slowdown and rising interest rates over the past couple of years have weighed down corporate earnings. And yet, the always resilient market is on the mend. Inevitably, several fundamentally sound stocks are experiencing drops in share prices, mainly due to the overarching market downtrend.
With that said, let’s delve deeper into growth stock opportunities that could potentially redefine your portfolio.
Taiwan Semiconductor (TSM)
Taiwan Semiconductor (NYSE: TSM) stands tall as the world’s leading semiconductor foundry in the sprawling semiconductor landscape.
It serves as a potent manufacturing ally for businesses with its powerful fabless semiconductors. Recently, Taiwan Semiconductor revealed a rather tepid earnings outlook, reflecting the slowdown in consumer electronics. Moreover, the impending wave of investment into AI chips offers a spectacular counterbalance. This will potentially offset short-term weakness in the coming quarters.
From a broader perspective, with the infiltration of chips into connected cars, home appliances, and an array of novel fields, we could be on the brink of a major demand surge. With forward revenue and EBIT estimates at a remarkable 12.3% and 14%, respectively, TSM stock will continue seizing a colossal portion of this expanding market. Its stock is trading at just seven times forward sales estimates, roughly 93% lower than its 5-year average. Additionally, it yields an enticing 1.8%, almost 13% higher than the sector median.
Zscaler (ZS)
Operating in the high-demand realm of enterprise cloud security, Zscaler (NASDAQ: ZS) continues to prove the naysayers wrong. It rebound from a May low of roughly $90. Its stock skyrocketed over 75% to more than $157.5, fueled by escalating security threats and a strong market appetite.
Recently, Zscaler made waves by unveiling a series of cutting-edge security solutions enriched by AI. These tools are designed to secure the use of generative AI without compromising data or intellectual property. They include Zscaler Data Loss Protection (DLP), AITotal, Access control, and others. With multiple applications across various sectors, anticipation is strong to boost Zscaler’s revenue while expanding its service range.
Reflecting this optimism, Zscaler’s recent earnings report showed an impressive uptick. Revenues surged by an amazing 46% year over year, hitting $418.8 million, while billings rose by 40% year over year to $482.3 million. Notably, its GAAP net loss dropped to $46 million, a marked improvement from $101.4 million year over year.
Datadog (DDOG)
In the sprawling landscape of tech innovation, Datadog (NASDAQ: DDOG) has emerged as a shining beacon.
It showcases its powerful growth fueled by the growing utilization of AI. The firm has charted an astounding bump in the value of more than 50% year to date, firmly establishing its status among future premier growth stocks.
A key driver of Datadog’s appeal lies in its vast total potential market. As per a Fortune Business Insights report, the cloud monitoring market could grow at a compound annual growth rate (CAGR) of 24.1%, ballooning to 9.96 billion by 2030. Such projections paint a highly promising picture of the firm’s long-term prospects.
In the face of receding optimization challenges, relaxed competitive pressures, improved go-to-market execution, and favorable generative AI winds, Datadog could reach unprecedented heights. This confluence of factors suggests a potential surge in DDOG stock, fortifying its position on the growth stock radar.
On the date of publication, Muslim Farooque 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