As April drew to a close, a sinister cloud loomed over Wall Street, betraying the usually prosperous month with an unexpected turn of events. Inflation stuck like glue, the labor market resilient yet shaky, and the U.S. GDP growth rate took a significant downturn, shaking the confidence of investors in risky ventures such as equities.
Despite the turbulent end to April, U.S. stock markets staged a remarkable comeback in early May. Recent economic data breathed new life into equity market enthusiasts, with a steep drop in April job additions, a stark decline in the U.S. GDP growth rate for the first quarter of 2024, a contraction in manufacturing and services PMI in April, and a less assertive stance from Fed Chair Jerome Powell post the May FOMC meeting, all fostering anticipation of an imminent interest rate cut.
A Glimpse of Hope
The aftermath of April’s nonfarm payrolls release brought a beacon of optimism, with the CME FedWatch signaling a 67.4% likelihood of the central bank trimming the benchmark lending rate by 25 basis points during the September FOMC session. Additionally, interest rate futures are betting heavily on a 50 basis points rate slash, displaying a remarkable 91.5% probability.
Moreover, reports suggest that first-quarter 2024 earnings have surpassed initial expectations. As of May 7, 426 companies listed on the S&P 500 Index disclosed their financial results, showcasing a promising 5.2% surge in total earnings compared to the same period last year, fueled by a 4.1% uptick in revenues. Impressively, 78.2% of these companies surpassed EPS estimates and 61% exceeded revenue estimations.
Looking ahead, total earnings for the S&P 500 Index in the first quarter of 2024 are projected to rise by 4.8% on 4.2% elevated revenues, following a 6.8% earnings upswing with 4% higher revenues in the fourth quarter of 2023 and a 3.8% earnings increase with 2.2% higher revenues in the third quarter of the same year.
Echoes of Growth
Venturing into the growth stock arena promises a roulette wheel of potential gains in 2024. Focused on stocks displaying robust upside potential, five picks have emerged with glowing results in earnings estimate revisions over the past 60 days. Each jewel in this collection boasts a Zacks Rank #1 (Strong Buy) and flaunts a Growth Score A, setting the stage for an exciting journey ahead.
Displayed below is the year-to-date price performance chart of these five promising entities.
Image Source: Zacks Investment Research
The first gem, Netflix Inc. NFLX, reported a stunning addition of 9.33 million paid subscribers worldwide in the first quarter of 2024, coupled with a 1% surge in average revenue per subscription. Netflix attributed its dazzling top-line growth to multiple drivers, including its innovative paid subscription-sharing offering, strategic price alterations, and overall business robustness.
Expected to maintain its dominion in the streaming sphere, Netflix’s diversified content portfolio remains a key asset, fueled by significant investments in producing and distributing localized and foreign-language content.
Forecasts paint a bright picture for Netflix, with an anticipated revenue and earnings growth rate of 14.7% and 52.1%, respectively, for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has witnessed a 0.9% uplift in the last seven days.
Wingstop Inc. WING, a heavyweight in the restaurant industry, stands as a beacon of potential with its expected revenue and earnings growth rate of 27.5% and 37.1%, respectively, for the current fiscal year. Impressively, the Zacks Consensus Estimate for Wingstop’s current-year earnings rose by 12.2% over the past seven days.
Often lauded for its end-to-end automation platform, UiPath Inc. PATH delivers a spectrum of robotic process automation solutions primarily in the United States, Romania, and Japan. PATH’s fusion of artificial intelligence and cutting-edge technologies positions it as a frontrunner, evidenced by its anticipated revenue and earnings growth rate of 15.9% and 5.6%, respectively, for the current fiscal year ending January 2025. Noteworthy is the 16.3% surge in Zacks Consensus Estimate for the company’s current-year earnings over the past 60 days.
Threading the needle between comfort and style, Skechers U.S.A. Inc. SKX strategically expands its brand to cater to shifting lifestyle preferences. SKX’s innovative approach and global expansion strategies are set to drive revenue and earnings growth rates of 10.3% and 15.2%, respectively, for the current year. A notable 5.2% elevation in the Zacks Consensus Estimate for current-year earnings in the last 30 days bolsters Skechers’ prospects.
Medpace Holdings Inc. MEDP, renowned for its clinical research-based services in drug and medical device development, radiates promise with an expected revenue and earnings growth rate of 15% and 26.5%, respectively, for the current fiscal year. The Zacks Consensus Estimate for Medpace Holdings’ current-year earnings has appreciated by 6.6% over the last 30 days, underlining a positive trajectory.
Mining for growth in the stock market can be akin to a high-stakes poker game. The allure of potential returns often overshadows the risks at hand. Yet, these carefully selected growth stocks offer a glimpse into a future brimming with promise and prosperity for investors bold enough to seize the opportunity.