When it comes to the stock market, the key to reaping significant returns lies in the art of careful selection. Investing in growth stocks, particularly those from burgeoning sectors like cannabis, biotech, energy, or technology, can pave the way for substantial gains. As these industries evolve and expand, leading companies within them have the potential to capture sizable market shares, propelling their stock prices skyward.
Since the onset of the artificial intelligence (AI) era, technology firms have witnessed explosive growth, a trend that shows no signs of abating as we march further into the AI epoch.
Unveiling the Giants: Growth Stock No. 1 – Qualcomm Incorporated
Qualcomm Incorporated (QCOM) stands tall as a global powerhouse in the realm of semiconductors and telecommunications equipment. Renowned for its ground-breaking work in 3G, 4G, and 5G technologies through its Snapdragon processors, Qualcomm has garnered significant accolades from analysts and investors alike.
With a market value of $213.8 billion, QCOM’s stock has surged by a commendable 32.4% year-to-date, outpacing the Nasdaq Composite’s 19% gain. Despite challenges faced in fiscal 2023 due to inflationary woes hindering consumer electronics spending, Qualcomm has rebounded remarkably in fiscal 2024.
In the second quarter of fiscal 2024, total revenue witnessed a 1% uptick to $9.38 billion, with adjusted net earnings per share soaring by an impressive 14% to $2.44.
Market Dynamics: A Closer Look at Qualcomm’s Performance Metrics
Operating across two key segments, Qualcomm’s Qualcomm CDMA Technologies (QCT) division experienced a modest 1% year-on-year increase in Q2, encompassing handsets, automotive, and IoT chip businesses. On the other hand, Qualcomm Technology Licensing (QTL) saw a 2% growth.
Given the surge in the global smartphone market by 12% year-on-year in Q2, Qualcomm is poised to capitalize on generative AI advancements fueling handset chip sales in the future. While automotive chip sales surged by 35%, IoT chip sales exhibited a decline of 11%.
Moreover, Qualcomm has embedded generative AI features in its product line with the launch of the Snapdragon 8 Gen 3 processor, forming a strategic partnership with Samsung to power the latter’s Galaxy phones with this cutting-edge technology.
Celebrating Milestones: Qualcomm’s Financial Fortitude and Forecast
Qualcomm is not just about growth; it also values its shareholders, evident through its 1.7% forward dividend yield (above the tech sector average). With a forward dividend payout ratio of 29.9%, Qualcomm has consecutively increased its dividends over the past 22 years, symbolizing its commitment to rewarding investors.
Looking ahead, fiscal 2024 is anticipated to deliver a 6.8% revenue upsurge to $38.3 billion, with earnings set to climb by 17.7% to $9.93 per share. Analysts further project a double-digit growth in revenue and earnings for fiscal 2025.
Trading at a forward 2024 P/E ratio of 19.3x, below its historical average, Qualcomm emerges as a promising AI growth stock. Analysts remain cautiously optimistic, with a majority rating it as a “moderate buy,” suggesting a potential upside of 41% based on the high target price of $270 per share.
Beckoning Success: Growth Stock No.2 – Duolingo
Enter Duolingo (DUOL), a beacon in the realm of language learning apps and educational technology. Launched in 2012, Duolingo has witnessed meteoric growth, attracting a diverse user base with its gamified language learning platform available on mobile and web interfaces.
Despite facing headwinds with a 15.6% dip in its stock value, contrasting the S&P 500’s 17.8% gain, Duolingo remains a resilient force in the e-learning landscape.
Thriving in Diverse Markets: Duolingo’s Revenue Growth and Market Expansion
With a strategic blend of user engagement strategies and revenue models, Duolingo has emerged victorious in monetizing its platform. The introduction of Duolingo Plus, a subscription service offering additional features and an ad-free experience, has augmented the company’s revenue streams. Revenue spikes were evident as total bookings soared by 41% to $197.5 million in the latest quarter.
Driving this growth trajectory is Duolingo’s relentless commitment to innovation and global outreach, boasting over 97.6 million monthly active users, with a 54% surge in paid subscribers marking a robust expansion phase.
The future shines brightly for Duolingo, with analysts predicting a 38.1% revenue surge in 2024, translating into an earnings per share jump from $0.35 in 2023 to $1.68. Fiscal 2025 forecasts further project revenue and earnings escalations of 28.2% and 58.7%, respectively.
Analysts echo a sentiment of cautious optimism with a “moderate buy” rating for DUOL, citing a potential 38% upside from the current trading range based on a mean target price of $246.54. The high target price of $275 paints an even rosier picture, showcasing a 54% upside within the next 12 months.
Out of the 14 analysts tracking the stock, a majority have signaled a “strong buy” sentiment, underlining Duolingo’s prowess in the language learning domain and its promising growth trajectory.