After years when many growth shares posted strong gains, the past few months have been a bumpy ride for many investors. However, I think that has thrown up some buying opportunities for my Stocks and Shares ISA.
Here are three growth shares I would consider buying for it now.
Alphabet
Over the past year, the share price of Google parent Alphabet (NASDAQ: GOOG) has grown just 1%. Meanwhile, the business continues to perform strongly and now trades on a price-to-earnings (P/E) ratio of 21.
Should you invest £1,000 in ITM Power right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if ITM Power made the list?
That may not sound cheap, but I think the growth story at Alphabet remains compelling. Over the past five years, revenues at the firm grew at a compound annual growth rate of 23%. Earnings growth was even stronger in the same period, coming in at an annual compound rate of 31%.
My Stocks and Shares ISA move
That would be good for any company, I feel, but what makes its more impressive is that Alphabet was starting from a large baseline. The company recorded over $258bn in revenues last year (it reports in dollars, of course, but in GBP it is £200bn, at current exchange rates). Double-digit percentage growth for a company with huge revenues is a major feat.
I think the growth at Alphabet reflects its massive user base and the way the company is integrated into their daily lives. I expect that to keep powering growth. A slowdown in ad spending could hurt profits, but I see the current Alphabet share price as an attractive buying opportunity for my Stocks and Shares ISA.
Netflix
The streaming giant Netflix (NASDAQ: NFLX) has a lower P/E ratio than Alphabet, at 17. Its shares have crashed 60% in the past year.
That reflects concerns about the ability of the company to retain customers and add new ones at the sorts of prices it needs to cover its costly productions. I do see customer churn as a risk to both revenues and profits. But I think the sell-off in these growth shares has been overdone, which is why I added the company to my Stocks and Shares ISA. Like Alphabet, Netflix benefits from a large installed customer base. It has expertise in monetising its content, so I think it can figure out the right pricing to stop too many customers cancelling their subscriptions.
Its content library gives it a unique competitive advantage. Over time, the company can spend less money developing new shows and rely more on a growing archive. That could be good for profits.
S4 Capital
The S4 Capital (LSE: SFOR) share price has taken a battering this year too, falling 49%.
That reflects concerns about its delayed results. But the company has now published audited results and promised to improve its financial controls. Meanwhile, the digital media agency group posted massive growth last year. On a like-for-like basis, billings grew 67%, revenue was up 52% and adjusted basic earnings per share increased 65%.
One ongoing concern I have is costs. S4 fell to a pre-tax loss last year, while margins shrank. If that continues, it could hurt profits. But I think the growth story here remains compelling. Now that the audited results have been published, I am considering taking advantage of ongoing share price weakness to buy more S4 Capital for my Stocks and Shares ISA.
