Those aged under 50 potentially have decades to build their wealth. So they should consider allocating some capital to growth stocks, which can potentially deliver enormous gains over the long run.
Here, I’m going to highlight three growth stocks that have significant long-term potential. All are listed in the US – a country with a great track record when it comes to innovation (and creating wealth for investors).
Amazon
First up is Amazon (NASDAQ:AMZN).
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A lot of people see Amazon as an online shopping company. But it’s so much more than this now.
Today, Amazon has exposure to cloud computing (an extremely profitable area of the business), streaming, digital advertising, artificial intelligence (AI), semiconductors, space/satellite broadband, logistics, self-driving cars, and more. Overall, it’s a monster of a technology company.
One reason I’m excited about Amazon right now is that, after years of cutting costs, its profits are soaring. For 2024, its net profit is expected to jump about 36%.
So while the stock is a little on the expensive side with a price-to-earnings (P/E) ratio of about 40 (which adds risk to the investment case), I’m comfortable with the valuation.
Uber
The second growth stock I want to highlight is Uber (NYSE: UBER).
This is another company I feel is a little misunderstood. Many people still see Uber as a basic rideshare company.
However today, Uber has exposure to food delivery, digital advertising, logistics, train and flight bookings, self-driving cars (it has partnered with Alphabet‘s Waymo), and more, meaning it has huge potential.
Like Amazon, Uber is seeing its profits soar. For 2024, net profit is expected to roughly triple to $2.5bn.
Although it currently has a high P/E ratio of around 50, the multiple is not that bloated relative to earnings growth.
Uber shares have had a strong run in 2023. So there’s a chance of a pullback in the near term. But taking a long-term view, I’m very bullish.
It’s worth noting that Uber is being added to the S&P 500 index later this month. This could increase interest in the stock.
Snowflake
Finally, we have Snowflake (NYSE: SNOW). It’s a data storage and analytics company with a distinguished list of customers (Mastercard, London Stock Exchange, Deliveroo, NHS, etc).
Snowflake has been growing at an incredible pace in recent years. And recent results for the quarter ended 31 October showed the company’s still flying.
For the period, revenue was $734m, up 32% year on year. Meanwhile, the number of customers with trailing 12-month product revenue greater than $1m came in at 436, up 52% on a year earlier.
On the back of these impressive results, a number of brokers raised their price targets for the stock. Citigroup, for example, took its target from $191 to $235.
This stock is higher up on the risk spectrum, because profits are still quite small at this stage. But I expect profits to rise meaningfully in the years ahead.
It’s worth pointing out that Warren Buffett owns around $1.1bn worth of Snowflake stock. This is very encouraging, to my mind.
