The stock market gives investors many choices. There are thousands of corporations offering their shares in the public markets. Holding onto the right equities can lead to meaningful long-term returns.
Some stocks are better than others and have the potential to become rising stars. This class of equities can outperform the market and reward long-term investors. If you are looking for some growth stock ideas, you may want to consider these companies.
Supermicro (NASDAQ:SMCI) has enjoyed a bull run of the ages with a 132% year-to-date gain that has comfortably outperformed the major indices. The company’s servers are built to handle the intense workload of artificial intelligence chips and are gaining momentum.
Supermicro’s rapid growth at the start of the year emerged due to the company’s exceptional earnings and guidance. Net sales more than doubled year-over-year in the second quarter of fiscal 2024. The midpoint of Supermicro’s third-quarter guidance ($3.9 billion) suggests revenue will grow by over 200% year-over-year. Supermicro closed out Q3 FY23 with $1.3 billion in revenue.
Inclusion into the S&P 500 seems inevitable at this point and will help the stock rally higher. Since the S&P 500 is a weighted index, Supermicro will become a larger percentage of the index as its market cap expands. Supermicro is generating all of this momentum without being in the index.
Investors may also want to note that a board member recently bought $1 million worth of shares in the company. This purchase took place after the equity took off in 2024. Insiders are bullish, and it’s easy to see why.
Artificial intelligence played a role in search engine and cloud revenue. Alphabet has been using AI to improve its products so businesses have more reasons to stick around. Cloud revenue was a standout with its 25.7% year-over-year growth rate.
The company’s Other Bets segment also performed well but represents a minuscule segment of total revenue. While Other Bets is an unprofitable segment, Google Cloud recently became profitable and can expand margins in the future.
Alphabet has two massive cash flow-producing segments that can fund other growth opportunities. The firm changed its name from Google to Alphabet to indicate the company wants to be more than just a search engine and a video platform. The corporation is strong already and looks poised to gain market share in multiple verticals.
Elf Beauty (ELF)
Elf Beauty (NYSE:ELF) is a cosmetics brand that only uses ethical ingredients in its beauty products. The company has been a big hit among Gen Z and other age groups.
Shares have surged by over 1,750% over the past five years, and it looks like they can generate more gains for investors. The company’s recent earnings report offered more reasons for optimism.
Elf Beauty reported an impressive 85% sales growth rate in the third quarter of fiscal 2024. That’s a higher growth rate than the 78% year-over-year revenue growth posted in the previous quarter. The company gained an additional 305 basis points of market share.
This marks the company’s 20th consecutive quarter of sales growth. Net income jumped from $19.1 million to $26.9 million which is a 40.8% year-over-year increase.
Elf Beauty raised guidance considerably for fiscal 2024. The midpoint in fiscal 2024 revenue guidance was previously $901 million. The midpoint has been moved to $985 million which indicates strong growth in the upcoming quarter.
Microsoft (NASDAQ:MSFT) is the largest publicly traded company by market cap. If you invest in a fund that mirrors the S&P 500 or Nasdaq 100, you already have exposure to this equity.
Microsoft has gained 55% over the past year and is up by 292% over the past five years. Double-digit growth rates in enticing verticals helped the tech conglomerate reach a $3 trillion market cap.
The company’s earnings results for Q2 FY24 highlight why it’s been a top stock. Revenue increased by 18% year-over-year while net income jumped by 33% year-over-year. Microsoft’s completed Activision Blizzard acquisition and further successes with artificial intelligence contributed to the financial results.
Microsoft Cloud revenue was a standout and was up by 24% year-over-year. Cloud is a meaningful revenue driver for the company that can remain high for many years to come. The firm hasn’t shied away from making big investments and can use its capital to acquire additional companies.
Cloudflare (NYSE:NET) keeps many websites up and running. The content delivery network firm also has several cybersecurity features designed to keep its clients safe from attacks.
Cloudflare has a good reputation for outperforming the market. Shares are up by 87% over the past year and have gained 506% over the past five years.
The company’s fourth-quarter results drew plenty of excitement and resulted in a 20% gain in the stock price. During that quarter, Cloudflare grew revenue by 32% year-over-year. The firm also achieved record operating cash flow and record free cash flow.
Cloudflare is experiencing more demand for its services and broke a new record for the annual contract value for one of its customers. The company didn’t stop at signing its largest new customer. Cloudflare also sealed the deal on its largest customer renewal ever. Customers are turning to Cloudflare in an uncertain economy to stay safe from hackers and keep their systems up and running.
The company’s artificial intelligence initiatives have given customers more choices and better results. George Kurtz, Crowdstrike’s president, co-founder, and CEO, shared promising news about those efforts in the press release.
“Customers increasingly trust the AI-native Falcon XDR platform as their cybersecurity consolidator of choice,” Kurtz stated.
The company is also sitting on $3.17 billion in cash which it can use to make acquisitions. While stock buybacks should be ruled out for now since the company is still expanding, investors can feel more confident knowing Crowdstrike has a large cash position and is generating profits.
The equity has rewarded long-term investors so far. CRWD stock is up by 202% over the past year and has a 5-year gain of 413%. Crowdstrike is one of the top cybersecurity firms and offers exposure to a rapidly growing industry.
Broadcom (NASDAQ:AVGO) is a top-performing semiconductor stock that recently surpassed a $600 billion market cap. The equity’s 1-year and 5-year gains stand at 116% and 355% respectively.
The company has benefitted from semiconductor tailwinds for many years, but artificial intelligence has propped the stock higher in recent months. Broadcom’s Trident 5-X12 is the answer for companies that want effective AI chips.
The cutting-edge chip contributed to Broadcom’s 5% year-over-year revenue growth in the third quarter of fiscal 2023. Broadcom initiated $2.17 billion in stock buybacks and accumulated 2.9 million shares.
Broadcom continues to give out dividends to investors and recently hiked its quarterly dividend from $4.60 per share to $5.25 per share. That’s a 14.1% growth rate.
Broadcom also has a vast software business segment that became stronger from its VMware acquisition. The tech firm has the potential to exceed $1 trillion in market cap within a few years.
On this date of publication, Marc Guberti held long positions in SMCI, ELF, MSFT, NET, and AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.