Many high-growth stocks soared in 2021, helped by stimulus checks, social media buzz and commission-free trading apps that attracted legions of new investors. But over the next two years, many of these stocks have collapsed as rising rates squeezed their valuations, deepened their losses and pushed investors into more conservative holdings.
But today, many of these hypergrowth stocks seem reasonably valued relative to their growth. I believe three of these stocks… Palantir (NYSE: PLTR), Symbolic (NASDAQ: SYM)And SentinelleOne (NYSE: S) — are still worth buying right now.
1. Palantir
Palantir develops data mining and analysis tools for government agencies and large enterprises. Artificial Intelligence (AI) Services can be used to aggregate data from disparate sources to help organizations make more effective decisions.
Palantir’s revenue grew 24% in 2022 and 17% to $2.2 billion in 2023, but it missed its initial target of growing revenue by at least 30% annually through 2025. It blamed the slowdown primarily on uneven government spending and macroeconomic headwinds to its business.
However, the company expects its revenue to grow 20% to 21% in 2024 as its government operations stabilize and its U.S. commercial operations accelerate. Analysts expect its revenue to grow at a compound annual growth rate (CAGR) of 20% between 2023 and 2026.
Palantir’s stabilizing growth is encouraging, and the company has remained profitable on a generally accepted accounting principles (GAAP) basis for six consecutive quarters. Analysts expect its GAAP earnings per share (EPS) to grow at a CAGR of 56% from 2023 to 2026. Its stock isn’t cheap at 21 times this year’s sales, but it could have plenty of growth potential. room to run as the AI ​​market grows.
2. Symbolic
Symbotic develops automated robots for handling pallets and boxes in warehouses. The company claims that a $50 million investment in just one of its modules (which includes its robots and software) can generate $250 million in savings over a 25-year lifespan.
Symbotic’s revenue jumped 136% in 2022 and 98% to $1.18 billion in 2023, and analysts expect it to continue growing at a compound annual growth rate of 45% from 2023 to 2026. The company narrowed its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss from $90 million in 2022 to $18 million in 2023, and analysts expect this metric to turn positive in 2024 and grow at a CAGR of 165% through 2026.
Those growth rates are impressive, but Symbotic’s stock has fallen more than 30% this year as three issues have spooked bulls. First, it generated 88% of its revenue from Walmart (NYSE: WMT) in fiscal 2023 (which ended last September), and its competitors could prevent it from significantly diversifying its customer base in the coming years.
Second, Symbotic has increased its share count by more than 60% over the past 12 months thanks to its secondary stock offerings and stock-based compensation. Finally, the stock still doesn’t look cheap at 11 times this year’s sales. But despite all these challenges, I think Symbotic could still be a promising value in the growing warehouse automation market.
3. SentinelOne
SentinelOne is a cybersecurity company that automates its entire threat detection process with AI algorithms on its Singularity extended detection and response (XDR) platform instead of relying on human analysts. It claims this approach is faster, more accurate, and easier to scale for growing organizations.
SentinelOne’s annual revenue more than doubled in fiscal 2021, 2022, and 2023 (which ended last January). Its revenue still grew 47% to $621 million in fiscal 2024, but that slowdown, attributed largely to macroeconomic headwinds, has spooked bulls. Its lack of earnings has also made it a tough stock to own in a high-interest-rate environment. That’s why its stock is down more than 20% this year and remains 40% below its IPO price.
But going forward, analysts expect its revenue to grow at a CAGR of 27% between fiscal 2024 and 2027. They also expect its adjusted EBITDA to turn positive in fiscal 2026. We have to take these estimates with a grain of salt, but its stock looks reasonably valued now at 8 times this year’s sales. It could be a great way to profit from the AI-driven disruption of traditional cybersecurity companies, and it could be a compelling takeover target for one of its larger competitors.
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Sun Leo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and Walmart. The Motley Fool has a disclosure policy.
3 Hypergrowth Stocks to Buy in 2024 and Beyond was originally published by The Motley Fool
