The 2 Hottest Growth Stocks to Buy in 2024 and Beyond

Recent record highs in stock market indices pose a challenge for growth investors. The dramatic recovery of some AI-based stocks, particularly the “Magnificent Seven,” drove most of the index’s gains. In this situation, investors may feel skeptical about growth stocks that failed to join the rally, wondering that it is too late.

Despite these concerns, growth stock investors can still benefit, especially with stocks selling at significant discounts to 2021 highs. These investors may find opportunities in two cloud stocks. digital ocean (DOCN 3.71%) and snowflake (eye -0.42%).

1. Digital Ocean

Investors who missed out on the AI-enabled gains at Magnificent Seven can get a second chance at DigitalOcean. DigitalOcean is a cloud provider for small and medium-sized businesses (SMBs). By offering transparent pricing, a developer community, and a collection of tutorials and videos, we can help customers whose businesses are too small to run a proper IT department.

More importantly, it’s the H100 GPU chip. nvidiaDesigned to run AI applications, they cost about $30,000 each. DigitalOcean can therefore provide a valuable service by enabling SMBs to run generative AI applications on their servers.

Despite these potential benefits, DigitalOcean’s business model worked the other way during bear markets, when the recession caused customers’ IT spending to decline. Additionally, the recent CEO change has left investors uncertain about the company’s future direction.

Despite this, the company appointed Paddy Srinivasan, former CEO of business communications company GoTo, as CEO. These changes at the top provide an opportunity to move in a new positive direction.

Additionally, improvements had already begun before the CEO change. Sales in 2023 were $693 million, up 20% from the previous year. This helped the company go from a loss of $28 million in 2022 to a net profit of $19 million in 2023.

It also expects revenue to be between $755 million and $775 million in 2024, an increase of 10% at the midpoint. This will help your profits go much higher. Additionally, analysts predict a forward P/E ratio of 24. Assuming DigitalOcean’s cloud and AI services become more valuable to small and medium-sized businesses, the stock could be higher in 2024 and beyond as more investors recognize that value at a lower price.

2. Snowflake

Of course, Snowflake may seem like a counterintuitive choice at first glance. Slowing growth and rising valuations appear to be slowing investors down.

Additionally, CEO Frank Slootman’s sudden retirement and replacement with Sridhar Ramaswamy, former CEO of Neema (now owned by Snowflake), was not well received by investors. Snowflake shares have fallen by about a third since the company released its earnings report in late February.

However, investors should remember that the company’s shares trade at high valuations due to its investor-friendly business model. First of all, Data Cloud is agnostic when it comes to cloud providers. So, our competitors are: Amazon It will promote Snowflake while also offering its own data cloud product. Customers also pay based on usage. The more you use, the more you earn.

Increased usage will boost revenue to $2.8 billion in fiscal 2024 (ending Jan. 31), a 36% annual increase. This included net revenue retention of 131%, meaning the average long-term customer spent 31% more on the platform than a year ago.

Losses for fiscal 2024 were $836 million, up from $797 million a year earlier. Nonetheless, the net loss was the product of approximately $1.2 billion in stock-based compensation (non-cash expenses). As a result, non-GAAP (adjusted) free cash flow for the fiscal year was $810 million, enabling the company to cover immediate costs without requiring external financing.

The company expects product revenues to grow 22% in fiscal 2025, and slowing growth could cause concern for investors. Still, Snowflake’s expensive P/S ratio of 18 is actually close to an all-time low. These factors can reduce downside risk and turn recent share price declines into buying opportunities.