Last year, a stock market sell-off in 2022 and residual economic challenges highlighted the importance of investing with a long-term perspective. Doing so can help safeguard your investments from what often turn out to be temporary economic declines.
Numerous stocks got dragged down over the course of 2022, in large part because inflation reached levels not seen in 40-plus years. Investors who bought reliable growth stocks with plans to not sell for several years saw their stocks dip in price, but were less worried because they had no intention of selling those stocks.
Then, in 2023, those investors were rewarded as the market bounced back. Countless stocks soared alongside renewed interest in burgeoning industries like artificial intelligence (AI).
Three reliable growth stocks, Alphabet (GOOGL -0.46%) (GOOG -0.41%), Amazon (AMZN 0.47%), and Nvidia (NVDA 0.76%), saw price dips in 2022, but surged last year. These companies have potent positions in tech and will likely continue rewarding patient investors with significant gains in the new year.
Here's why these three growth stocks are at the top of my list in 2024.
1. Alphabet
Alphabet has enjoyed immense growth over the years, with its stock up 164% since 2019 and annual revenue rising 75%. The Google parent's majority market share in search engines has given it the funds and brand recognition to grow in several markets, which will likely keep Alphabet expanding in 2024 and beyond.
Brands like Google, Android, and YouTube have garnered billions of users and present almost endless advertising opportunities. As a result, Alphabet has become an advertising powerhouse, significantly profiting from the $740 billion digital advertising industry.
In the third quarter of 2023, Alphabet's revenue rose 11% year over year, beating Wall Street forecasts by $980 million.The company benefited from a return to growth in the digital ad market, as Google Search sales increased by 11% and YouTube ads by 12%.
Additionally, Alphabet is an exciting option for anyone investing in AI in 2024. The tech giant will launch a highly anticipated large language model it calls Gemini, which is expected to be competitive with OpenAI's top-shelf AI engine, GPT-4. The model could boost multiple areas of Alphabet's business and see it gain a powerful position in the industry.
Data by YCharts
Moreover, this chart compares the price-to-earnings ratios (P/E) and price-to-free cash flows of some of the biggest names in tech. Alphabet's lower figures on both fronts mean its stock offers the most value and is potentially one of the biggest bargains in tech.
2. Amazon
Amazon's stock is up 60% over the last twelve months after a stellar growth year. Cost-cutting measures and investments in lucrative sectors like AI have put the company on a promising trajectory that could offer major gains over the long term.
After repeated hits to its business in 2022, Amazon got to work restructuring its operations with a priority on profits. Cost-cutting moves like closing dozens of warehouses, thousands of layoffs, and shuttering unprofitable projects have been instrumental to the company's recovery, and have seen its free cash flow soar 427% in the last year.
The company is significantly benefiting from an improving e-commerce business and its highly profitable cloud platform, Amazon Web Services (AWS).
With its leading 32% market share in the cloud sector, AWS is well positioned to reap major benefits from AI. The cloud platform is steadily expanding its AI offerings, and recently announced a venture into chip development, which could make Amazon one of the biggest threats in the budding industry.
Data by YCharts
This chart shows that Amazon's earnings could reach nearly $5 per share by fiscal 2024. Multiplying that figure by the company's forward P/E of 44 yields a stock price of $211, projecting stock growth of 36% over the next fiscal year.
Pair this growth with recent cost-cutting measures and a growing position in AI, and Amazon stock looks like a no-brainer buy in 2024.
3. Nvidia
Nvidia's business has exploded in recent years, with its stock up over 1,400% since 2019. Much of that growth has occurred in that last year as the company's graphics processing units (GPUs) have become the gold standard for AI developers worldwide.
As interest in AI soared in 2023, so did demand for GPUs, and Nvidia was perfectly positioned to supply its hardware to the entire market. The company achieved an estimated 90% market share in AI chips alongside soaring earnings.
In the third quarter of fiscal 2024 (which ended October 2023), Nvidia's revenue rose 206% year over year as operating income increased 1,600%. The company profited from a spike in AI GPU sales, represented by a 279% rise in data center revenue.
Alongside lucrative positions in other areas of tech like cloud computing, PCs, video game consoles, and more, Nvidia's growth makes it an attractive growth stock to hold for many years.
Data by YCharts
This chart shows Nvidia's earnings could hit nearly $20 per share by its next fiscal year. That figure, multiplied by its forward P/E of 49, implies a potential stock price of $980 per share. If projections are correct, Nvidia's stock would rise 65% over the next year. It's a lofty target but based on reasonable financial forecasts.
As a result, Nvidia's stock strikes me as a screaming buy at the start of 2024.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy.
