Savvy investors are constantly looking for investment options that offer significant returns. Growth stocks stand out for their ability to generate significant capital appreciation over time. Many growth stocks operate in innovative industries, using disruptive technologies or business models to gain a competitive advantage. These companies are frequently at the cutting edge of technological advancements and market trends.
However, investors don't necessarily have to part with a huge amount of money to include these growth stocks in their portfolio. Some outstanding stocks in hyper-growth industries, with the potential to generate massive returns over time, can be purchased for as little as $100. Here are two outstanding stocks to buy for under $100 and hold indefinitely.
Roblox Stock
Founded in 2004, Roblox (RBLX) initially flew under the radar. But over the years, its user base steadily grew, thanks in large part to its unique strategy of providing a platform for users to create and share their games within a vast virtual universe.
Unlike traditional video games, Roblox enables users to express their creativity, design their games with Roblox Studio, and monetize their creations through virtual goods sales.
Roblox is available on a variety of platforms, including Windows, Mac, Android, and others, which contributed to its widespread appeal. Roblox stock increased by 60.6% last year. However, the stock is down 11.4% this year, while the S&P 500 Index ($SPX) is up 8.7%.
The global pandemic boosted Roblox's platform demand, increasing revenue from $508.4 million in 2019 to $2.79 billion in 2023. Revenue grew by double digits in all four quarters of 2023, with the most recent quarter seeing a massive 30% increase. Bookings increased 25% year over year in Q4, and average daily active users rose by 22% to 71.5 million.
For the full year, a 23% increase in bookings led to a 26% year-over-year jump in revenue. While revenue growth is impressive, the company's bottom line has failed to impress investors, which is likely why the stock has fallen this year. Net loss for the year totaled $1.15 billion.
Turning to the balance sheet, Roblox ended the quarter with $2.2 billion in cash, cash equivalents, short- and long-term investments, and net of long-term debts. It also had a free cash flow balance of $124 million at the end of 2023. Its financial strength should allow it to continue investing in AI projects and advertising to generate profits.
For the first quarter of 2024, management expects bookings between $910 million and $940 million, with revenue ranging from $755 million to $780 million. For the full year, revenue is estimated to grow by 18% to 22%.
Analysts predict that revenue will increase by 20% in 2024 and 18.8% in 2025. RBLX stock is currently trading at 5.9 times forward estimated 2024 sales. For a fast-evolving robotics company, Roblox is a reasonable buy now, given its long-term opportunities in robotics, machine learning, and AI.
On Wall Street, analysts have given Roblox stock a "moderate buy" rating. Of the 23 analysts who cover the stock, 15 rate it as a "strong buy," one as a "moderate buy," five as a "hold," and two as a "strong sell." The average target price for Roblox stock is $49.05, 20.9% higher than current levels. Furthermore, its high target price of $60 implies a potential 48% gain over the next 12 months.
Palantir Stock
Palantir Technologies (PLTR), a data analytics company, is rapidly expanding thanks to its innovative AIP, or Artificial Intelligence Platform, which is popular with both government and commercial businesses.
On May 6, the company reported another strong quarter, beating consensus estimates - but the stock fell due to management's downbeat outlook for the year. In comparison to the market as a whole, PLTR stock is outperforming, up 24.6% year-to-date.
The government segment generates approximately 53% of Palantir's total revenue. In the most recent first quarter of 2024, the government segment generated $335 million in revenue, a growth of 16% year over year. Total revenue grew by 21% to $634 million.
Additionally, Q1 marked the company's sixth consecutive profitable quarter, with a net profit of $106 million under GAAP (generally accepted accounting principles).
Palantir's reliance on a small number of government contracts raises questions about revenue sustainability. While its expansion into commercial sectors has broadened its client base, the company's long-term growth prospects are still dependent on its ability to secure and retain government contracts.
As a result, the company is gradually working to increase its commercial segment clientele, which currently accounts for 47% of revenue. Aside from its collaborations with CAZ Investments and PwC, the company recently signed another agreement with Oracle (ORCL). Both companies partnered to provide "secure cloud and AI solutions" to both governments and business enterprises.
Oracle, as a larger and better-known technology company, can assist Palantir in gaining more customers and expanding its commercial segment. Management expects U.S. commercial revenue to increase by 45% in 2024 to $661 million. Total revenue is expected to be between $2.67 billion and $2.69 billion for the year. Furthermore, management expects to report GAAP profits for each quarter of 2024.
At the end of the first quarter, cash, cash equivalents, and short-term U.S. treasuries totaled $3.9 billion. The company also generated an adjusted free cash flow (FCF) of $149 million. Management expects adjusted FCF to range between $800 million and $1 billion in 2024.
Despite Palantir's outstanding growth, the stock's relatively high valuation has contributed to a generally bearish outlook from Wall Street.
Currently, PLTR stock is trading at 77 times forward estimated 2024 earnings and 19 times forward 2024 sales estimates. Analysts expect Palantir's revenue to increase by 21.4% in 2024 and 20% in 2025. Similarly, earnings are expected to grow by 30.5% in 2024 and 20.8% in 2025.
Overall, Wall Street is neutral on PLTR stock, rating it a "hold." Out of the 14 analysts covering PLTR, two rate it as a "strong buy," one as a "moderate buy," six as a "hold," one as a "moderate sell," and four as a "strong sell."
Following its Q1 results, Palantir stock is still trading above its mean target price of $20.85. Its high target price of $35 implies a potential upside of 63.6% over the next 12 months.
Though Wall Street has mixed feelings about PLTR, I believe it is a top AI pick right now, because the company has excellent opportunities as AI advances. However, given its high valuation, it would be wise to hold Palantir stock for the long term.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
