Growth stocks, the linchpins of wealth creation, captivate investors with their potential for outsized returns, often outpacing broader market gains. These companies, driven by innovation and robust fundamentals, thrive in emerging industries or capitalize on transformative trends, making them pivotal for long-term portfolios.
Recognizing this, JPMorgan analysts recently updated their coveted “Analyst Focus List,” a curated selection spanning growth, income, value, and short ideas.
Three names on this list stand out – chipmaker Broadcom (AVGO) , Vistra Corp. (VST) in energy transition, and cybersecurity firm CyberArk Software (CYBR). Each of these stocks not only exemplifies strategic positioning within its sector, but also boasts solid upside potential, as highlighted by JPMorgan's analysis.
Let’s dive into these standout picks to uncover why they are commanding the spotlight among growth-oriented investments.
Growth Stock #1: Broadcom
Founded in 1961 and based in Palo Alto, California, Broadcom is a global leader in infrastructure technology, providing a wide range of semiconductor and infrastructure software solutions for data centers, cloud computing, networking, and wireless communications. Its market cap currently stands at $835.75 billion.
Shares of Broadcom are having an impressive run this year, with its stock price climbing 53.4% on a year-to-date basis. Over the past three months, its shares rose 15.5%, hitting its 52-week high of $186.42 in October.
AVGO is currently priced at 33.11 times forward earnings and 17.78 times sales, trading at a premium to its industry peers. However, it is well justified, given its strong growth trajectory.
Known for delivering value to shareholders, Broadcom generated $4.8 billion in free cash flow last quarter, allocating $2.45 billion toward dividends. The AI chip leader has maintained consistent dividend growth for over a decade, with its latest payout of $0.53 per share on Sept. 30 offering a solid 1.17% yield. With a forward payout ratio of just 46.4%, Broadcom’s growth remains sustainable and investor-friendly.
On Sept. 5, Broadcom dropped its fiscal third quarter 2024 earnings, and the numbers painted a strong story of growth and demand. The company reported net revenue of $13.1 billion, marking a 47.3% year-over-year surge that comfortably exceeded expectations. This growth was largely fueled by booming demand for AI semiconductor solutions and the strategic acquisition of VMware. Adjusted earnings climbed 18.1% from the previous year to $1.24 per share, also surpassing estimates.
Broadcom operates in two core segments: semiconductor solutions and infrastructure software. The semiconductor solutions business leads the way, pulling in about $7.3 billion during the quarter, a 5% uptick from last year. However, the real standout was the infrastructure software segment, which soared 200% to $5.8 billion - accounting for 44% of total revenue.
With a non-GAAP gross margin of 77% and non-GAAP operating income jumping 43.6% to $7.9 billion, Broadcom’s financials reflected strength and efficiency. As of Aug. 4, its cash and cash equivalents totaled $10 billion, giving it solid financial footing.
Broadcom is expected to release its Q4 earnings report on Thursday, Dec. 12, after the bell. The management expects revenue of approximately $14 billion and an adjusted EBITDA margin of around 64% of projected revenue.
Analysts tracking the company anticipate its profit to surge 15.3% year over year to $1.13 per share, projecting the fiscal 2024 bottom line to amount to $3.79 per share. Looking ahead to fiscal 2025, the company's EPS is projected to be $5.15, marking a growth of 35.9%.
AVGO stock has a consensus “Strong Buy” rating overall. Among the 33 analysts covering the stock, 30 suggest a “Strong Buy,” and three analysts are playing it safe, advising a “Hold” rating.
JPMorgan set a price target of $210 for AVGO, which implies 17% upside potential.
As of this writing, the mean price target of $196.03 suggests upside potential of 9.2%. The Street-high target price of $240 implies that the stock could rise as much as 33.7%.
Growth Stock #2: Vistra
Vistra, founded in 1882 and based in Irving, Texas, is a major player in the U.S. energy market, serving 5 million customers with 41,000 megawatts of generation capacity. Boasting a market cap of $50.5 billion, Vistra leads in retail electricity, natural gas (NGF25), and diverse power generation, including solar, coal, nuclear, and battery storage. Committed to sustainability, the company aims for a 60% reduction in greenhouse gas emissions by 2030 and net-zero emissions by 2050.
The unregulated utility stock has been the star performer on the S&P 500 this year, skyrocketing by a remarkable 279% over the past 52 weeks. Last month, it hit a 52-week high of $168.67, marking its strongest performance in months. Over the past three months, VST climbed 84%, proving its momentum is unyielding.
Vistra is a powerhouse in the energy game, priced at 35.91 times forward earnings - slightly above the sector average. However, the company is rewarding its shareholders through dividends. Paying a quarterly dividend of $0.22, translating to a 0.54% yield at these levels, Vistra is proving it values its investors.
On Nov. 7, VST stock soared 7.7%, fueled by its impressive Q3 earnings results. The company reported record-breaking revenue of $6.3 billion, surpassing expectations, while posting adjusted EPS of $5.25 - more than four times the $1.24 estimate and a staggering 350% increase from the same quarter last year.
Operational efficiencies were a key driver, with adjusted EBITDA hitting $1.4 billion and liquidity standing strong at $4 billion. Vistra further strengthened its zero-carbon asset portfolio by acquiring a $3.1 billion minority stake in Vistra Vision. Not just stopping there, the company also approved a $1 billion share buyback and secured power purchase agreements with tech giants like Amazon (AMZN) and Microsoft (MSFT).
With renewed confidence, Vistra raised its 2024 guidance, projecting EBITDA between $5 billion and $5.2 billion and free cash flow ranging from $2.65 billion to $2.85 billion. The company’s strategy and execution are signaling sustained growth ahead.
For fiscal 2024, analysts foresee the company to report EPS of $4.48, up 24.8% year over year, and grow by another 35.5% to $6.07 in 2025.
VST has a consensus “Strong Buy” rating overall. Of the 12 analysts covering the stock, 11 recommend a “Strong Buy,” and the remaining one suggests a “Moderate Buy.”
JPMorgan set a price target of $178 for VST, which implies roughly 20% upside potential.
The average analyst price target for VST is $162.33, indicating potential upside of 15%. The Street-high target price of $231 implies that the stock could rally as much as 63%.
Growth Stock #3: CyberArk Software
CyberArk Software, founded in 1999 and headquartered in Herzliya, Israel, is a cybersecurity leader specializing in privileged access management (PAM). With a market cap of $13.9 billion, CyberArk provides solutions that secure critical systems by managing and monitoring privileged accounts, protecting organizations from cyber threats.
Its product suite includes Privileged Access Manager, Vendor Privileged Access Manager, and Endpoint Privilege Manager. CyberArk serves industries like finance, healthcare, energy, and government, operating globally to address identity and access security challenges.
CYBR has been on an impressive run, soaring 55% over the past 52 weeks and jumping 19% in just the last three months. Last week, it celebrated a milestone by reaching its all-time high of $333.32.
From a valuation standpoint, CYBR is currently trading at 18.98 times sales, a premium compared to its peers and its historical average. However, this underscores its market leadership and robust growth trajectory as investors bet on its transformative potential.
On Nov. 13, the IT security solutions provider unveiled its Q3 earnings results, reporting revenue of $240.1 million, up 25.6% year over year and beating Wall Street's projections. This was driven by surging subscriptions, contributing 73.1% of total revenue. Its adjusted EPS rose 123.8% to $0.94, surpassing expectations with robust revenue and disciplined cost control.
Annual Recurring Revenue (ARR) reached $926 million, climbing 31% year-over-year. Subscription ARR, now 79% of the total, grew 46% to $735 million, highlighting a shift toward recurring revenue streams. Meanwhile, Maintenance ARR contributed $191 million.
The company’s cash generation signaled resilience. For the nine months ended Sept. 30, 2024, the company's net cash from operating activities skyrocketed to $167.2 million from just $9.3 million the prior year. Liquidity surged, with cash, cash equivalents, short-term deposits, and marketable securities at $1.5 billion, up from $993.4 million as of Dec. 31, 2023. These achievements underscore its financial resilience and growing dominance in IT security.
In October, CyberArk acquired Venafi, a leader in machine identity management. CEO Matt Cohen highlighted this move as a strategic leap, integrating market-leading machine identity security into CyberArk’s platform. Venafi’s solutions complement CyberArk’s offerings seamlessly, bolstering its leadership in addressing the rapidly growing identity security segment.
For Q4, the management expects total revenue between $297 million and $303 million, while adjusted EPS is projected to land somewhere between $0.65 and $0.75. Looking forward to fiscal 2024, total revenue is expected to be in the range of $983 million to $989 million, representing growth of 31% to 32% year-over-year. Non-GAAP EPS is anticipated to be between $2.85 and $2.96.
Analysts tracking CyberArk project its fiscal 2024 losses to narrow 59.4% year over year to $0.58 per share and shrink by another 13.8% to $0.50 per share.
CYBR stock has a consensus “Strong Buy” rating overall. Among the 28 analysts covering the stock, 26 suggest a “Strong Buy,” one advises a “Moderate Buy,” and one gives a Hold.”
JPMorgan set a price target of $355 for CYBR, which implies 14% upside potential.
The average analyst price target of $344.92 indicates 11% potential upside from the current price levels, while the Street-high price target of $400 suggests that the CYBR could rally as much as 28% from here.
