Best High-Growth Stocks to Buy

Enphase Energy

• Market value: $18.0 billion
• Dividend yield: N/A
• Analysts' ratings: 14 Strong Buy, 8 Buy, 11 Hold, 1 Sell, 0 Strong Sell
• Analysts' consensus recommendation: 1.97 (Buy)

Enphase Energy (ENPH, $131.44) delivered mixed results for Q2 2023 in late July and the markets hammered its stock. As a result, the manufacturer of solar microinverters, battery energy storage and electric vehicle charging stations, is now down more than 50% for the year-to-date.

While ENPH reported higher-than-expected Q2 earnings of $1.47 per share, revenue of $711.1 million fell short of what analysts were anticipating. On the top line, the company reported revenue of $711.1 million, below the $726.0 million in Q2 2022. This is due in part to declining U.S. sales, which fell 12% year-over-year amid a combination of lower utility rates and higher interest rates.

Enphase also said its board of directors approved a $1 billion stock buyback program.

The company guided for third-quarter revenue of $550 million to $600 million, down 19% quarter-over-quarter and 9% year-over-year at the midpoint. While it didn't reveal its guidance for earnings, it did say that the non-GAAP (generally accepted accounting principles) gross margin should be 43.5% at the midpoint, with non-GAAP operating expenses around $103 million. 

Raymond James analyst Pavel Molchanov maintained an Outperform (Buy) rating on ENPH after earnings, saying the company's "geographic diversification provides growing exposure to Europe's energy transition, bolstered by climate policy and the urgency of security." Additionally, despite recent headwinds to ENPH's top line, Molchanov forecasts 18% annual revenue growth in both fiscal 2023 and 2024.

Analysts are also anticipating a big rebound in the share price of one of Wall Street's best high-growth stocks. The average price target of $194.05 represents implied upside of 48% over the next 12 months or so.

SolarEdge Technologies

• Market value: $9.2 billion
• Dividend yield: N/A
• Analysts' ratings: 15 Strong Buy, 7 Buy, 9 Hold, 0 Sell, 0 Strong Sell
• Analysts' consensus recommendation: 1.81 (Buy)

SolarEdge Technologies (SEDG, $162.77) manufactures and sells direct current (DC) optimized inverter systems to residential and commercial solar installations. Since SolarEdge commercialized the system in 2010, it has shipped nearly 48.0 gigawatts (GW) of these systems to customers in more than 125 countries.

In early August, SolarEdge reported record second-quarter revenue of $991.3 million, up 5% from Q1 and 36% higher than the year-ago period. Non-GAAP net income was $157.4 million, down 10% from the previous quarter, but up substantially from the $15.1 million it recorded in Q2 2022. 

Similar to Enphase, SEDG is seeing headwinds in the U.S. from higher interest rates. However, demand in Europe remains relatively strong and the company "is on track for U.S. manufacturing to commence in the third quarter" says Susquehanna Financial Group analyst Biju Perincheril. The analyst currently has a Positive (Buy) rating on SEDG, with a $305 target price. Additionally, Perincheril expects annual top-line growth of 24% and 26% in fiscal 2023 and 2024, respectively. 

Perincheril isn't alone in this bullish revenue outlook for SolarEdge. Analysts surveyed by S&P Global Market Intelligence estimate SEDG will grow sales by about 22% annually over the next two years. And earnings per share are expected to climb to $9.25 this year from 2022's $5.95, and hit $11.40 in fiscal 2024.

And considering SEDG is down more than 42% for the year-to-date amid macroeconomic headwinds, investors seeking out the best high-growth stocks can pick this one up at a relative bargain. 

Paylocity Holding

• Market value: $10.7 billion
• Dividend yield: N/A
• Analysts' ratings: 9 Strong Buy, 5 Buy, 5 Hold, 0 Sell, 0 Strong Sell
• Analysts' consensus recommendation: 1.79 (Buy)

Paylocity Holding (PCTY, $191.76) provides payroll and human capital management (HCM) software solutions. Its competition includes Paycom (PAYC), Paychex (PAYX) and Automatic Data Processing (ADP).

Like many of its competitors, most of Paylocity's revenue is recurring, making the sales process a little easier. In fiscal 2023 (June year-end), total revenue increased 38% year-over-year to $1.17 billion – 93.5% of which came from recurring revenue. Meanwhile, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $375.2 million – 55% higher than in fiscal 2022.

Paylocity expects fiscal 2024 revenue to range between $1.405 billion and $1.410 billion, which would mark a 20% increase at the midpoint. In addition, its outlook for adjusted EBITDA is $466.0 million at the midpoint, 25% higher than fiscal 2023.

And the company has even more growth potential in its pocket. Paylocity estimates that the total addressable market (TAM) of businesses with between 10 and 5,000 employees is $18.6 billion. It currently has 3% of the 1.3 million businesses in this market.  

Raymond James analyst Brian Peterson maintained an Outperform (Buy) rating and $265 price target on PCTY after earnings. "Given the company's consistent execution, expanding product portfolio and healthy balance of growth and profitability, we continue to believe shares will represent an attractive long-term compounder," Peterson wrote in a note to clients.

Meanwhile, analysts tracked by S&P Global Market Intelligence are expecting solid upside for one of Wall Street's best high-growth stocks. The average price target of $253 sits nearly 31% above PCTY's current price.

Nvidia

• Market value: $1.07 trillion
• Dividend yield: 0.04%
• Analysts' ratings: 32 Strong Buy, 13 Buy, 6 Hold, 1 Sell, 0 Strong Sell
• Analysts' consensus recommendation: 1.54 (Buy)

It seems safe to assume that any list of the best high-growth stocks will include Nvidia (NVDA, $433.43). The semiconductor stock has nearly tripled for the year-to-date as it continues to benefit from the push by corporate America into artificial intelligence (AI). As a result, the chip designer's GPU (graphics processing unit) business is booming as the tech industry buys up its new A100 and H100 GPUs.

The only downside: It's having a tough time keeping up with demand. However, there could be worse problems to sort through.

Nvidia reported first-quarter earnings in late May. Not only was the quarter a rousing success – revenue of $7.2 billion was 10% higher than analysts were expecting, while earnings of $1.09 per share came in well above estimates. And its forecast was otherworldly.

Specifically, Wall Street was expecting a second-quarter revenue forecast of around $7.2 billion; Nvidia guided for $11 billion on huge demand for chips that power AI applications.

"The computer industry is going through two simultaneous transitions – accelerated computing and generative AI," said Jensen Huang, founder and CEO of Nvidia, in the Q1 press release. "A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process."

Analysts were already quite enthusiastic about Nvidia's business. The latest earnings report only ratcheted up this enthusiasm – and instilled NVDA as the newest member of the trillion-dollar market-cap club.

"Nvidia has transformed from a graphics company to a premier leading AI computing platform company," says Oppenheimer analyst Rick Schafer, who has an Outperform (Buy) rating and $500 price target on the stock. "We see several structural tailwinds driving sustained outsized topline growth in high performance gaming, data center/AI and autonomous driving vehicles."  

Translation: Nvidia remains one of the best high-growth stocks to own for the long haul.

Deckers Outdoor

• Market value: $14.3 billion
• Dividend yield: N/A
• Analysts' ratings: 11 Strong Buy, 3 Buy, 3 Hold, 0 Sell, 0 Strong Sell
• Analysts' consensus recommendation: 1.53 (Buy)

Deckers Outdoor (DECK, $548.08) is best known for its Ugg boots. However, it is the Hoka running shoes that have really lit a fire under this high-growth stock. Shares of the consumer discretionary stock are up more than 39% for the year-to-date and nearly 63% over the past year as the company's Hoka brand continues to capture investor interest.

In late July, DECK disclosed fiscal first-quarter earnings, with total revenue up 10% year-over-year to $676 million. Hoka sales surged 27.4% to $420.5 million – or 62% of total revenue – while Ugg sales slipped 6% to $195.5 million.

"Critically, HOKA revenue was +27% despite tough Wholesale channel dynamics and a pause in new distribution," says Raymond James analyst Rick Patel, who has an Outperform (Buy) rating on DECK. "Indicators of brand affinity are strong, and we view HOKA as in the early innings of long-term global growth."

Over at UBS Global Research, analyst Jay Sole notes that "Hoka is one of the world's fastest growing footwear brands and its direct-to-consumer sales increased 63% year-over-year in the first quarter. We believe Hoka's exceptional momentum with consumers continues and think this will lead to strong fiscal 2024 sales growth and stock-driving earnings beats."

Sole believes DECK is one of the best high-growth stocks around and shares are expected to outperform. "Thus, our rating is Buy," he says.

ServiceNow

• Market value: $110.8 billion
• Dividend yield: N/A
• Analysts' ratings: 24 Strong Buy, 9 Buy, 4 Hold, 0 Sell, 0 Strong Sell
• Analysts' consensus recommendation: 1.46 (Strong Buy)

Of the 37 analysts covering ServiceNow (NOW, $543.64) stock, 33 say it's a Buy or Strong Buy, making it one of the top-rated high-growth stocks featured here. 

The cloud-based enterprise software company reported second-quarter earnings in late July that exceeded analysts' expectations. ServiceNow disclosed revenue of $2.15 billion, 25% higher than the year-ago period. On the bottom line, it earned $2.37 per share, up 46.3% year-over-year.

"ServiceNow results were supercharged by unprecedented demand for our organic innovation," said Bill McDermott, chairman and CEO of ServiceNow in the company's press release. "We're in a powerful new 'AI world,' where imagination is the only limit. ServiceNow is already seeing our own significant productivity increases with the generative AI solutions we're releasing to the market, which will rapidly accelerate breakthrough innovation for our customers."

Indeed, NOW remains busier than ever. The second quarter finished with a current remaining performance obligation (CRPO) of $7.2 billion, 25% higher than a year ago, excluding currency. Plus, the number of customers with more than $1 million in annual contract revenue jumped 18% from Q2 2022.

"The increase in the number of high-value deals demonstrated ServiceNow's traction in a shaky enterprise market, as well as its ability to sign multiproduct deals," says Argus Research analyst Joseph Bonner, who has a Buy rating on NOW stock.

Additionally, ServiceNow "sees generative AI as an accelerator for its business, increasing its total available market and boosting average selling prices," Bonner says. The company is already implementing generative AI across its platform, and is currently partnering with Microsoft (MSFT) to connect its platform to Azure OpenAI. "Management expects to see a 25% increase in average selling prices as new generative AI-based tools drive higher-priced solutions," Bonner notes.

Still, NOW is not cheap relative to the broader market. Shares currently trade at 59.2 times forward earnings vs 19 times for the S&P 500. However, this is well below ServiceNow's five-year average forward price-to-earnings (P/E) ratio of 76.5.

VICI Properties

• Market value: $29.8 billion
• Dividend yield: 5.2%
• Analysts' ratings: 13 Strong Buy, 5 Buy, 2 Hold, 0 Sell, 0 Strong Sell
• Analysts' consensus recommendation: 1.45 (Strong Buy)

If you're a risk-averse investor, a better way to play the growth in sports betting in America is to buy shares in VICI Properties (VICI, $29.67), one of the largest owners of casino properties in America.

The REIT (real estate investment trust) owns the real estate at iconic Las Vegas casinos such as Caesars Palace, MGM Grand and The Venetian Resort. Overall, VICI's portfolio consists of 50 gaming facilities with more than 60,000 hotel rooms and 450 restaurants, bars and sportsbooks.

VICI announced in mid-May that it acquired four properties in Alberta from Century Casinos (CNTY), and paid $165 million for the real estate assets. Century will lease the properties from VICI, and the REIT's annual rent will increase by $12.8 million due to the sale-leaseback transaction. Properties acquired from the transaction have rent escalations beginning in early 2025, and rents escalate at 1.25% annually or the Canadian CPI (Consumer Price Index) to a maximum of 2.50%, whichever is greater.

This is VICI's second Canadian sale-leaseback transaction. The first was in January 2023, when it paid $201 million for four Canadian gaming properties acquired from Pure Canadian Gaming.

Jefferies analyst David Katz thinks the company's focus on acquisitions and partnerships – like its investment in wellness resort Canyon Ranch – "could add meaningfully to shareholders over the long term." Katz has a Buy rating and $43 price target on VICI, representing implied upside of nearly 45% for one of Wall Street's best high-growth stocks.

Targa Resources

• Market value: $18.9 billion
• Dividend yield: 2.4%
• Analysts' ratings: 13 Strong Buy, 5 Buy, 1 Hold, 0 Sell, 0 Strong Sell
• Analysts' consensus recommendation: 1.37 (Strong Buy)

Targa Resources (TRGP, $83.79) is one of the leading midstream infrastructure companies in North America. Based in Houston, the company is on RBC Capital Markets Global Energy Best Ideas list.

In the second quarter, TRGP said revenue was down 44% year-over-year amid lower commodities prices. However, the company reported adjusted EBITDA of $789.1 million, up 18.4% year-over-year.

Targa expects its full-year adjusted EBITDA to be $3.6 billion at the midpoint of its guidance, 24% higher than the record $2.9 billion it posted in 2022.

As you can see from the analysts' ratings and analysts' consensus recommendation, Wall Street really likes this energy stock.

Following TRGP's recent earnings announcement, CFRA Research analyst Stewart Glickman reiterated a Strong Buy rating on the stock and lifted his price target by $7 to $102. The analyst believes next year's completion of its Daytona natural gas liquids (NGLs) pipeline will lower the company's capital expenditures and potentially boost the dividend. 

Wall Street is certainly upbeat about TRGP's growth prospects down the road. Analysts, on average, expect the company to generate average annual earnings growth of 15% over the next three to five years.

Plus, the average price target of $100.68 represents implied upside of 20% over the next 12 months or so for this Strong Buy stock. 

Churchill Downs

• Market value: $9.1 billion
• Dividend yield: 0.3%
• Analysts' ratings: 5 Strong Buy, 1 Buy, 0 Hold, 0 Sell, 0 Strong Sell
• Analysts' consensus recommendation: 1.17 (Strong Buy)

On the first Saturday in May every year, the Kentucky Derby is held at Churchill Downs (CHDN, $120.99) in Louisville. More than 150,000 attended the race this year, with Mage winning the Run for the Roses going off at 15-1 odds. Unfortunately for Mage's owners, the horse came third in the Preakness Stakes, the second leg of the Triple Crown, putting the underdog story to rest for another year.

A considerable portion of Churchill Downs' revenue is generated by horse racing. In addition to owning America's most iconic horse racetrack, it also owns three other race tracks in Kentucky and the Fair Grounds Race Course in New Orleans. In February, it sold the Arlington Heights property in Illinois to the Chicago Bears for $197.2 million.

In Q1 2023, the company's Live and Historical racing segment generated $408.0 million in revenue, up 48% year-over-year. The segment accounted for more than half of CHDN's $768.5 million in total revenue

Churchill Downs' Gaming segment, meanwhile, posted $247.9 million in revenue for Q2, accounting for roughly a third of total revenue. Acquisitions in New York and Iowa drove most of the growth. The company's Q2 2023 revenue and adjusted EBITDA were both record results. 

With these impressive fundamentals, it's no wonder Churchill Downs is on this list of the best high-growth stocks. The strength is being seen on the price charts, too, where CHDN has averaged an annual total return (price change + dividends) of 25.4% over the past 10 years.

Jefferies analyst David Katz sees even more upside for CHDN stock, as evidenced by his Buy rating and $157 price target, nearly 30% higher than current levels. While the company's Q2 results came in below Katz's estimates, he believes "the longer term growth remains intact, which is unique to CHDN." 

The analyst adds that "there should be ongoing growth catalysts near term and longer term, which should drive upside in the shares."

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