In this article, we discuss the 7 best revenue growth stocks to buy according to analysts along with the latest Federal Reserve actions and their market impact.
The Fed recently cut the funds rate by 50 basis points which has been considered a bold move by some analysts while others and most of the market have welcomed it with open arms. Moreover, over 50% of interest rate traders expect another 50 bps cut in the next meeting as well, according to the CME Fed-watch tool.
While the Fed’s move might seem risky, the broader market is up over 2.5% since the cuts, as of September 27.
Jeremy Siegel on the Fed’s Bold Move
In an interview with CNBC Squawk Box on September 19, Professor Jeremy Siegel of the Wharton School expressed his strong approval of the Fed’s decision to cut interest rates by 50 basis points. He called it the best news from the Fed in years.
Professor Siegel believes that this move will lead to a significant rise in the stock market and pointed out that the Fed is now addressing the gap between current rates and what he considers the “new neutral” Fed funds rate of 2.9%.
He said that the Fed has shifted from expecting only one rate cut by the year’s end to anticipating four cuts in total, with the market reflecting expectations of a gradual approach to future cuts.
When asked about concerns from former Fed Vice Chair Roger Ferguson, who warned that the market might be overreacting to the cuts, Siegel said that smaller, consistent rate decreases would be enough.
He suggested that if inflation remains low, the Fed could implement 25 basis point cuts in the upcoming meetings, ultimately reducing rates to around 3.3% to 3.5%. He said with confidence that inflation would not rise significantly, as he referenced the market indicators suggesting it could fall below 2% next year.
In a discussion about economic policies from the presidential candidates, Professor Siegel critiqued both sides as extreme and said that their policies are unlikely to be implemented. He said that there would be a divided government that would limit any drastic changes. He stressed that while some policies might be proposed, actual governance would lead to compromises rather than sweeping reforms.
Historical Insights on Rate Cuts and Stock Returns
According to data from Ned Davis Research, historical trends indicate that stocks tend to perform favorably in the year following the initial interest rate cut. According to the data, the broader market has recorded an average increase of around 12% in the first six months and 15% in the first twelve.
Despite the generally positive outlook for stocks following interest rate cuts, there were exceptions in 2001 and 2007, when the broader market saw declines of 12.4% and 22.2%, respectively, in the year following the Fed’s actions. This shows that historical average performance does not guarantee that rate cuts will always yield favorable outcomes.
However, looking at the last ten rate cut cycles since 1974, the market has risen in eight of those instances, with four cycles resulting in gains of over 20%. Additionally, after the 1974 cut cycle, the market reached a remarkable 40% increase.
With that, we look at the 7 Best Revenue Growth Stocks to Buy According to Analysts.
7 Best Revenue Growth Stocks to Buy According to Analysts
Our Methodology
For this article, we used stock screeners to compile a list of over 30 stocks with 5-year revenue compound annual growth rate of 30% or above. Next, we narrowed our list to 7 stocks most favored by analysts. The 7 best revenue growth stocks are listed in ascending order of their average analyst price target upside as of September 27.
We also mentioned the hedge fund sentiment around each stock.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best Revenue Growth Stocks to Buy According to Analysts
7. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Average Price Target Upside: 13.78%
5-Year Revenue CAGR: 31.70%
Number of Hedge Fund Holders: 108
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a prominent semiconductor company that operates globally and focuses on a range of markets through its various segments, including Data Center, Client, Gaming, and Embedded.
It specializes in producing x86 microprocessors and graphics processing units, along with advanced products like chipsets and adaptive system-on-chip solutions. Well-known product lines include AMD Ryzen and AMD Radeon, which serve both consumer and professional markets.
As the technology industry evolves, the company is increasingly positioning itself within the AI sector, further expanding its footprint in the rapidly growing data center space. It has made significant strides into the AI accelerator market. Advanced Micro (NASDAQ:AMD) sells merchant AI accelerators and is focused on custom AI chip development, aligning with industry trends and customer demands.
It has led to remarkable growth in the data center segment, which reported a staggering 115% increase in revenue, reaching $2.8 billion in Q2. The growth trajectory has made the data center the largest revenue contributor for the company as it accounts for nearly half of its overall income. If this momentum continues, it can ensure sustained revenue growth even if other segments experience fluctuations.
Furthermore, the company’s net income reflects a strong recovery, which surged to $265 million in the second quarter, up from just $27 million during the same period last year. The recovery indicates improved operational efficiency and successful adaptation to market demands.
The stock has been given a consensus Buy rating by 55 analysts. As of September 27, the average price target of $187.00 has an upside of 13.78% to the stock’s current level.
As the semiconductor industry continues to evolve, the company is focused on expanding its product offerings and entering new markets positions the company for long-term success.
Fred Alger Management stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2024 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a major global supplier of PC microprocessors and graphics processors to computing original equipment manufacturers (OEMs). The company’s product range spans desktops, notebooks, servers, graphics, and embedded/semi-custom chips. AMD operates in a large addressable market, covering areas such as PCs, servers, high-end gaming, and deep learning. Additionally, AMD has introduced competitive AI technologies, including powerful accelerators poised to capture a share in a market worth several hundred billion dollars. During the quarter, the company reported fiscal first-quarter operating results that met analyst estimates, with strengths in data center GPUs and server CPUs offsetting weaknesses in their gaming and embedded businesses. Moreover, management raised their fiscal second-quarter revenue guidance, albeit slightly below consensus estimates, where they expected double digit growth in data center revenues, while projecting a decline in their gaming segment, driven by weaknesses in both desktop GPUs and Semi-Custom Systems-on-a-Chip (SoC). While weaker-than-expected near-term results weighed on shares during the quarter, we believe the company is positioning itself to potentially benefit from long-term growth in AI infrastructure spending. Specifically, the company continues to gain server CPU market share, which could potentially accelerate as traditional compute deployments begin to recover.”
6. First Citizens BancShares, Inc. (NASDAQ:FCNCA)
Average Price Target Upside: 20.56%
5-Year Revenue CAGR: 42.02%
Number of Hedge Fund Holders: 46
First Citizens BancShares, Inc. (NASDAQ:FCNCA) serves as the parent company of First-Citizens Bank & Trust Company, which provides a wide range of banking services to individuals, businesses, and professionals.
Through 500 branches spread across 30 states, the institution offers diverse financial products, including checking and savings accounts, various loan options, and wealth management services.
The extensive footprint and expansive service portfolio position the company as a significant player in the U.S. banking landscape, managing more than $200 billion in assets and ranking among the Fortune 500 companies.
In a significant move in 2023, First Citizens (NASDAQ:FCNCA) expanded its reach by acquiring Silicon Valley Bank, a prominent lender within the tech sector that was seized by the Federal Deposit Insurance Corporation after insolvency.
The transaction involved purchasing around $72 billion in loans at a substantial discount and transferring deposits valued at $56 billion. The acquisition improves its position in the rapidly evolving financial landscape, especially within technology-driven markets.
Recent commentary from JPMorgan’s analyst, Steven Alexopoulos, suggests a turning point for regional banks following a 50 basis point rate cut by the Federal Reserve. The shift signals a potential end to the challenges posed by rising deposit costs and sluggish loan growth.
With the prospect of further rate cuts on the horizon, there is optimism that these factors could transform into supportive conditions for banks. A favorable yield curve, which has begun to normalize, suggests improved net interest margins and improved earnings potential for banks. The firm highlighted First Citizens (NASDAQ:FCNCA), among others, being attractive on current levels.
The stock has a consensus Buy rating from 14 analysts and its average price target of $2,225.00 implies a 20.56% upside from the stock’s present price, as of September 27. It is one of the best revenue growth stocks to buy according to analysts.
According to Insider Monkey’s database, in Q2, 46 hedge funds held stakes in First Citizens (NASDAQ:FCNCA), with positions worth $2.19 billion. As of the second quarter, Harris Associates is the most significant shareholder in the company. The firm has increased its stake in the company by 32% to 676,052 shares worth $1.138 billion.
Artisan Partners stated the following regarding First Citizens BancShares, Inc. (NASDAQ:FCNCA) in its fourth quarter 2023 investor letter:
“First Citizens BancShares, Inc. (NASDAQ:FCNCA) was our top overall contributor in 2023. Headquartered in Raleigh, North Carolina, and one of the largest family-controlled banks in the US, First Citizens was a big winner from its acquisition of the failed Silicon Valley Bank. First Citizens purchased $72.1 billion in loans at a deeply discounted price of $16.5 billion. The transaction adds scale, increases geographic diversity and is financially attractive with downside protections from a loss-sharing agreement with the FDIC. First Citizens is now one of the top-15 largest US banks. The bank is run by and almost fully controlled by CEO Frank Holding and his family members. They have significant ownership, aligning their interest with minority shareholders like us. They’ve done an admirable job of growing the bank by keeping a strong capital and liquidity profile that allows for opportunistic M&A during times of market stress, like we just experienced in March. In the global financial crisis, First Citizens used its position of strength to acquire when others could not, and during the COVID-induced stress of 2020, it flexed its muscles again with the acquisition of CIT at a great price.”
5. NVIDIA Corporation (NASDAQ:NVDA)
Average Price Target Upside: 23.56%
5-Year Revenue CAGR: 56.73%
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) specializes in graphics, computing, and networking solutions. Established in 1993, the company initially carved out a niche with its pioneering graphics processing units (GPUs), which excel at handling multiple tasks simultaneously.
The innovation has made it a critical player not only in the gaming industry but also in sectors such as professional visualization, data centers, and automotive markets. The company operates through two main segments, Graphics and Compute & Networking.
The Graphics segment includes GeForce GPUs and the GeForce NOW game streaming service, while the Compute & Networking segment features data center platforms and advanced AI software.
Its stock has received a consensus Strong Buy rating from 64 analysts. As of September 27, the average price target of $150.00 has an upside of 23.56% from current levels. It ranks 5th on our list of the best revenue growth stocks to buy according to analysts.
In 2023, NVIDIA (NASDAQ:NVDA) captured an impressive 94% market share in AI server sales as per Mizuho Securities analyst Vijay Rakesh’s estimates, which reinforces its dominance in the rapidly growing AI GPU market.
The company’s data center revenue has surged at a rate significantly outpacing that of competitors, which show a strong demand for its products. Customers are actively seeking NVIDIA’s Hopper AI GPUs, which are expected to be succeeded by the next-generation Blackwell chips. The demand for these upcoming processors is projected to surpass supply through 2025, which is a sign of a strong pipeline for future revenue.
4. Datadog, Inc. (NASDAQ:DDOG)
Average Price Target Upside: 31.35%
5-Year Revenue CAGR: 55.19%
Number of Hedge Fund Holders: 79
One of the best revenue growth stocks, Datadog, Inc. (NASDAQ:DDOG) runs an observability and security platform for cloud applications. It offers a suite of essential tools, including infrastructure monitoring, application performance monitoring (APM), log management, security monitoring, and digital experience monitoring. The solutions are essential for IT and DevOps teams striving to maintain reliable and efficient operations in increasingly complex environments.
In the first half of 2024, the company showed significant financial growth, with revenues rising nearly 27% year-over-year to reach $1.26 billion. The company also turned around its operating performance, reporting an operating income of $24.6 million compared to an operating loss of $57 million in the same period last year.
The improvement in financial health extended to net income, which climbed to $86.5 million, a stark contrast to the net loss of $28.1 million from a year prior. Additionally, free cash flow surged by 28% year-over-year, reaching $330.5 million, which shows the company’s ability to generate cash effectively.
To improve its service offerings and deepen customer loyalty, Datadog (NASDAQ:DDOG) has been proactive in launching new features. For example, the introduction of Data Jobs Monitoring allows data teams to detect job failures and optimize computing resources, ultimately leading to cost savings.
In June, the company also expanded its security product portfolio, which allows security teams to seamlessly access their code, cloud environments, and production applications. The additions improve the user experience and position the company as a go-to solution in a rapidly evolving market.
Management sees significant growth potential ahead, believing that the company currently holds just a 5% market share. With around 27,400 customers and a vast opportunity pool of over 530,000 potential global accounts, the market for cloud security solutions appears ripe for expansion.
The total addressable market for cloud security was estimated at approximately $21 billion in 2023, projected to grow at an annual rate of 16% through 2027. It suggests a favorable environment for continued growth as the company seeks to capture a larger share of this lucrative market.
43 analysts have given Datadog (NASDAQ:DDOG) a consensus Buy rating. The average price target of $150.00 has a 31.35% upside from the stock’s price on September 27.
Baron Opportunity Fund stated the following regarding Datadog, Inc. (NASDAQ:DDOG) in its Q2 2024 investor letter:
“In our view, the enterprise software winners will have to be better at delivering AI services and features than build-your-own AI tools, and they will have to use their incumbency or leadership advantages to ward off upstarts. We believe the winners will be the ones that have a well-established product development culture of innovation and iteration; differentiated proprietary, industry, and customer data; distribution advantages with large customer bases, successful go-to-market efforts, and key partners; well-designed workflows where AI improves the user interface, intelligent predictions/recommendations, and automation; and established always-on connectivity and feedback from their customers; among other things.
Here are a few examples of our software investments that we believe are AI winners: Datadog, Inc. (NASDAQ:DDOG), a cloud observability platform that the leading LLM providers are using today to monitor their AI apps; these AI customers are already driving nearly $100 million of annual recurring revenue for Datadog already.”
3. Block, Inc. (NYSE:SQ)
Average Price Target Upside: 34.39%
5-Year Revenue CAGR: 42.87%
Number of Hedge Fund Holders: 59
Block, Inc. (NYSE:SQ), formerly known as Square, Inc., is a prominent American technology company. The organization operates through two primary segments, Square and Cash App. The Square segment focuses on providing a wide range of commerce products designed for various business needs, including services for restaurants, retail, online sales, and invoicing.
The segment improves business operations with features such as loyalty programs, marketing tools, team management, and payroll services. On the other hand, the Cash App segment empowers individuals with financial tools, that enable peer-to-peer payments, Bitcoin transactions, stock investments, and flexible payment solutions like Pay in 4.
With a consensus Buy rating from 44 analysts, the stock’s average price target of $90.00 represents an upside of 34.39%, as of September 27. It takes its place among our best revenue growth stocks to buy according to analysts.
In the most recent quarter, Block (NYSE:SQ) reported a net income of $195.3 million, translating to earnings of $0.31 per share. This marks an impressive 91% increase compared to the same period last year. The Cash App division emerged as a driver of profitability, generating $1.3 billion in gross profit, which is a 23% increase year-over-year.
The company’s overall financial health is further illustrated by the reported adjusted free cash flow of $1.43 billion for the twelve months ending in June. The figure is double that of the prior period and accounts for 57% of adjusted EBITDA, which shows the company’s ability to generate cash effectively.
Columbia Contrarian Core Fund stated the following regarding Block, Inc. (NYSE:SQ) in its Q2 2024 investor letter:
“Block, Inc. (NYSE:SQ) – It is hard to pinpoint why the stock moved lower in the last two months of the quarter, but the most likely reason seems to be simply that investor sentiment on the stock remains generally quite negative for the near term. Investors seem to be taking recent comments from Jack Dorsey (CEO of Square, who also heads Square’s parent company, Block) to mean that a lot still needs to be fixed, rather than the perspective that Mr. Dorsey is being honest and straightforward that things weren’t working and that Square now has a clear plan and a lot of urgency behind its initiatives. The reinvigoration of Square appears very real, with a bold vision to become a generational technology company. The organization is aligned on making Square and Cash App a vertically integrated commerce platform for both sellers and consumers. For Square, this means achieving a growth rate similar to its early days with much better technology while, for Cash App, success is defined as becoming the leading primary bank for those making less than $150,000 per year, along with significant success combining the two ecosystems. The experimentation and innovation culture is back with buy-in across the organization, with a key focus on engineering discipline and exceptional products. This discipline had been lost and is now coming back and should create much better product experiences that are customer-problem focused and enable the company to regain its prior pace of market share gains.”
2. Genmab A/S (NASDAQ:GMAB)
Average Price Target Upside: 56.20%
5-Year Revenue CAGR: 42.83%
Number of Hedge Fund Holders: 13
One of the best revenue growth stocks, Genmab A/S (NASDAQ:GMAB) is a biotechnology company based in Denmark that specializes in developing innovative antibody therapeutics aimed at treating cancer and other serious diseases.
Using advanced technology platforms, the company has built a strong pipeline that includes bispecific T-cell engagers, next-generation immune checkpoint modulators, and antibody-drug conjugates.
It has a clear vision to transform the treatment landscape by 2030 and seeks to deliver groundbreaking “Knock-Your-Socks-Off” antibody therapies to improve patient outcomes significantly.
Additionally, as per 26 analysts, the stock has a consensus Buy rating. As of September 27, the average price target of $38.00 implies an upside of 56.20% from the current levels.
A key factor in Genmab’s (NASDAQ:GMAB) success is its extensive network of partnerships, having established over 20 collaborations with leading biotech and pharmaceutical companies. The alliances enhance the company’s ability to accelerate the development of novel therapies.
In August, the company received conditional marketing authorization from the European Commission for TEPKINLY (epcoritamab), a treatment for adults with relapsed or refractory follicular lymphoma.
The approval is groundbreaking as TEPKINLY is the first and only subcutaneous bispecific antibody designed to engage T-cells for patients who have not responded to at least two prior therapies.
By effectively targeting and killing cancerous B-cells, TEPKINLY employs a unique mechanism that improves the body’s immune response against lymphoma. The innovative approach shows its focus on addressing unmet medical needs and the potential of its antibody therapies in the oncology space.
Furthermore, Genmab (NASDAQ:GMAB) has embraced technological advancements in its operations, recently rolling out an “AI Everywhere” initiative that has expanded access to AI tools for its employees. With over 2,000 licenses and more than 100 custom GPTs, the company is improving productivity and data analysis capabilities across various functions, from drafting documents to summarizing scientific literature.
1. Sarepta Therapeutics, Inc. (NASDAQ:SRPT)
Average Price Target Upside: 60.60%
5-Year Revenue CAGR: 34.29%
Number of Hedge Fund Holders: 55
Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is a biopharmaceutical company dedicated to advancing therapies for rare genetic disorders, particularly those affecting the neuromuscular system like Duchenne muscular dystrophy (DMD).
It is focused on RNA-targeted therapeutics and gene therapies. The company utilizes a unique Precision Genetic Medicine Engine that integrates various cutting-edge approaches, including gene editing and RNA-based treatments. It has established itself as a leader in the field, with a portfolio of FDA-approved products that directly address specific genetic mutations associated with DMD.
Sarepta Therapeutics (NASDAQ:SRPT) has a consensus Strong Buy rating from 20 analysts and its average price target of $200.00 has a 60.60% upside to the stock’s price, as of September 27. It tops our list of the best revenue growth stocks to buy according to analysts.
In June, the company achieved a significant regulatory breakthrough by obtaining broad approval for ELEVIDYS, making it accessible to over 80% of patients in the U.S. with DMD. The traditional approval for all ambulant patients aged four and older, along with accelerated approval for non-ambulant patients, shows the urgency and impact of this therapy.
The ability to provide a treatment option to a large patient population shows its commitment to addressing critical unmet needs in the DMD community.
In the second quarter, 55 hedge funds tracked by Insider Monkey held positions in Sarepta Therapeutics (NASDAQ:SRPT) and their stakes amounted to $2.404 billion. As of June 30, VenBio Select Advisor is the most dominant shareholder in the company and has a position worth $474 million.
While we acknowledge the potential of Sarepta Therapeutics, Inc. (NASDAQ:SRPT) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SRPT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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