In this article, we will look at the 8 Cheap Growth Stocks to Buy According to Analysts.
Why Is the Market Still Volatile After Rate Cuts?
When the Federal Reserve cut rates last week there was a general anticipation that the market would rise. However, that has not been the case. Tom Lee, Fundstrat Global Advisors managing partner and head of research joined CNBC for an interview recently to talk about why the market is not performing as expected. The Federal Reserve has unleashed an easing cycle on the market, which is supposed to have a positive effect. Tom Lee believes that the market is positive historically if we look at a 3-month or a 6-month picture. However, the behavior of the market for the next 40 days is a coin flip.
Two reasons why there is volatility are first because there was some repositioning in the market due to the rate cuts and secondly the market is now entering into the 40-day election period. Tom believes that the positive effect that the rate cut was supposed to have has not vanished but is delayed until after the elections. Talking about his personal experience coming from various conferences and meetings, he thinks that a major chunk of the population doesn’t want to commit capital before the election. Moreover, it doesn’t matter who wins, but the public just wants to have the election day in their rear mirror before they take the capital out.
We recently covered an article about 7 Cheap Blue Chip Stocks to Invest in Now, where we talked about how the S&P 500 index has been overcrowded with Technology companies and has somewhat lost its diversity. Here’s an excerpt from the article:
“Turning back to how investors might revisit their idea of S&P being a low-risk investment. This idea was pitched by Bill Nygren, the Chief Investment Officer at Oakmark Funds in a recent CNBC interview. His approach reflects a strategic shift as to how investors might view the S&P 500 and mega-cap stocks in the current market situation. He pointed out that while the index has traditionally been viewed as a diversified index, in reality, it is just a bet on a few large technology companies. Currently, around half of the S&P 500 is dominated by some 25 large tech names, which essentially diminishes its original diversification.
Bill Nygren, emphasized the importance of having a more diversified portfolio beyond just mega-cap stocks. He believes that diversification of the portfolio provides better risk-adjusted returns compared to relying solely on a few big companies. We have also discussed Matt Stucky, Northwestern Mutual Wealth Management’s chief equities portfolio manager, talking about a similar strategy in 13 Most Undervalued Blue Chip Stocks To Buy According To Analysts.
The investment strategy that Nygren is vouching for suggests that the current market scenario where investors are favoring positive momentum stocks can lead to missed opportunities in other undervalued sectors such as financials and energy. He believes that the potential lucrativeness of the Tech sector has overcrowded the space creating opportunity in other sectors.”
Lee also supports the idea that the S&P 500 index is a bet on the technology sector. He believes that if the technology sector does not resume its role as the leader and declines, it is going to be difficult for the rest of the stocks to hold up.
Lee has been a fan of small-cap stocks and closely analyzes the Russell 2000 index. He acknowledges that the index has been slow, however, the fundamental investment case for small caps remains the same. Lee thinks that bottoms of the year are not always straight up and the probability of the market making record highs next year remains high. His investment thesis is to buy the dip if the market goes down during the election days as the current market condition ensures that the positive effect is just around the corner.
With that let’s look at the 8 cheap growth stocks to buy according to analysts.
A closeup of a person’s hand managing a portfolio of stocks on a graphically rich financial app interface.
Our Methodology
To compile the list of 8 cheap growth stocks to buy according to analysts, we used the Finviz stock screener to aggregate an initial list of stocks. We searched for cheap stocks in various growth industries including Technology, Healthcare, Biotechnology, and Telecommunications, among others. Our criteria for “cheap” is stocks trading below the forward price-to-earnings ratio of 23.98 (the market’s forward P/E as per the Wall Street Journal) and earnings expected to grow during the year. Using this criteria we compiled a list of 20 cheap growth stocks and then ranked them as per their analyst upside potential sourced from CNN. The list is ranked in ascending order of the analyst upside potential.
Why do we care about what hedge funds do? 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).
8 Cheap Growth Stocks to Buy According to Analysts
8. AstraZeneca PLC (NASDAQ:AZN)
Forward P/E Ratio: 18.98
Earnings Growth This Year: 37.70%
Analyst Upside Potential: 20.94%
AstraZeneca PLC (NASDAQ:AZN) is an international biopharmaceutical company based in the United Kingdom. It leads in developing and selling prescription medicines that focus on curing oncology, cardiovascular, respiratory, and other rare diseases.
The company has a cheap valuation with a forward price-to-earnings ratio of 19 and earnings are expected to grow by 37.70% this year. It also has some aggressive growth projections which makes it one of the cheap growth stocks to buy according to analysts.
AstraZeneca PLC’s (NASDAQ:AZN) pipeline looks robust with more than 200 ongoing projects. Moreover, it is also benefiting from the steady growth in cancer treatment. Three of its cancer treatment drugs Imfinzi, Tagrisso, and Enhertu are in their final clinical trial phases, indicating significant upcoming growth for the company.
The company grew its top line by 18% year-over-year during the first half of 2024, mainly due to its strong performance in the United States region and outperforming the Oncology segment. The total revenue for the United States was also up 18% during the first half, whereas, the Oncology segment drove the revenue higher by growing 22% during the same time.
In terms of profitability, AstraZeneca PLC (NASDAQ:AZN) improved its operating profit by 7% and management believes its revenue and core EPS to grow between mid-teens for the rest of the year. 30 analysts have a consensus Buy rating on the stock, with their 12-month median price target presenting towards 21% upside from current levels.
Parnassus Growth Equity Fund stated the following regarding AstraZeneca PLC (NASDAQ:AZN) in its Q2 2024 investor letter:
“AstraZeneca PLC (NASDAQ:AZN) gained after announcing robust first-quarter results and setting 2030 targets at an Investor Day that were above consensus expectations. We continue to believe that AstraZeneca’s robust pipeline and industry-leading innovation in oncology should support above-expectation revenue growth for the next several years.”
7. Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY)
Forward P/E Ratio: 12.71
Earnings Growth This Year: 5.20%
Analyst Upside Potential: 25.59%
Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) operates as a biopharmaceutical company that specializes in commercialized therapies for rare neurological diseases. The company also focuses on neurological diseases where existing treatments are not effective.
One of the key breakthroughs that Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) has achieved is its Pitolisant drug which sells under the brand name WAKIX. It was initially approved by the FDA to treat excessive daytime sleepiness in adults with narcolepsy. However, recently it has also been approved for the treatment of PWS. The drug has the potential to address the unmet medical needs of more than 20,000 patients living in the United States.
The company delivered key financial results in the second quarter of 2024, the WAKIX Net Revenue grew 29% year-over-year to reach $172.8 million. Moreover, the average number of patients on the drug increased by 250 patients on a subsequential basis.
The pipeline of Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) also looks healthy. Its Pitolisant Gastro-Resistant (GR) is on track to start the Dosing Optimization study by the end of the year. Moreover, Pitolisant HD has shown differentiating results with a 20% increase in relative bioavailability.
As a result of strong growth, the company was able to deliver a net income of $60.6 million during the quarter and is on track to achieve its revenue target of $700 million to $720 million for the full year.
Its robust pipeline ensures that the company is in for some lofty growth and its forward price-to-earnings ratio of 12.71 indicates a cheap valuation. Thereby making Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) a cheap growth stock to buy according to analysts.
6. QUALCOMM Incorporated (NASDAQ:QCOM)
Forward P/E Ratio: 16.53
Earnings Growth This Year: 19.60%
Analyst Upside Potential: 27.28%
While investors have been focused on the potential of AI servers they may have overlooked the potential of artificial intelligence in smartphones. QUALCOMM Incorporated (NASDAQ:QCOM) is capitalizing on making AI-capable chips for smartphones. It is a multinational corporation that develops integrated circuits and software for various technology devices. It has a significant contribution in enabling phones to connect to 4G and 5G technology.
Recently, Apple released its first AI-ready iPhone with the help of QUALCOMM Incorporated’s (NASDAQ:QCOM) Snapdragon 8 Gen 3 chip. Although the maker of the iPhone intends to move away from QUALCOMM. However, they have extended their patent license agreement to the first quarter of 2027, indicating the importance of the company in the smartphone industry.
Moreover, on September 24, Reuters reported that QUALCOMM Incorporated (NASDAQ:QCOM) has approached Intel for a potential buyout. If it goes through this will not only be one of the biggest mergers and acquisitions in the industry but will unleash a series of new products. The unification of Snapdragon chips with Intel’s PC and server chips will result in a semiconductor powerhouse.
The company recently released its fiscal third quarter results indicating revenue of $9.4 billion, which was towards the higher end of its guidance. The revenue growth was on the back of strong performance across the board, with QCT segment and QTL segment revenue growing 12% and 3% year-over-year respectively.
QUALCOMM Incorporated (NASDAQ:QCOM) is one of our cheap growth stocks to buy according to analysts. It is trading at a 31% discount to its sector, with earnings expected to grow 19.6% during the year.
O’keefe Stevens Advisory stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2024 investor letter:
“During the quarter, the A.I. rally broadened beyond the obvious players of Nvidia, AMD, and hyperscalers. QUALCOMM Incorporated (NASDAQ:QCOM), a long-standing investment, is gaining recognition for integrating artificial intelligence into mobile phones. Qualcomm’s A.I. on-device capabilities enable real-time language translation, improved voice recognition, and sophisticated imaging techniques as A.I. becomes more integral to mobile experiences. Qualcomm benefits by leading the market in providing robust, efficient, and versatile A.I. solutions. A.I. could be the first technology advancement in several years to accelerate the smartphone replacement cycle as users desire these advanced capabilities.”
5. Lam Research Corporation (NASDAQ:LRCX)
Forward P/E Ratio: 21.9
Earnings Growth This Year: 18.20%
Analyst Upside Potential: 29.13%
Lam Research Corporation (NASDAQ:LRCX) is a technology company that develops essential equipment and services required for making semiconductors, which are the powerhouse for artificial intelligence these days.
The strategic edge of the company originates from the rapid adoption of artificial intelligence. It has been witnessing increased demand for high-bandwidth memory (HBM) technology. The HBM technology enables data centers to track high amounts of data while keeping energy consumption low.
All major technology companies that are working on AI or data centers are expected to need more HBM technologies to keep their operations running. According to a forecast the demand for HBM is expected to increase from 478 million GB in 2023 to more than 1,700 GB by 2025.
Lam Research Corporation (NASDAQ:LRCX) generated around 36% of its total revenue from the sale of memory-related technology, indicating its close relation with the industry and prospects of growth associated with it.
The fiscal fourth-quarter revenue was ahead of analyst expectations, the company generated $3.87 billion while the expectations were $3.82 billion. The revenues went up 21% year-over-year, and earnings per share also bested analysts at $8.14.
Lam Research Corporation (NASDAQ:LRCX) is one of the cheap growth stocks to buy according to analysts. 33 analysts have a consensus Buy rating on the stock, with their 12-month median price target of $1,021.50, presenting a 29.13% upside from current levels.
Artisan Select Equity Fund stated the following regarding Lam Research Corporation (NASDAQ:LRCX) in its Q2 2024 investor letter:
“The top contributors to performance for the quarter were Alphabet, Lam Research Corporation (NASDAQ:LRCX) and Elevance. Lam Research shares rose 10% during the quarter and are up 67% over the past year, primarily due to optimism around the pending investment cycle in semiconductor capital expenditures. Lam is one of the largest equipment manufacturers used to make semiconductor chips. This equipment, commonly referred to as WFE (wafer fabrication equipment), is expected to experience significant growth due to a combination of a cyclical rebound in memory chips and growing demand for new AI-related chips. Lam’s product portfolio is particularly well positioned to benefit from both trends and should grow even faster than the overall market. Its shares now trade at ~30X prior peak earnings, which suggests this dynamic is well understood by the market and is mostly priced in.”
4. Super Micro Computer, Inc. (NASDAQ:SMCI)
Forward P/E Ratio: 13.89
Earnings Growth This Year: 53.50%
Analyst Upside Potential: 36.97%
Super Micro Computer, Inc. (NASDAQ:SMCI) is a technology company that specializes in providing high-performance computing solutions. It designs servers and storage systems that are used for data centers, cloud computing, 5G networking, and artificial intelligence.
Its cutting-edge products such as liquid cooling clusters and next-gen X14 Intel Xeon 6 and H14 AMD Turin systems have proved to be indispensable in the growing artificial intelligence environment. Over the past couple of years, AI has emerged as a new catalyst for the stock. We say this because the company has grown its revenue by more than 61% and its bottom line by around 121% during the past 3 years.
Super Micro Computer, Inc. (NASDAQ:SMCI) ended fiscal 2024 with a revenue of $14.9 billion almost double the previous year’s $7.1 billion. Management has speeded up its production, it is now producing 5,000 racks and more than 2,000 direct liquid cooling racks per month.
While the most recent year results are robust, what’s more impressive is its anticipation for 2025 to be another historic year, with a record number of orders, and a growing backlog of design wins. Management stays confident that it is in the right momentum to meet the demand for its AI servers.
The stock is trading at only 14 times its forward earnings, with analysts expecting its earnings to grow by more than 53% during the year. Thereby, making Super Micro Computer, Inc. (NASDAQ:SMCI) a cheap growth stock to buy according to analysts.
Carillon Scout Mid Cap Fund stated the following regarding Super Micro Computer, Inc. (NASDAQ:SMCI) in its Q2 2024 investor letter:
“Super Micro Computer, Inc. (NASDAQ:SMCI) was the top detractor to returns in the second quarter. Super Micro designs and manufacturers server solutions based on modular and open-standard architecture. This modular approach combined with a strong engineering culture helps the company to supply the market with advanced servers and rack-scale compute solutions quickly. After an impressive return in the first quarter, the company offered disappointing near-term earnings guidance, though we do not believe its long-term opportunity has diminished. We expect continued strong growth for several years, although the range of outcomes is quite wide; it is difficult to forecast AI server market growth with precision.”
3. Nextracker Inc. (NASDAQ:NXT)
Forward P/E Ratio: 11.9
Earnings Growth This Year: 2.30%
Analyst Upside Potential: 70.28%
Nextracker Inc. (NASDAQ:NXT) is a renewable energy technology company focused on the goal of transitioning the world to renewable power. To do so, it has specialized in solar tracker technology and software solutions for large-scale solar energy projects.
The solar tracker technology allows solar panels to follow the movement of the sun throughout the day and maximize the amount of sunlight it converts to consumable energy. On the other hand, the software, TrueCapture, optimizes the performance of solar panels by adjusting the angle based on the environmental needs.
Nextracker Inc. (NASDAQ:NXT) has a global presence and has installed more than 100 gigawatts of solar trackers internationally.
The company has demonstrated its ability to deliver consistent revenue growth. The fiscal first quarter of 2025 marked the sixth consecutive quarter of double-digit revenue growth since its IPO. The recent quarter’s revenue was up more than 50% year-over-year to 720 million.
Its technology has already started to gain traction in the market, especially in the United States. In the first quarter, US revenue was up 71% year-over-year, while the rest of the world grew by 29%. It already has increased its order backlog by $4 billion during the quarter indicating continued growth for at least a short term. Management has been working on enhancing its product portfolio and launched the NX HorizonTM Low Carbon Tracker in April 2024. Furthermore, it expects FY2025 revenue to be in the range of $2.8 billion to $2.9 billion.
With robust growth prospects and a cheap valuation indicated by a forward price-to-earnings ratio of 11.9, Nextracker Inc. (NASDAQ:NXT) is a cheap growth stock to buy according to analysts. 32 analysts have a consensus Buy rating for NXT with their median price target of $62 presenting an upside of 70.28% from current levels.
2. Five9, Inc. (NASDAQ:FIVN)
Forward P/E Ratio: 12.17
Earnings Growth This Year: 10.70%
Analyst Upside Potential: 80.83%
Five9, Inc. (NASDAQ:FIVN) is a leading technology company that provides cloud-based software solutions for contact dealers. One of the key offerings of the company includes a Virtual Contact Center (VCC), which is aimed at enhancing customer service for businesses. The omnichannel platform allows businesses to seamlessly integrate voice, chat, social media, and much more into customer services.
The company has been focused on enhancing the consumer experience through integrating artificial intelligence in its platform. It stands as a differentiated leader in the said market and has incorporated features such as virtual agents that blend human interaction with AI capabilities to ensure personalized customer care for businesses.
Five9, Inc. (NASDAQ:FIVN) just surpassed the $1 billion mark for its FQ2 2024 revenue in annual run rate. Revenue growth was driven by a strong subscription rate, with the last 12-month subscription revenue growing 21% year-over-year and total subscriptions growing around 17% during the same time.
The growth prospects of the company look robust as it has developed various streams that generate high annual recurring revenue. It recently signed deals with higher education enrollment management, healthcare, and pharmacy benefits management companies.
Furthermore, due to its forward price-to-earnings ratio of 12.17 and earnings growth expected at 10.7% this year, it is one of the cheapest growth stocks to buy according to analysts.
Brown Capital Management Mid Company Fund stated the following regarding Five9, Inc. (NASDAQ:FIVN) in its Q2 2024 investor letter:
“Five9, Inc. (NASDAQ:FIVN) is a leader in cloud-based contact-center software, which serves as the routing engine to connect callers to agents. With the growth of e-commerce, consumers are making fewer in-person visits to stores but contacting companies more frequently, driving the need for world-class contact-center software solutions like Five9’s. It has been a tough couple of years for Five9’s stock and this quarter provided no relief. Competitive concerns, questions about AI’s long-term impact on the business and deteriorating macroeconomic conditions have all cast clouds over the company’s stock. Five9’s consumer segment, one of its largest divisions, has really struggled of late as clients hire fewer call-center agents, pressuring Five9’s seat-based revenue model. Total revenue growth decelerated to 13% year-over-year in the most recent quarter, down from 28% and 17% in 2022 and 2023, respectively. Moreover, management guided to 16% for the full year 2024, which some consider optimistic given the weak start to the year. These worsening sales trends further weighed on shares during the quarter.
Looking through the current industry doldrums, we see a bright future for Five9. The company inked its largest deal ever during the quarter, which will generate more than $50 million in annual revenue once fully rolled out. We believe this is an important signal of Five9’s long-term potential. The company is attacking a $60 billion market opportunity, is winning new business at industry-leading rates and is gaining share from legacy incumbents stuck with antiquated technology. We continue to assess the potential threat of AI, but so far it has provided an uplift to company results. The company’s AI product is very popular with large enterprises as it assists agents with customer interactions and can sometimes be used to fully automate interactions. Far from shrinking the number of industry seats, as some fear, management said revenue per seat doubles when customers adopt their AI applications. We expect sales growth to pick up markedly in the coming years, which should result in much stronger stock performance.”
1. Flex Ltd. (NASDAQ:FLEX)
Forward P/E Ratio: 13.55
Earnings Growth This Year: 12.60%
Analyst Upside Potential: 21.31%
Flex Ltd. (NASDAQ:FLEX) is a multinational technology company that provides a wide range of services for various industries. For instance, its Flex Agility Solutions (FAS) helps organizations build infrastructure for data and communication. On the other hand, Flex Reliability Solutions (FRS) develops components for high-end industries such as automotive, health, and industrial products.
The products and solutions provided by Flex Ltd. (NASDAQ:FLEX) help businesses integrate artificial intelligence and machine learning capabilities into their technology. Thereby making it a hidden AI company that is prospected for growth soon. As soon as the management shifted its focus towards high-end value products the company entered an era of growth. At the moment, these industries account for more than 60% of the company’s total revenue and management is at work to grow its footprint further.
Another differentiating factor is its engagement within the data center and AI market. The most recent quarter results further highlighted its growth prospects. While the fiscal first quarter revenue for 2025, was down 13.93% year-over-year, it was up from the previous quarter by 2%. More notably, 25% of this revenue came from the growth in the data center and power segments.
Despite the revenue decline, gross profits were up by 50 basis points led by a strong demand for medical devices. Moreover, the company also benefited from its effective cost management.
The fact that Flex Ltd. (NASDAQ:FLEX) is involved with high-end industries which are forecasted to grow in the future, automatically makes the business landscape lucrative for the company. Furthermore, it is also undervalued at current levels. Flex is trading at 13.55 times its forward earnings while the market average sits close to 24. Moreover, analysts expect its earnings to grow by 12.6% during the year, thereby making it one of the cheapest growth stocks to buy according to analysts.
Artisan Small Cap Fund stated the following regarding Flex Ltd. (NASDAQ:FLEX) in its first quarter 2024 investor letter:
“We initiated new GardenSM positions in Flex Ltd. (NASDAQ:FLEX), On Holding and Onto Innovation during the quarter. Flex provides outsourced electronic manufacturing services to a diverse set of end markets. The company hired a new CEO in 2020, who has been driving a strategic pivot toward manufacturing high-value products in areas such as health care, industrial, automotive and cloud infrastructure. Today, these higher value items account for ~60% of revenues, and we believe they will continue to tick higher. We also believe an improving business mix, along with the reshoring of supply chains, will lead to faster growth and higher margins.”
While we acknowledge the potential of Flex Ltd. (NASDAQ:FLEX) to grow, 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 a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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