Investors seeking stocks that outperform market indexes often look for growth stocks that have the potential for above-average returns. In this regard, two companies have recently experienced pullbacks from their highs but possess promising prospects for long-term value.
The first company, Advanced Micro Devices (AMD), is a leading semiconductor manufacturer. Concerns over potential export controls on products utilizing American technology have caused chip stocks, including AMD, to trade lower. Despite these concerns, the demand for advanced chips used in data centers and AI training models remains strong. AMD’s data center revenue has surged by 80% year over year, driven by the success of its new MI300 data center chips. These high-powered chips command higher selling prices and margins, indicating positive long-term profitability for AMD. With analysts projecting annualized earnings growth of 43%, AMD stock is expected to recover and deliver market-beating returns in the coming years.
The second company, HubSpot, is a customer management software provider. Shares of HubSpot declined after acquisition talks with Google’s parent company, Alphabet, fell through. However, this dip presents an opportunity for investors to buy shares of a leading company in the customer management software market. HubSpot’s platform enables businesses to attract customers, increase web traffic, and convert sales leads. Despite weakening enterprise software spending, HubSpot’s revenue growth remains solid, with a 23% increase year over year. The recent decline in stock price offers investors better value, with the price-to-sales multiple dropping to a more reasonable level. The customer relationship management software market is projected to grow at a rate of 10% annually, and HubSpot is already outpacing this projection, indicating potential market share gains. Analysts expect HubSpot to deliver 25% annualized earnings growth in the long term, making it an attractive investment for those seeking long-term rewards.