Growth investing is starting to tiptoe back after falling out of favor last year. Many growth stocks that tanked in 2022 are gaining momentum in 2023. Some of these companies still look risky in the current environment, though, and it can be hard to imagine what they might look like in 10 years.
However, the risks are sometimes worth taking, even for the average investor. Let's see why Nu Holdings (NU -0.08%), Revolve Group (RVLV 2.03%), and Global-e Online (GLBE -0.28%) are excellent growth stocks to buy now.
1. Nu Holdings: a Warren Buffett choice
As the guru of value investing, Buffett's investment in Nu Holdings looked like a head-scratcher when the company went public at the end of 2021. Buffett's holding company, Berkshire Hathaway, also took an equity position in Nu even before its IPO.
Nu is a Latin American digital bank that offers a broad range of financial services centered around personal banking. Although it looked like a classic unprofitable but high-growth stock during its market debut, it has posted two consecutive quarters of profits while still increasing sales at a triple-digit rate, a rare feat. Currency-neutral sales rose 112% year over year in the fourth quarter of 2022, while adjusted net income reversed from a $66 million loss last year to a $58 million profit. Nu added 4.2 million customers in the quarter, up 38%, for a total of 74.6 million.
Nu is headquartered in Brazil with 44% of the adult population as customers. It's growing even faster in its newer markets like Mexico, where it has only 3% of the market, and in Colombia, where it has only 2%. Aside from gaining new customers, its growth strategy is focused around cross-selling multiple products, and every single one of its categories demonstrated robust year-over-year growth in the fourth quarter.
This stock looks incredibly promising, but it is fairly expensive. Even down 45% from its IPO price, shares trade at 8 times trailing-12-month sales. However, as it posts profits, the risk factor is declining, and the growth story looks solid.
2. Revolve Group: a leader in fashion technology
You might not think of fashion when you think about artificial intelligence (AI) and technology, but if you don't, you'll miss out on this fantastic opportunity.
Revolve Group operates two high-fashion websites that harness digital capabilities and AI to create a modern shopping experience. It targets millennial and Gen Z shoppers, leveraging social media and relationships with celebrities and influencers to attract its core clientele. These shoppers are willing to spend for the latest trends, and Revolve's ability to offer on-trend products backed by AI algorithms generates a high rate of full-price sales and leads to strong profitability.
That's being tested now, though, as inflation continues to be a factor in consumer spending. Revolve eked out a double-digit sales increase in the 2022 third quarter with sales increasing 10% year over year. Gross margin declined 211 basis, and net income fell 28% to $12 million.
The pressure may finally be letting up, though, as the U.S. Department of Commerce reported a 3% jump in retail sales from December to January after two months of declines. As shoppers get back into the game, Revolve is ready and waiting, and 2023 could be a huge year for a recovery. Whatever the short-term situation, Revolve's growth potential looks outstanding. The stock trades at an attractive valuation of 20 times trailing-12-month earnings, a discount to the broad market. It should reward investors heartily over the next 10 years and more.
3. Global-e: high growth in e-commerce
It really is a small world, even more so in the digital age, where buying products from another country is as simple as clicking a button. Global-e has simplified that process, so when you get to the checkout page on an e-commerce website, it instantly calculates all shipping and customs costs, delivery options and timing, and prices in nearly 100 currencies.
Global-e's platform is easily integrated into a retailer's website. It takes a fee from each purchase, making it affordable as it opens up a whole world of new customers.
It's no surprise that Global-e has been growing fast. It has posted high-double-digit top-line growth every quarter since going public, including a 79% year-over-year sales increase in the 2022 third quarter. It also keeps adding high-profile clients to its list -- names like LVMH and Disney -- and has a partnership with Shopify, giving it access to Shopify's million-plus merchant clients and hundreds of millions of customers.
Global-e is the only unprofitable stock on this list, partly due to scaling. But another reason is the warrants from Shopify's investment in the company, which are amortized each quarter and will fully amortize by 2025. Ten years from now, Global-e should be a larger, profitable company. It's also not cheap, trading at 12 times trailing-12-month sales, but its opportunity looks massive.
