Growth stocks, with their constant rising trends and promising future prospects, are must-haves in your financial portfolio. Growth stocks are a type of stock that are expected to increase in value at a faster rate than the overall stock market. These stocks typically represent companies that are experiencing strong revenue and earnings growth, often in emerging industries or markets. Growth companies often reinvest their profits back into the business to fund further growth, rather than paying dividends to shareholders. This strategy can be attractive to investors who are looking for long-term capital appreciation, as opposed to short-term income.
If you’ve got $5,000 to invest or any other amount, buying Lightspeed Commerce and Microsoft is an excellent choice. After taking a dip in 2022 among larger tech selloff, these two growth stocks are back in the green this year. I expect more upside for the rest of the year.
Lightspeed Commerce
Lightspeed Commerce (TSX:LSPD) is one of the best Canadian tech stocks. The company has a cloud-based point-of-sale, or POS, system. Retailers use these to manage the check-out process. In addition to general retail, Lightspeed also has solutions for restaurants and hospitality. Lightspeed is smaller than competitors like Block or Shopify, so it has more room to grow. In the early days of the pandemic, when retailers were rushing to switch to more advanced checkout systems, Lightspeed had a lot of early success. Its shares went up by as much as 10-fold.
Lightspeed grew its sales from just $57 million in 2017 to $548 million in fiscal year 2022. Analysts expect the top line to grow by about 25% per year going forward. Meanwhile, the company is expected to start making money in 2024. Lightspeed’s shares have fallen from an all-time high of more than $125 per share to less than $21. This is enough of a drop to make it a good time for contrarian investors to buy. Shares have gained 4% year to date and has potential for much more upside.
Microsoft
Investors are all of a sudden rushing to put their money into companies that use artificial intelligence. The success of the ChatGPT AI platform has gotten a lot of attention from the general public. AI has been a common theme in science fiction for a long time, but recent advances in AI chat and image generation are making it seem more real. There are companies that only do AI, but they tend to be small and not profitable right now.
Microsoft (NASDAQ:MSFT) is a safer choice for AI. After adding AI to its Bing search engine, the company is getting a first-mover advantage. You can expect strong AI to make its way into Office and other core products over time. This will help to change what’s popular in the Windows work environment. A lot of computing power is also needed for AI. This is a great reason to use Microsoft’s Azure cloud hosting service. In other words, Microsoft is in a great position to win on multiple fronts as the use of AI solutions grows.
Microsoft stock is now trading below US$280, which is far from is 52-week high of US$343.11 hit in November 2021. The stock is on the right path, as it has already gained 15% so far this year.
