But finding the market’s best growth stocks is easier said than done. So to help you get started, here are three top growth stocks I think investors should consider buying this month.

Disrupting the real estate industry — again

Zillow Group (NASDAQ: Z)(NASDAQ: ZG) made its name by effectively disrupting the way consumers access valuable real estate data through its websites and apps. But shares of the online real estate platform are down a whopping 42% from their 52-week high as of this writing — a precipitous drop that mostly came on the heels of Zillow’s impressive second-quarter 2019 report in August.

The culprit? Zillow handily beat consensus estimates for its top and bottom lines in Q2 — revenue grew 84% to just under $600 million, or around $15 million above expectations — but it also offered guidance that left the market hungry for more, driven partly by monetization changes meant to promote more flexible payment models for its core Premier Agents business.

Meanwhile, bearish investors are concerned about the high overhead required to fund the rapid ramp of Zillow’s new Homes segment and its related Zillow Offers program. After expanding to seven new, large metropolitan markets in Q2, Zillow bought 1,535 homes in the second quarter. But it also technically lost a little more than $2,900 on each of the 786 homes it sold during its most recent three-month period.

Nonetheless, Zillow is powering forward toward its longer-term target of buying 5,000 homes per month. Before the benefits of that scale become evident, I think investors should consider taking advantage of Zillow’s recent pullback.

This drop won’t last forever

Splunk (NASDAQ: SPLK) stock has similarly fallen hard after each of its past two quarterly reports — but I think this is another case of the market getting it wrong. To be sure, Splunk handily beat its guidance on revenue in both quarters, most recently achieving a 33% increase in its top line to $516.6 million.

However, Splunk also massively reduced its cash flow guidance, last time calling for negative operating cash flow of $300 million for all of fiscal 2020, blaming a combination of a new pricing structure and the significantly faster-than-expected pace of its shift away from perpetual licenses and toward cloud-based, renewable subscriptions. For perspective, while Splunk previously anticipated renewable licenses would account for around 85% of its total by the end of the year, after last quarter it became apparent the figure would be closer to 99%.

Make no mistake, while that accelerated shift hurts Splunk’s cash collections in the near term, over the longer term it will mean more predictable revenue streams as long as Splunk’s loyal, growing customer base (it added more than 400 new enterprise customers last quarter alone, including Chipotle Mexican Grill, Cerner, and Slack) maintains its appetite for turning unstructured machine data into actionable intelligence.

A tiny company with a proven business model

Finally, consider Boston Omaha (NASDAQ: BOMN), a tiny financial holding company that currently focuses on billboard advertising and surety insurance, though it also has smaller stakes in various businesses including a homebuilder, a regional bank, and a real estate services firm.

But perhaps most exciting for investors today is that Boston Omaha follows a similar method for building shareholder value to what Warren Buffett employed with Berkshire Hathaway. That connection is no coincidence. In late 2017, Boston Omaha shares rallied after The Wall Street Journal highlighted that one of its co-CEOs is Buffett’s grandnephew Alex Buffett Rozek.

Of course, the same article was quick to point out the older Buffett does not own Boston Omaha shares and has nothing to do with its daily operations. But the Oracle of Omaha did say he “think[s] the world of Alex,” adding that his younger kin has a “very good mind [and] good values.”

Still, Boston Omaha remains in the earliest stages of its long-term story. Revenue more than tripled last quarter on a year-over-year basis, to just over $10 million, mostly driven by recent billboard acquisitions and the expansion of its surety insurance operations.

With shares trading at a reasonable 1.36 times book value today, I think investors who buy Boston Omaha now could be in for staggering gains as it continues to grow in the coming years.

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Between the ongoing U.S-China trade war, concerns of a broader economic slowdown, and geopolitical strife in general, it seems an understatement to say many investors are hesitant to buy stocks with any kind of outsized reliance on China.

But for those willing to play a contrarian role, now might be the perfect time to do exactly that. To this end, here are three China stocks I think investors could do well to consider buying today.

The “Disney of China”

Considering it recently exceeded 100 million paying subscribers for its fast-growing video-streaming service — good for growth of 50% year over year — it’s no surprise iQiyi (NASDAQ: IQ) is often called the “Netflix of China” by investors. But even putting aside iQiyi’s enormous advertising business, which fellow Fool Simon Erickson recently noted still funds the entirety of its research, sales, and marketing expenses, iQiyi management has insisted its longer-term business model will look similar to that of an online version of Disney, with plans to build out a comprehensive ecosystem of entertainment content and IP, including literature, comics, novels, and online games.

At the same time, investors need to recognize that iQiyi must walk a fine line in creating content that appeases China’s often-strict regulators. And the stock is undoubtedly sensitive to any macroeconomic forces that threaten to slow the growth (and disposable income) of China’s rising middle class.

But as the company continues to build its membership base and enterprise value — and with the stock currently trading around 13% below its $18-per-share IPO price from early 2018 — I think investors who can entertain the idea of iQiyi significantly expanding its reach in the coming years would do well to consider opening or adding to a position now.

The “Amazon of China”

By contrast, shares of JD.com (NASDAQ: JD) have rallied more than 30% so far in 2019. Most recently, that rise was aided by a big post-earnings pop last month after the Chinese e-commerce leader (and so-called Amazon of China) swung to GAAP profitability and absolutely trounced its own guidance for revenue (up 18% to $21.9 billion) in the second quarter.

Much like Amazon here in the U.S. — and unlike marketplace sites like eBay stateside and its Chinese peer Alibaba — JD’s edge comes from its status as China’s largest direct e-commerce retailer, which stems from its conscious decision to hold its own inventory and invest heavily in its own delivery and logistics network. That strategy has meant slim profits for JD to date as it works to scale its business in the near term. But over the longer term, that scale should begin to more rapidly translate to steady market-share gains and — as Chinese consumers continue to shift their buying to online sources — enviable operating leverage with fatter margins.

As it stands, I think we’re still in the earliest stages of JD’s long-term growth story. As the benefits of its investments begin to yield more tangible fruit, I think its recent gains will prove to be only the start of a longer-term trend of consistently beating the market.

The future of electric vehicles

Finally, I’m well aware Tesla (NASDAQ: TSLA) isn’t a pure play on China, particularly considering the electric vehicle (EV) maker collected only 8% of its $22.8 billion in 2018 revenue from the Middle Kingdom.

But for perspective, when Tesla announced second-quarter results in late July, CEO Elon Musk said the company was on track to start Model 3 production by the end of 2019. Coincidentally — exactly nine months since Tesla broke ground on its Shanghai Gigafactory in January — on Monday industry watchers spotted what appeared to be the first made-in-China Tesla Model 3 driving on the facility’s test track.

Assuming all goes as planned, Tesla’s new Shanghai factory will boast an initial manufacturing capacity of 150,000 units per year, proving instrumental in not only reducing the cost of catering to China’s massive auto industry, but also ramping toward the company’s 2020 production target for 500,000 vehicles globally.

There are other moving parts involved in owning a piece of Tesla, of course, whether we’re talking about headwinds created by its record (but still apparently underwhelming) Q3 deliveries, scrutiny surrounding Tesla’s acquisition of SolarCity, or the market’s reaction to the widely anticipated unveiling of Tesla’s electric pickup truck in the coming weeks.

But I still think there are enough positive catalysts for Tesla to make my short list of top China stocks to buy now, if even in the form of a small starter position to keep tabs on its progress.

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Shares of International Game Technology (NYSE: IGT) climbed 18.6% in September, according to data from S&P Global Market Intelligence, rebounding from a five-year low as the gambling-technology company announced a new seven-year contract with the Mississippi Lottery Corporation.

To be clear, IGT stock began to rally along with the broader market at the start of last month, then gained momentum following its Sept. 6 announcement of the long-term deal.

So what

Following a competitive bidding process held by the State of Mississippi, International Game Technology’s subsidiary, IGT Global Solutions, won the contract to provide the Mississippi Lottery with a variety of services including lottery terminals and a draw-based central system. In addition, IGT won a separate seven-year contract to produce instant tickets as well as to provide secure warehousing and game-distribution services. Each of the contracts allows for up to three single-year extensions.

“We are thrilled to have IGT on board with the Mississippi Lottery Corporation,” said lottery president Tom Shaheen. “We look forward to partnering with them in our effort as we pursue our mission of raising funds for roads and bridges throughout Mississippi.”

Now what

For perspective, International Game Technology’s stock had plunged more than 20% year to date leading into last month, hurt by the burden of massive debt levels, declining sales, and underwhelming profits. So while this new long-term contract undoubtedly helps appease some investors’ concerns to those ends, after last month’s pop I’m content watching this story play out from the sidelines until IGT is able to demonstrate more tangible progress toward returning to sustained, profitable growth.

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Shares of Dropbox (NASDAQ: DBX) climbed 12.7% in September, according to data from S&P Global Market Intelligence, rebounding from a 24% decline in August as multiple analysts issued positive notes on the cloud-based storage and data-management specialist following its first analyst day and user conference since going public early last year.

So what

Given its steep post-earnings drop in August, the stock rebounded in the first half of last month along with the broader market’s rise, even resisting some of the negative volatility endured by other peers in the cloud-computing space.

But it certainly helped toward the end of September when analysts at Deutsche Bank (NYSE: DB), RBC Capital, and Canaccord Genuity each issued or reaffirmed their respective buy (or equivalent) ratings on Dropbox following its Work in Progress conference in San Francisco on Sept. 25.

Now what

With per-share price targets ranging from $30 to $35 representing hefty premiums from the current price below $20, all three analyst firms suggested Dropbox’s valuation is attractive and that consensus estimates are likely too low — particularly in light of the company’s internal target for sustaining annual revenue growth in the 15% to 20% range.

Perhaps ironically, shares initially plunged in August despite Dropbox technically beating consensus estimates on both revenue and adjusted earnings, helped by what CEO Drew Houston called “another solid quarter of execution” — though billings and deferred revenue (both key metrics for predicting growth) seemed light at the time.

It remains to be seen whether these analyst calls are correct. But if Dropbox is able to sustain its growth momentum in the coming quarters, I agree that its stock price should continue to follow suit.

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What happened

Shares of BlackBerry (NYSE: BB) dropped 24.1% in September, according to data from S&P Global Market Intelligence, after the enterprise software and services specialist announced disappointing fiscal second-quarter 2020 results. To be sure, virtually all of BlackBerry’s plunge last month came on September 24 — the first trading day after its quarterly update hit the wires.

So what

That’s not to say BlackBerry’s quarterly results looked bad at first glance. After all, its non-GAAP (adjusted) revenue climbed 22% year over year to $261 million, translating to slightly better-than-expected break-even earnings on an adjusted per-share basis. But that top line also arrived well below the $266 million most analysts were anticipating and — perhaps less concerning — marked a slight deceleration from the 23% growth BlackBerry achieved three months earlier.

What’s more, during the subsequent conference call, CEO John Chen warned of “softness” from BlackBerry’s enterprise software and services (ESS) business — both in fiscal Q2 and expected to persist for another two quarters going forward — driven by a “retooling” of the company’s sales team for the segment.

Now what

Still, while admitting they were “disappointed” with its “short-term results,” Chen remained optimistic that BlackBerry is still positioned to grab a significant piece of the secure Internet of Things (IoT) and automotive software markets going forward.

Given its relative underperformance in the second quarter, however, and until BlackBerry shows more tangible progress to that end, I suspect its stock will remain under pressure.

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Shares of GoPro (NASDAQ: GPRO) were down 24.8% as of 11:00 a.m. EDT Thursday after the action-camera specialist reduced its full-year 2019 outlook.

Blaming “a late stage production delay” for its just-announced HERO8 Black camera, GoPro now expects 2019 revenue in the range of $1.215 billion to $1.25 billion, good for growth of 6% to 9% from 2018, which should translate to adjusted (non-GAAP) earnings per share of $0.30 to $0.35. By comparison, GoPro’s previous guidance (provided in early August) called for 2019 revenue growth of 9% to 12%, and most analysts were looking for higher 2019 earnings of $0.39 per share.

So what

More specifically, GoPro is shifting HERO8 Black shipments from the third quarter (as originally planned) to the fourth quarter. As such, GoPro now expects third-quarter revenue to be in the range of $123 million to $127 million, down sharply from $286 million a year earlier, which should translate to an adjusted net loss of $75 million to $65 million. For the entire second half of this year, GoPro sees revenue in the range of $680 million to $715 million, or growth of 6% to 9%, down from its previous second-half target for 9% to 12% growth.

Now what

To be fair, investors can take some solace knowing GoPro still expects its new products to be available for the bulk of the lucrative holiday season. But given its modest full-year guidance reduction, it’s clear the company anticipates missing out on some early holiday demand. Considering this isn’t GoPro’s first botched product launch, and that the company is still squarely in the middle of a turnaround through which it hopes to return to sustained, profitable growth, it’s hardly surprising to see the stock plunging as the market absorbs the news.

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Late Tuesday, however, Tesla breathed fresh life into its self-driving ambitions by quietly acquiring DeepScale (according to sources speaking with CNBC), a 4-year-old AI start-up focused on advancing deep neural networks (DNNs) for use in autonomous vehicles. Terms for the deal weren’t disclosed, indicating it wasn’t a particularly large acquisition, but DeepScale previously raised more than $18 million in venture capital funding since it was founded in late 2015.

To be clear, Tesla hasn’t independently confirmed the purchase just yet. But DeepScale co-founder and CEO Forrest Iandola did indirectly acknowledge the move with a Tweet:

I joined the @Tesla #Autopilot team this week. I am looking forward to working with some of the brightest minds in #deeplearning and #autonomousdriving.

— Forrest Iandola (@fiandola) October 1, 2019

More specifically, DeepScale specializes in “squeezing” artificial intelligence, or making “an AI system use less resources by whatever means necessary.”

More to Tesla’s purpose, DeepScale’s proprietary “Carver21” software was created as a modular solution to easily integrate with other businesses’ self-driving vehicle sensors, technology, and chips.

That aligns perfectly with Tesla’s proprietary self-driving chip, which was formally unveiled at its Autonomy Day presentation this past April and targets using no more than 250 watts to ensure it won’t negatively impact the vehicles’ battery range.

But make no mistake: This acquisition is as much about pulling in high-quality engineering talent as it is about supplementing Tesla’s own self-driving vehicle technology. According to DeepScale’s website, 25% of its engineering team already have doctoral degrees — including both company co-founders Iandola and Kurt Keutzer — and together that team boasts more than 30,000 scholarly citations.

And putting aside the financial terms of the purchase, why wouldn’t this well-educated group want to join Tesla’s fold? With hundreds of thousands of Tesla vehicles already on the road continuously collecting hoards of self-driving vehicle data, the enormous data advantage enjoyed by the company in these early stages of the self-driving vehicle race is enough to make any self-respecting AI scientist giddy with anticipation.

What remains to be seen, however, is whether the DeepScale team is able to successfully assimilate both its personnel and its AI technology into the high-pressure environment Elon Musk seems to thrive on fostering. If they can succeed to that end, this small acquisition could ultimately prove to be exactly what Tesla needs to propel its Autopilot capabilities into the future.

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But the creative software leader also followed with a seemingly conservative update to its outlook — at least, relative to Wall Street’s expectations — leaving shares down modestly in after-hours trading as of this writing. Let’s dive deeper for a better idea of what Adobe accomplished over the past few months, and what we should be watching as it wraps up its fiscal year.

Adobe Systems results: The raw numbers

Data source: Adobe Systems. *For the period ended Aug. 30.

What happened with Adobe Systems this quarter?

• Adjusted for items like stock-based compensation and acquisition costs, Adobe’s (non-GAAP) net income was $1.006 billion, or $2.05 per share, up from $859.8 million, or $1.73 per share in the same year-ago period.
• Both the top and bottom lines arrived above Adobe’s guidance, provided in June, for adjusted earnings of $1.95 per share on revenue of $2.80 billion.
• Digital-media segment revenue grew 22% year over year, to $1.96 billion — above guidance for 20% growth — including Document Cloud revenue of $307 million and Creative revenue of $1.65 billion.
• Digital-experience segment revenue climbed 34% to $821 million, in line with guidance.
• Adobe added net new digital-media annualized recurring revenue (ARR) of $386 million — above guidance for $360 million — to bring its total digital media ARR to $7.86 billion exiting the quarter.
• 92% of Adobe’s revenue this quarter came from recurring sources, up from 91% last quarter.
• Deferred revenue exiting the quarter was $3.26 billion, up from $3.13 billion last quarter.
• Adobe generated operating cash flow of $922 million this quarter, and repurchased 2.6 million shares for $750 million. That leaves $5.85 billion remaining of Adobe’s original $8 billion repurchase authorization, which is valid through the end of 2021.

What management had to say

“Customers across every industry continued to rely on Adobe to run their businesses, transform how they work, and bring their creative ideas to life as reflected in our record Q3 results,” CEO Shantanu Narayen said. “We’re excited for the opportunities in front of us and confident in our ability to drive strong top-line and bottom-line growth.”

Looking forward

For the fourth quarter of fiscal 2019, Adobe expects revenue of $2.97 billion, assuming 20% growth in digital-media segment revenue and 23% growth from digital experience products. Adobe also anticipates net new digital media ARR of $450 million, and adjusted earnings of $2.25 per share. For perspective, and while we don’t typically pay close attention to Wall Street’s demands, most analysts were modeling slightly higher fourth-quarter adjusted earnings of $2.30 per share on revenue closer to $3.03 billion.

Still, during the subsequent conference call, CFO John Murphy insisted these figures represent a “strong finish for the year,” and promised additional color on Adobe’s strategy and growth opportunities at its financial analyst meeting at the Adobe MAX conference in early November. What’s more, in the end, considering Adobe’s penchant for underpromising and overdelivering, I suspect this seemingly light guidance could prove conservative when all is said and done next quarter.

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Shares of Zillow Group (NASDAQ: Z)(NASDAQ: ZG) fell more than 30% in August after the online real estate platform specialist announced strong second-quarter 2019 results, but followed with underwhelming forward guidance.

The bulk of Zillow’s losses last month came in the two days following its Aug. 7 update, when the company told investors that quarterly revenue had soared 84% year over year to $599.6 million, translating to an adjusted net loss of $0.14 per share. By contrast, most analysts were looking for a slightly larger net loss on lower revenue of $585 million.

So what gives? And perhaps more important for investors today, is Zillow stock worth buying after the drop?

Perspective is in order

Zillow’s legacy Premier Agent business saw revenue climb only 0.5%, to just under $232 million this quarter — which, to be fair, was close to the high end of Zillow’s guidance. Traffic to Zillow Group’s mobile apps and websites also climbed 4% year over year, to over 194 million monthly unique users, and its number of total visits climbed 14%, to almost 2.2 billion.

But Zillow’s top-line growth was largely driven by its newer “homes” segment, which generated sales of $248.9 million during the quarter, well above guidance for a range of $230 million to $245 million. And Zillow noted that consumer awareness for its Zillow Offers program is gaining steam: Over 69,000 homeowners requested an offer from Zillow to buy their homes during the quarter (up 94% sequentially from Q1), helping the program reach an annualized revenue run rate of more than $1 billion within its first year.

Of course, that revenue hasn’t turned into profits just yet. After accounting for costs related to acquisition, renovations, holding, and selling, Zillow actually lost an average of just over $2,900 on each of the 786 homes it sold this quarter.

But that should change as Zillow rapidly grows its homes business and enjoys greater economies of scale. To that end, Zillow added seven new Zillow Offers markets in the second quarter alone, expanding to Dallas-Fort Worth, Minneapolis, Portland, Nashville, Orlando, and the Colorado Springs/Fort Collins areas. And by the middle of next year, it plans to launch Zillow Offers in Cincinnati, Tuscon, Jacksonville, and Oklahoma City.

“Early stages of a bold expansion”

For perspective, recall that over the longer term, Zillow management has told investors they see the company purchasing as many as 5,000 homes per month, which should, in turn, help feed at least 3,000 mortgage loans per month (assuming a 33% attach rate) through its budding mortgages segment.

“We’re in the early stages of a bold expansion of our company that opens up exciting opportunities for our customers, partners, shareholders and employees,” added Zillow co-founder and CEO Rich Barton. “We are uniquely advantaged by our brand awareness, audience size, technology, data science, industry partnerships, and operational know-how and are well on our way to rewire real estate.”

Looking ahead to the full year, however, Zillow told investors last month to expect Premier Agent revenue of $900 million to $915 million, up around 1% at the midpoint but marking a reduction from its old target range of $910 million to $930 million. That modest growth can be partly attributed to Zillow’s new “Flex” monetization model, which allows Premier Agents to pay a fee only when they close a transaction with a consumer lead rather than paying for ads upfront. The company also declined to provide a 2019 outlook for that early-stage homes segment, opting instead to prioritize scaling the business as quickly as possible.

The end result? After rallying more than 60% year to date leading up to its quarterly report, Zillow effectively gave up most of that gain over the past month as traders panned its lack of profitability and sluggish Premier Agent revenue growth.

But if Zillow can manage to over deliver and show it has what it takes to generate sustained, profitable growth over the long term from each of its core segments — led by the massively disruptive homes segment — I think now could be a perfect time to pick up the stock before the rest of the market realizes its potential.

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Shares of Etsy (NASDAQ: ETSY) dropped 21.2% in August, according to data from S&P Global Market Intelligence, as the market reacted to the vintage- and handmade-centric e-commerce site’s second-quarter results.

To be sure, virtually all of Etsy’s plunge came at the start of last month, with the stock down 20% in the two trading days after its quarterly update hit the wires. But that’s not to say Etsy’s performance looked bad at first glance.

So what

To the contrary, Etsy’s second-quarter revenue grew 37% year over year to $181 million, translating to net income of $18.2 million, or $0.14 per share (up from $0.03 per share a year earlier). Analysts, on average, were modeling slightly lower earnings of $0.13 per share, but on slightly higher revenue of $183 million.

Still, Etsy CEO Josh Silverman called the company’s growth last quarter “excellent,” crediting “solid execution across [Etsy’s] portfolio of product and marketing investments and the strength of [its] core marketplace.”

So why the decline?

First, it’s worth keeping in mind Etsy stock was already up 45% year to date leading into its announcement, leaving some traders more than willing to take profits on the heels of a technically mixed report.

It also didn’t help that growth in Etsy’s services revenue — up 16.2% year over year to $45.9 million — decelerated significantly from the 29% increase the same segment achieved in Q1. Marketplace revenue, on the other hand, soared a whopping 47.2% to $181.1 million, while gross merchandise sales (GMS) grew 21.4% to $1.095 billion.

Now what

Etsy also boosted its full-year guidance for both GMS (up 20% to 22%, versus an 18% to 21% growth target before) and revenue (up 32% to 34%, an increase from 30% to 32% previously), while simultaneously reducing its outlook for adjusted EBITDA margin to be 22% to 24% (down from its old range of 23% to 25%).

To blame for the latter, according to Etsy management during the subsequent conference call, was the “short-term absorption of zero-margin revenue” stemming from the company’s new unified advertising platform. Over the longer term, however, that platform should also allow the company to make greater investments toward “upper-funnel” marketing channels (think television and digital video) to increase brand awareness and — in turn — drive incremental growth over the longer term.

For investors willing to buy on the pullback and watch this story play out, I think Etsy could be one of the most compelling portfolio candidates our market has to offer today.

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