Growth stocks on the Nasdaq exchange have been some of the market’s best performers over the past few years. However, last month they were heavily sold off.
This opened up several fantastic buying opportunities. If you took advantage of the sell-off, congratulations — the stocks have nearly unanimously risen from their lows at the end of March. Yet the recent rally may have caused some investors to feel like they missed the boat on a huge run.
If you missed it, I don’t think there’s any need for concern. There is plenty of momentum in this space, and still plenty of upside for countless Nasdaq stocks.
Image source: Getty Images.
Several Nasdaq stocks remain well off their all-time highs
Even if some stocks on the Nasdaq have rallied from their lows, several are still down from their all-time highs. One of the most prominent is Microsoft (MSFT +2.11%), which is off more than 20% from its all-time high (although it was down as much as 34% at its low point). There is still lots of room left for Microsoft to run, especially since its valuation is nowhere near where it normally is.
I think the best way to value the stock is based on the company’s operating profits, since these ignore the effects of one-time tax charges and gains on investments, among other things. It just gives investors a clearer look into how Microsoft’s stock has been priced over the past decade. From this standpoint, it still looks cheap.
MSFT Operating PE Ratio, data by YCharts; PE = price to earnings.
You can still buy Microsoft stock for nearly the same price as during the 2023 sell-off, which turned out to be a great opportunity.
Still, there’s no sugarcoating it: If you’re a month late to the party, stocks like Broadcom (AVGO +0.62%) and Nvidia (NVDA +4.30%) have rallied to nearly all-time highs. However, these stocks are expected to grow significantly over the next few years, and there is still significant upside from here.
AI is driving huge growth
Companies like Broadcom and Nvidia are thriving off the extreme AI buildout opportunity. Each of them designs and oversees the manufacturing of AI computing chips, which should lead to phenomenal growth.
Today’s Change
(4.30%) $8.60
Current Price
$208.24
Key Data Points
Market Cap
$5.1T
Day’s Range
$199.82 – $210.94
52wk Range
$104.08 – $212.19
Volume
8M
Avg Vol
174M
Gross Margin
71.07%
Dividend Yield
0.02%
Nvidia CEO Jensen Huang has told investors his company has $1 trillion in cumulative orders for its Rubin and Blackwell chips through 2027. For reference, its revenue over the past 12 months was about $216 billion. That’s huge growth in the years ahead, and Wall Street analysts expect revenue to more than double from now until the end of 2027.
Broadcom is growing similarly, with its custom AI chips attracting several new clients. CEO Hock Tan believes this segment of his business will generate more than $100 billion in revenue by the end of next year, more than triple its current level. Wall Street agrees with this general assessment and projects Broadcom’s revenue will rise from $64 billion in fiscal 2025 to $158 billion in fiscal 2027.
Today’s Change
(0.62%) $2.59
Current Price
$422.53
Key Data Points
Market Cap
$2.0T
Day’s Range
$408.91 – $424.99
52wk Range
$184.02 – $429.31
Volume
896K
Avg Vol
26M
Gross Margin
64.96%
Dividend Yield
0.59%
So, even if you missed the boat on the recent rally, there’s a real possibility that shares of Broadcom and Nvidia could double over the next two years based on growth alone. Don’t let a mere 20% to 30% run-up over the past month scare you away from the fact that the long-term upside of these two stocks is far greater than the rally they have undergone over the past month.
Throw an undervalued stock like Microsoft into the mix, and you have a recipe for three stocks that can dramatically outperform the market indexes over the next few years.
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