The biggest growth stocks – Meta (NASDAQ:META), Amazon (NASDAQ:AMZN), etc – posted top-tier earnings to kickstart 2024, sending the S&P 500 climbing back to all-time highs. But, of course, a major criticism is that most of the overall market today is held aloft by those same top tech stocks. The Magnificent Seven stocks, which include earnings report winners like Meta and Amazon, accounted for most of last year’s market gains, and early indicators point to the trend continuing.
That’s great for index investors – until it isn’t. Over-concentration also means overexposure, and it’ll just take a brief pause in momentum among those top tech stocks to bring markets crashing back down. That’s why diversifying into additional growth stocks now, while there’s still a chance, is needed if you want to protect your portfolio from the ups and downs of a handful of mega-caps.
Luckily, the Mag 7 aren’t the only growth stocks set to post strong earnings this season. These seven stand to do the same, and investors cycling out of overexposed positions would do well to consider them as alternatives.
Spotify Technology (SPOT)
Earnings Date: Tuesday, February 6th (Pre-Market)
Spotify Technology (NYSE:SPOT) is already front-running an expectedly strong earnings report. Last week, shares jumped by about 3% on the heels of a strong analyst assessment and upgrade from UBS. The note included a bullish view of SPOT’s margin management and an ultimate price target of $247 per share. That marks more than 10% upside from today’s per-share pricing – not bad considering the company already has a $43.4 billion market cap.
SPOT’s February 6th earnings report comes after December’s widespread layoffs, including a 17% staff reduction before the holidays. While the timing wasn’t ideal, it points to an overall trend that investors should watch closely: far from a bearish indicator, layoffs among growth stocks previously subject to ZIRP-era headcount bloat are signs of adaptive and effective management. And, in a unique sign of honesty, Spotify’s CEO Denial Ek pointed to exactly that sentiment in his note to employees, saying, “In 2020 and 2021, we took advantage of the opportunity presented by lower-cost capital [but] we now find ourselves in a very different environment.”
Ek offered a breath of fresh air in a sector awash with corporate doublespeak, and early signs point to his honesty and practicality paying off in this week’s earnings.
Growth Stocks: Enphase Energy (ENPH)
Earnings Date: Tuesday, February 6th (After Hours)
Solar stocks might not seem the safest bet among growth stocks this earnings season, but Enphase Energy’s (NASDAQ:ENPH) long-term potential and apparent undervaluation make it an exception. The company is, of course, unique among commercial and residential competitors in that its core focus is in its proprietary microinverter tech. However slim, this establishes a moat for ENPH that helps the company stay afloat even as broader green tech sectors lag.
Markets are generally pricing in low expectations for ENPH, and shares are down nearly 30% since the year started. And, while past results might align with bearish expectations, the company’s forward-looking outlook could be a catalyst to reinvigorate investor enthusiasm. Investors should pay close attention to international developments, as overseas segments have been Enphase’s best-performing markets and are less afflicted by U.S.-centric consumer trends eschewing solar.
2022’s Inflation Reduction Act put wind into Enphase’s sails, and there’s a non-zero chance that this election cycle holds similar benefits and opportunities for Enphase and the wider clean energy industry. With that in mind, alongside the company’s per-share plummet, it’s hard to say Enphase isn’t worth a buy today compared to many growth stocks.
Arm Holdings (ARM)
Earnings Date: Wednesday, February 7th (After Hours)
I was admittedly bearish on Arm Holdings (NASDAQ:ARM), but it seems as though this is one stock that’s beating back competition and rising against all odds. Most of my negative outlook came from the company’s poor showing during its second-ever public earnings report, which included an adjusted earnings loss of 11 cents per share. At the time, management claimed that most of the loss was due to share-based compensation post-IPO and that future reports would be better since they wouldn’t include the one-time event series.
Markets seem to be taking that assertion seriously, and shares climbed more than 15% since its poor November showing. And its outlook is bright, considering Arm is pushing to expand its offerings to include chips integral to AI, automated vehicles, and cloud computing. Today, the company is hot within the mobile phone segment but that doesn’t offer the full breadth of income opportunity hotter sectors do – so Arm is smart to make like competitor growth stocks and expand its view to include next-gen tech.
Growth Stocks: Sharkninja (SN)
Earnings Date: Thursday, February 15th (Pre-Market)
I’m a Sharkninja (NYSE:SN) mega-bull, but somehow, this company continues to slide below collective investor radar. That’s likely because most don’t see consumer retail companies as offering the same upside as growth stocks, but Sharkninja has a trajectory that defies conventional wisdom. The appliance manufacturer’s shares rose 60% over the past 6 months, and a strong holiday sales season could boost it further after next week’s earnings report.
Sharkninja has posted a 20% CAGR since 2008, and its growth rate increased to 26% annually since 2018. That trend isn’t likely to slow, considering economic conditions for the holiday sales season proved better than expected. Likewise, the company’s rapid international expansion helps protect it against lackluster sales stateside and further reinforces its wide market share for ice cream makers, vacuums, blenders, and more.
Expert analysts are generally bullish on the stock, with collective consensus marking it a Moderate Buy.
Alteryx (AYX)
Earnings Date: Thursday, February 8th (TBD)
Alteryx (NYSE:AYX) is unique in that not only does it stand among growth stocks poised to post strong earnings, but it’s also one of the few “sure bet” merger arbitrage plays in today’s market. Private equity firm Clearlake Capital Group is set to buy Alteryx and take it private sometime in the first half of this year. The deal’s per-share price is $48.25, or just below 2% of today’s pricing. That represents an immediate opportunity to lock in gains, however meager, once the deal closes.
Some estimates expect Alteryx’s imminent earnings report to post a 37% year-over-year income increase and a 12% quarter-over-quarter revenue climb. The downside to an Alteryx investment today is that the per-share price won’t likely exceed Clearlake’s price point even if the company blows earnings away. But shares could move rapidly to meet the $48.25 sales tag if earnings are sufficient, letting merger arbitrage investors lock in gains well before the expected deal closes.
Growth Stocks: Yelp (YELP)
Earnings Date: Thursday, February 15th (After Hours)
Yelp (NYSE:YELP) is one of many consumer-facing companies leaning into the ongoing AI trend. And, if other companies’ strong earnings are an indication, AI could be a tailwind propelling Yelp back toward the top after a tough start to 2024.
In its last earnings report, Yelp more than doubled analyst expectations, generating $0.79 EPS compared to the anticipated $0.34. That’s also a 500% YoY gain, which is significant considering the report covered a period still awash with economic unease and reduced tourist tendencies. A strong holiday season, as many expect, could drive Yelp’s earnings even higher and get a 5-star rating from investors.
Palantir (PLTR)
Earnings Date: Monday, February 5th (After Hours)
Palantir (NYSE:PLTR) is probably at the top of the list of hotly-anticipated growth stocks this earnings season. Following on the heels of four consecutive profitable quarters, Palantir is now eligible for S&P 500 inclusion (and already valued more, by market cap, than 3/5 of the titleholders). Shares see-sawed over the past few weeks as bears and bulls debated whether Palantir could keep the ball rolling and maintain momentum, but early signs point to a strong showing this afternoon.
Palantir’s last earnings report outlook ballparked $600 million in revenue for the quarter, but analysts are already frontrunning management expectations by anticipating a $603 million sales stat. Interested investors should look for info during the call about the company’s corporate strategy, which will be the big moneymaker moving forward, while government contracting helps maintain a base of consistent and reliable recurring revenue. Last year, company CEO Alex Karp claimed its commercial segment would hit a $1 billion run rate by 2025’s first quarter – if he reports that they’re on track to match or surpass the goal, Palantir could be the best-performing growth stock this season.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.