There's never a bad time to invest in a good company. But, if you can step into a worthy growth stock at a discount, you'll obviously get more bang for your buck.
Here's a closer look at a couple of great growth stocks that are currently on sale. If you can handle the risk and their likely continued volatility, they just might be a good fit for your portfolio.
1. ASML Holding
There's a decent chance you've never even heard of ASML Holding(NASDAQ: ASML). There's an even better chance, however, you regularly benefit from its expertise. You may be benefiting from its technology right now, in fact.
See, ASML provides chipmakers with a means of manufacturing high-performance computer chips. The Netherlands-based company has perfected the art and science of lithography, which is the use of light as a screening mask to etch or spray a microchip into existence. While complex, this approach allows for far smaller chips than could be created using more mechanical processes. Indeed, ASML's tech is so complicated and heavily patented that no rival can truly replicate it. That's why most estimates put its lithography market share in the ballpark of 90%.
That doesn't mean there aren't risks. Like any other outfit in the semiconductor business, this one is subject to the economic ebbs and flows (as well as geopolitical factors) that impact corporate spending on new equipment. After last fiscal year's top-line growth of more than 40%, as an example, ASML's revenue is essentially on pace to be flat this year. That's the chief reason shares are down 36% from their July high. It's a headwind investors weren't expecting that was made even more real by disappointing third-quarter results followed by lowered sales guidance for the coming year.
Now take a step back and look at the bigger picture. Even with weaker-than-expected revenue, the analyst community is calling for 2025 revenue growth of at least 19%. Earnings are apt to grow even more.
And it's worth adding that the bulk of this headwind was already priced into this stock before ASML made it official with a lowered outlook. Analysts' consensus price target still stands at just under $924 per share, which is 30% above the stock's present price. The vast majority of the analyst community also currently rates ASML stock as a strong buy not despite its recent weakness, but because of it.
2. Plug Power
The other discounted growth stock worth considering right now is Plug Power(NASDAQ: PLUG), although its story couldn't be any more different than ASML's.
Simply put, Plug Power is a renewable energy company. Its tech turns raw hydrogen into electricity by chemically separating hydrogen's negatively charged electrons from its positively charged protons. The so-called fuel cells that make this happen are being used as a power source for equipment as small as a forklift to as large as a building, which of course require electricity to keep the lights on, power computers, and operate HVAC equipment. Perhaps most notably, fuel cells can be used to propel automobiles.
While the zero-emission technology is proven in a wide range of applications, there's still a major hurdle to clear. That's producing the needed hydrogen in the first place. The process of splitting water into its core elements of oxygen and hydrogen requires lots of electricity itself. So, hydrogen fuel cells aren't necessarily more cost-effective or environmentally friendly to utilize. It takes the right power-generating technology -- like solar -- for fuel cells to work as cleanly and efficiently as intended. While wind and solar's cost is now more or less on par with more traditional energy sources like petroleum or natural gas, these alternatives remain relatively uncommon, accounting for one-tenth of the nation's current power output. Such sources of energy are also infrastructure-intensive to establish.
There's a growing movement, however, that could make the energy-consuming process of isolating hydrogen cost-effective as well as common. That's nuclear power. Although this source of power has a bit of a checkered past, newer nuclear power plant designs have the potential to rekindle use of this carbon-free source of energy. In fact, companies like NuScale are designing small, modular reactors meant to operate at sites where large-scale power is ultimately consumed. This includes facilities where hydrogen is separated and collected for industrial uses like fuel cells.
This movement is still in its infancy, which is one of the reasons Plug Power stock is now down 97% from its early 2021 high. The market finally fell in love with the idea then, and only afterward realized there was still a massive amount of work to do for fuel cells to enter the mainstream. Most of that work is yet to be done. The sellers have arguably overshot their target though.
Bottom line? If you believe that the world is poised to continue moving toward a carbon-free, zero-emissions future and can remain patient while stomaching some volatility, Plug Power is a compelling prospect.
This might help: An outlook from Straits Research suggests the global fuel cell market is set to grow at an annualized pace of more than 21% between now and 2033. That jibes with Plug Power's expected average top-line growth for at least the next couple of years following this year's economic-prompted lull.
Don’t miss this second chance at a potentially lucrative opportunity
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*Stock Advisor returns as of October 28, 2024
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
