My portfolio isn’t heavy on growth stocks. I prefer the lower risks provided by value stocks, but I think now is a great time to be hunting for the next generation of firms with high-growth potential.
So, here are two growth stocks I’m looking to buy before the market recovers.
XPeng
Xpeng (NYSE:XPEV), also known as Xiaopeng Motors, is a Chinese electric vehicle (EV) manufacturer headquartered in Guangzhou.
Over the past two months, XPeng’s share price has lagged its peers, but there are some positive signs coming from the Chinese firm.
Amid Covid-19 lockdowns, the stock was pushed down by sluggish delivery growth over the first few months of the year.
However, more recent data is positive. In June, it recorded 15,295 Smart EV deliveries, marking a 133% increase year-on-year. The firm delivered 34,422 EVs in total in the second quarter, topping the list of emerging auto brands in China for the fourth consecutive quarter.
Despite this, XPeng’s valuation is actually less than that of its peers NIO and Li Auto. And it trades with a price-to-sales ratio of 5.8, which is comparable with the two other firms.
In terms of average sales price, NIO is the highest of these three companies and XPeng is the lowest. I think this could aid it as China’s economy flounders. In some cases, its offering is by far the cheapest.
As an international investor, there a several perceived risks with Chinese companies. For one, I just don’t know how bad this financial crisis is going to be over there. Secondly, there are geopolitical concerns, although I don’t see China waging war on Taiwan in the immediate future.
For me, XPeng is a buy right now as concerns over Chinese economic growth peak.
Darktrace
Investors have been talking about Darktrace (LSE:DARK) a lot, but largely for the wrong reasons. The cyber-defence firm tanked in June after one of its executives was named in a legal row concerning Autonomy’s 2011 sale to Hewlett Packard.
The company clearly has huge potential, but valuing it has proven tricky. The share price has jumped up and down considerably since its IPO.
Darktrace is on an impressive growth curve. On Tuesday, it upped its guidance and said it expected revenue of at least $417m, reflecting year-on-year growth of approximately 48%. As a point of reference, total revenue in the year to June 2018 was $79.4m.
More than 500 net new customers were added during the year. The group’s customer base now extends to 7,400, representing a year-on-year rise of around 32%.
Given the geopolitical environment, it’s no surprise that Darktrace is attracting customers. And I see this as a theme that will pick up further in the years to come.
Some analysts are concerned about increasing competition in the space and it’s true that growth is certainly not guaranteed in this industry.
At 374p, Darktrace is a buy for m portfolio. It’s down 48% year-on-year, but I think there are considerable growth opportunities here.