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Top Stocks Favored by Wall Street Analysts for Long-Term Growth

2024-12-15

Pavlo Gonchar | Lightrocket | Getty Images highlights three stocks that stand out in the U.S. stock market. These stocks offer promising growth opportunities despite elevated valuations. Investors can rely on the recommendations of Wall Street experts to make informed decisions. Let's take a closer look at each of these stocks.

Uncover Stocks with Sustainable Growth in a Volatile Market

GitLab: An AI-Powered Software Development Company

GitLab (GTLB) is an artificial intelligence-powered company that provides software development tools. In the third quarter of fiscal 2025, the company reported solid results and raised its full-year outlook. The demand for its end-to-end DevSecOps platform is strong. BTIG analyst Gray Powell reiterated a buy rating and increased the price target to $86 from $63. The Q3 revenue surpassed BTIG expectations by 4%, and operating income and earnings per share were significantly above estimates. The magnitude of upside surprises in revenue has increased over the year, indicating robust demand and market positioning. GitLab is well-positioned to maintain elevated growth rates with additional tailwinds such as new product offerings and rising customer seat counts. The enterprise value (EV)/sales multiple of 12.0x (based on calendar year 2026 estimates) is reasonable for a sustainable 25%+ growth story with improving operating and [free cash flow] margins. Powell ranks No. 775 among more than 9,200 analysts tracked by TipRanks. His ratings have been profitable 57% of the time, delivering an average return of 10.5%.GitLab's key metrics like remaining performance obligations (RPO), current RPO (CRPO), and net retention rate (NRR) are strong. These metrics show the company's ability to retain customers and generate revenue. The rise in the take rates for the company's Ultimate bundle is also a positive sign. Overall, GitLab is a company with great potential in the software development space.

MongoDB: A Database Software Company with Impressive Results

MongoDB (MDB) is a database software company that exceeded analysts' expectations in its fiscal third quarter. The solid demand for its Enterprise Advanced (EA) and Atlas offerings drove the company's performance. However, the stock fell after the COO and CFO Michael Gordon resigned. Needham analyst Mike Cikos reaffirmed a buy rating and raised the price target to $415 from $335. The EA offering was the primary driver of the Q3 revenue beat. Cikos expects EA to continue to outperform investors' expectations due to MongoDB's "run anywhere" strategy. This strategy allows organizations to deploy applications anywhere, including on-premises data centers and the cloud.While the Atlas offering was a smaller contributor to the top-line beat compared to EA, it still outperformed Needham's estimates. Daily Atlas Consumption accelerated to 6.4% sequentially from 5.9% in the prior quarter. The company's decision to reallocate certain mid-market investments to prioritize the Enterprise segment is a strategic move that matches other software vendors. This reflects their efforts to evolve best sales practices in the current macroeconomic backdrop. Cikos ranks No. 511 among more than 9,200 analysts tracked by TipRanks. His ratings have been profitable 59% of the time, delivering an average return of 15.2%.

SentinelOne: An AI-Powered Cybersecurity Company

SentinelOne (S) is an AI-powered cybersecurity company that reported better-than-expected revenue for the third quarter of fiscal 2025. However, its loss per share widened due to higher operating expenses. TD Cowen analyst Shaul Eyal reaffirmed a buy rating with a price target of $35. The analyst believes in the company's ability to continuously disrupt and win share in the $7 billion legacy antivirus (AV) market. Eyal thinks that "key ingredients are at hand to make an exciting cocktail" and drive a reacceleration in annual recurring revenue and revenue in fiscal 2026. The key drivers cited were increasing win rates, positive new logo trends, and a continuously rising share of clients' spending.SentinelOne's partnership with PC maker Lenovo is expected to enhance its medium-term branding, although it may not have a significant impact on near-term performance. The revenue outlook for the first quarter and full year of fiscal 2026 is likely to be a major catalyst for the stock. It will determine how much the company can capitalize on recent woes at rival CrowdStrike. Eyal ranks No. 8 among more than 9,200 analysts tracked by TipRanks. His ratings have been profitable 71% of the time, delivering an average return of 27%.These three stocks offer unique opportunities in different sectors. Investors can consider these stocks based on their growth potential and the recommendations of Wall Street experts.

There's no denying the remarkable performance of the stock market in 2024. As of now, the S&P 500 has seen a significant increase of nearly 28% year to date. Among the top performers, Nvidia has surged by 180% and Palantir Technologies has risen more than 300%. These two stocks have been the talk of the town, but there are other constituents of the S&P 500 that are also beating the market by a wide margin.

Highlighting Three Stocks

Walmart (WMT 0.39%)

Walmart, founded over 60 years ago, is renowned for its brick-and-mortar retail operations and was already the largest retailer globally before 2024. Surprisingly, its stock is up an astonishing 82% year to date. While its stock price has grown faster than its business fundamentals, indicating a higher valuation, the company's modest sales growth has translated into increased profitability, justifying the higher stock price. The growth in Walmart's digital capabilities has been crucial to its success. With the rise of e-commerce, the company has effectively leveraged higher-margin opportunities, such as in digital advertising. After acquiring smart-TV company Vizio, Walmart is well-positioned to continue this trend. Although we may not expect Walmart's stock to jump another 82% in 2025, the company seems to be at the beginning of a multi-year growth phase as it monetizes its business through digital offerings. This provides a good reason for Walmart's shareholders to hold on tightly.

Deckers (DECK 1.45%)

Deckers Brands may not be involved in developing AI software, exploring outer space, or curing cancer. Instead, it simply sells shoes. However, it has been an excellent stock, with a gain of more than 660% over the last five years, including an 85% jump this year. Valuation is indeed a contributing factor, as the stock has moved from a reasonable valuation to an expensive one over the past five years. Nevertheless, the company's growth has been spectacular, and the increase in its operating profit margin is equally impressive. In the first half of its fiscal 2025 (ending in September), Deckers had an operating margin of just over 20%, compared to below 10% several years ago. This means the company is now earning twice as much profit for the same amount of sales. Moreover, Deckers' sales have been growing dramatically in recent years, and it is expected to continue growing at a double-digit rate in fiscal 2025, with strong growth driven by its Hoka and Ugg brands. As long as this trend persists, it will be difficult to bet against Deckers stock despite its significant gains in recent years.

GoDaddy (GDDY -1.02%)

It has been nearly 20 years since GoDaddy became a household name after its first Super Bowl commercial. Investors might have thought the business had better days ahead, but the stock price tells a different story, with shares soaring 95% in 2024. GoDaddy is known as a platform for buying domain names and also offers products for running an online business. This is where it aims to drive growth, as selling ancillary products can lead to sustainable free cash flow growth. Last year, GoDaddy launched new AI-powered software, which has significantly increased the adoption of its ancillary products. Management claims that tasks that used to take months now take seconds. The effectiveness of this AI is driving spending from its existing customer base and unlocking free-cash-flow growth. As the chart shows, GoDaddy's free cash flow per share is skyrocketing faster than revenue. It's important to note that GoDaddy's stock has risen significantly in recent years, but its gains are largely in line with its growth in free cash flow per share. Therefore, its valuation has not increased much, and it can still be considered a good value, trading at 24 times its free cash flow. Moreover, if its AI software continues to drive adoption, GoDaddy could be set for strong growth again in 2025, as it launched the software relatively recently and there are still many customers to adopt it.This year's winning stocks offer a great opportunity to identify next year's winners. Stocks are closely tied to businesses, and business trends often play out over multiple years. Looking at the best stocks from 2024 is a valuable exercise when searching for good investment opportunities in 2025. That's why Walmart, Deckers, and GoDaddy are three stocks worth considering in more depth. Among them, GoDaddy stock would be my top pick due to its reasonable valuation and potential for strong growth in the coming years.

The past few years have seen a remarkable surge in the application of artificial intelligence (AI) across different aspects of our lives. Companies at the forefront of this technological wave are reaping significant benefits. Among them, Nvidia (NVDA -2.25%) stands out as a true powerhouse. Over the past five years, it has achieved an astonishing 2,300% increase, firmly establishing itself as one of the most remarkable growth stories in the technology domain. Investors have been quick to recognize its potential and have been eager to capitalize on its success by investing in its chips for data centers and graphics.

Unparalleled Growth in the AI Landscape - Nvidia's Journey

Unprecedented Expansion of AI

The past few years have witnessed a meteoric rise in the integration of artificial intelligence into various aspects of our daily lives. From healthcare to finance and from cloud computing to entertainment, AI is making its mark everywhere. Companies that have embraced this technological revolution are now at the forefront of innovation, and Nvidia is no exception. Its graphics cards have become the backbone of many AI systems, enabling these systems to perform complex tasks with ease. As the demand for AI technology continues to soar, the need for high-performance graphics cards like those produced by Nvidia is only going to increase.This demand is not just limited to the technology sector. Industries across the board are realizing the potential of AI and are scrambling to integrate it into their operations. From manufacturing to logistics, from retail to healthcare, AI is transforming the way businesses operate. And Nvidia is well-positioned to be the key supplier for the graphics side of this infrastructure.

Growth and Financials

Nvidia's recent financial stats are truly impressive. On a GAAP basis, its most recent quarter saw a year-over-year revenue growth of 94% to $35.08 billion. Earnings also grew by 111% year over year to $0.78 per diluted share, amounting to roughly $19.3 billion. These numbers highlight the company's ability to generate significant revenue and earnings even in a highly competitive market.I always place a great emphasis on earnings as they are the backbone of long-term stock performance. In the case of Nvidia, the earnings potential and overall revenue growth potential are closely intertwined. Over the last five years, Nvidia's stock price has actually grown almost in lockstep with its GAAP earnings per share, which is a testament to the company's financial strength and growth potential.But one of the most exciting aspects of Nvidia's third-quarter results was its fourth-quarter GAAP estimates on margins. The company anticipates margins of 73%, which is a high-margin business. This indicates that Nvidia is not only growing its revenue but also improving its profitability, which is a key factor in driving long-term shareholder value.

Supply and Demand Dynamics

As fellow Fool writer Adria Cimino pointed out, Nvidia holds an 80% market share for its products. This is a very strong position to be in, especially in a market where demand for AI and machine learning chips is surging. Digitaltrends.com has warned of a potential GPU shortage, especially for gamers. This supply and demand imbalance creates a unique opportunity for Nvidia. As long as the demand for AI and machine learning chips continues to grow and supply remains constrained, Nvidia's stock should remain strong.This is clearly demonstrated by the company's revenue growth in fiscal 2024 compared to fiscal 2023. Companies across different industries need Nvidia's GPUs to power their AI initiatives. This demand is likely to continue to grow in the coming years, as more and more businesses realize the potential of AI.

Future Outlook and Recommendations

Looking ahead, Wall Street analysts are expecting Nvidia to finish fiscal 2025 with $2.95 per share. This would give it a forward P/E ratio of 47.2 times fiscal 2025 earnings. While this may seem like a high multiple compared to some other stocks, it is not extreme given Nvidia's long-term potential and its current dominance within its space.Tesla, for example, trades at almost 100 times earnings, while Cava, a stock I love by the way, trades at over 300 times earnings. In comparison, a premium of 47 times earnings for Nvidia shares seems reasonable. This is a company that is far from done. In fact, the best years for Nvidia are very likely in the future.My recommendation is to not be afraid to buy Nvidia at current levels. The company's growth potential is immense, and its position in the AI market is unassailable. As AI continues to expand and become more integrated into our lives, Nvidia is well-positioned to benefit from this trend. Investors who have the patience to hold onto Nvidia's stock over the long term are likely to be rewarded with significant returns.