Despite all the fluctuations and pressures, the U.S. stock market proved to be very resilient in 2024. Broad-based after a very strong 2023 S&P500 The index has returned 7.5% so far in 2024.
Investors are now starting to worry about a pullback due to high interest rates and geopolitical risks, but there is still room to make money in the market. Long-term investors can build wealth over time by investing small amounts of stock in companies that have essentially solid growth, riding solid tailwinds over time.
The reason is as follows growth stocks broadcom (NASDAQ:AVGO) and New Holdings (New York Stock Exchange: NU) Both meet these criteria and could be great purchases in the long run.
broadcom
Broadcom, a leading high-speed networking solutions provider, posted strong results in its most recent quarter (Q1 2024 ended February 4), with both revenue and profits easily beating consensus estimates . However, investors appear to be disappointed by the company’s weaker-than-expected fiscal year 2024 outlook, which has impacted the company’s stock performance over the past month. Nevertheless, there are still several reasons why long-term investors like this stock.
First, Broadcom is targeting hyperscaler and large-scale customers for artificial intelligence (AI)-optimized accelerators and AI-related networking components, including the Tomahawk 5 800G switch, Ethernet, digital signal processing (DSP) platforms, and optical components. We are seeing solid demand from larger companies. Companies deploying on-premises AI data centers. This is clear considering the company’s AI revenue quadrupled year-over-year to $2.3 billion in the first quarter. Broadcom now expects AI revenue to be more than $10 billion, representing nearly 35% of its fiscal 2024 revenue, up from its previous forecast of 25%.
Second, the custom AI accelerator business requires companies to work with large clients over multiple years and build a supporting software ecosystem, making it very difficult for new competitors to enter. . Broadcom has partnered with two major hyperscalers for several years. The company is therefore well-positioned to take full advantage of the growth in the customized AI accelerator market.
Third, the VMware acquisition plays a pivotal role in driving Broadcom’s infrastructure software revenue. In the first quarter, the company’s infrastructure revenue was $4.6 billion, up 153% year over year. VMware earned $2.1 billion in revenue in his 10.5-week contribution to Broadcom’s first-quarter results (since the acquisition closed in November 2023). The company expects VMware’s revenue to continue to grow at double-digit percentages through its fiscal year 2024.
Broadcom’s VMware strategy is primarily about upselling VMware Cloud Foundation (VCF) to customers who already run workloads on VMware’s vSphere virtualization platform. VCF is a complete software stack (including compute, storage, and networking functions) that virtualizes a customer’s data center. VCF helps create an on-premises, self-service cloud platform that replaces public clouds, allowing enterprises to run high-performance computing and AI workloads without compromising privacy. Additionally, in partnership with VMware, Nvidia We also enable customers to run advanced AI models on VCF (using the computing power of Nvidia’s advanced AI chips).
To be fair, Broadcom’s price-to-sales (P/S) ratio of 16.5x is quite expensive compared to its average valuation of 9.2x over the past five years. But regardless, Broadcom looks well-positioned for a solid growth trajectory in the coming months, given its many solid tailwinds.
New Holdings
Nu Holdings is an all-digital bank offering a wide range of financial solutions including credit cards, savings and personal accounts, lending and investment solutions, and insurance in Latin American markets including Brazil, Mexico, and Colombia.
With a high proportion of young population (19-30 years old), rapidly increasing spending and investment needs, and widespread internet penetration, Latin America is proving to be an exceptional opportunity for digital banks. It has been.
Nu’s customer base grew rapidly, reaching 93.9 million customers by the end of 2023, an increase of 26% year-on-year. Brazil added an average of 1.3 million customers per month in 2023, bringing the total number of customers to her 87.8 million. Mexico and Colombia, on the other hand, are relatively new markets with over 5.2 million and over 800,000 customers respectively.
Nu has had great success in cross-selling and upselling to existing customers, which has helped it build a tenacious customer base. This is clear considering that active customers used an average of four products in Q4. The company’s average revenue per active customer (ARPAC) also increased 23% year over year (at constant currency) to $10.6 at the end of the fourth quarter. Nevertheless, the company’s service cost per customer on a year-over-year basis remained stable at $0.90.
Nu’s financial performance in the recent fourth quarter was also impressive. Revenues increased 57% year over year to $2.4 billion, and net income increased 489% year over year to $360.9 million.
However, the company is not resting on its laurels and is focused on further accelerating its growth in 2024. Nu aims to expand secured lending in Brazil and increase its share of Brazil’s high-income population. The company is also working to scale up in Mexico, leveraging the successful launch of its Cuenta Nu digital savings account in 2023.
Nu currently trades at just under 7 times trailing 12-month sales. This valuation seems quite low, as analysts expect the company’s sales to grow steadily by 38% year-on-year in fiscal 2024. So, considering multiple tailwinds, solid financials, and a significantly lower valuation, Nu appears to be the smart choice at the moment.
Should you invest $1,000 in Broadcom right now?
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manali pradhan has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Nvidia. The Motley Fool recommends Broadcom and Nu Holdings. The Motley Fool has Disclosure policy.
2 growth stocks you should buy like there’s no tomorrow Originally published by The Motley Fool
