The stock market is crashing, and high-growth companies are now available at enticing valuations, which means now is a great time for investors to buy some solid stocks on the cheap.
More importantly, investors can start buying shares of top companies amid the ongoing stock market sell-off even with small amounts thanks to the power of fractional investing. For instance, investors can buy fractional shares of growth stocks such as Nvidia (NVDA 4.32%) even if they have limited funds — say $100. Let’s look at the reasons it would be a good idea to put $100 into the graphics specialist right now.
Nvidia is a top growth stock to buy right now
Nvidia stock is available at a nice discount today. It is trading at 42 times trailing earnings, which makes it way cheaper than 2021’s price-to-earnings ratio of 90. Buying $100 worth of Nvidia stock at this valuation looks like a good deal considering its impressive growth and bright prospects.
Nvidia had delivered fiscal 2023 first-quarter revenue of $8.29 billion, up 46% from the prior-year period. Near-term challenges are going to weigh on Nvidia’s growth, but analysts remain upbeat about its prospects in the long run. The semiconductor giant’s earnings are expected to clock average annual growth of nearly 23% for the next five years, though it won’t be surprising to see it clock faster gains thanks to a bunch of solid catalysts.
The video gaming and data center markets should help Nvidia sustain its terrific growth in the coming years. However, the lucrative opportunities in fast-growing niches such as automotive and the omniverse, which are already giving the company’s business a nice shot in the arm, could accelerate the company’s business gains.
But then, Nvidia isn’t the only growth stock you may want to invest $100 in. There are quite a few other fast-growing companies that are available at mouthwatering multiples.
This little-known chipmaker is benefiting from a massive opportunity
Ambarella (AMBA 1.23%) may not be a household name, but it has been clocking impressive growth lately thanks to the markets it serves.
Ambarella’s chips power cameras used for automotive and security applications. The chipmaker’s fiscal 2023 first-quarter revenue increased 29% year over year to $90.3 million. Adjusted earnings shot up to $0.44 per share from $0.23 per share in the prior-year period.
Supply chain challenges will hurt Ambarella’s near-term momentum. But the growing deployment of cameras in the automotive industry along with an upgrade cycle in the security camera market means Ambarella has a huge addressable revenue opportunity ahead of it. In the automotive segment, for instance, Ambarella estimates that its serviceable addressable market could exceed $7 billion by fiscal 2028, which would be a big increase over this year’s estimate of just over $2.5 billion.
The good part is that Ambarella has already scored $700 million worth of design wins in the automotive market that it expects to realize over the next five fiscal years. A design win means that Ambarella’s chips have been selected for deployment in vehicles by its customers, and they should translate into revenue once those vehicles go into production. What’s more, Ambarella says it has an additional $1.1 billion worth of automotive design wins in the pipeline.
As such, Ambarella’s impressive growth could continue in the long run. With the stock trading at 7.6 times sales as compared to last year’s multiple of 24, buying this potential growth stock looks like a smart move right now.
A no-brainer stock to buy
There is a massive demand for semiconductors around the globe that chipmakers can’t meet, and Applied Materials (AMAT 5.95%) is one company that can play a key role in alleviating that shortage. The company’s products are in huge demand as it had generated a record $23 billion in revenue in fiscal 2021 (which ended on Oct. 31, 2021), an increase of 34% over the prior year.
However, Applied Materials stock slid 43% this year as the company itself has fallen prey to the supply chain snarls that are impacting the entire semiconductor industry.
But this slide means investors can now buy Applied Materials stock for just 13 times trailing earnings, a big discount over last year’s earnings multiple of over 24. Buying the stock at this valuation looks like a no-brainer. That’s because Applied Materials’ semiconductor manufacturing equipment is used by major chipmakers such as Samsung and Taiwan Semiconductor Manufacturing, popularly known as TSMC, while Intel is another major customer.
Samsung and TSMC together accounted for 35% of Applied Materials’ total revenue last year, and the good part is that both foundries have pledged to spend huge amounts on ramping up their capacities in the long run. TSMC, for instance, is expected to raise its capital spending by 47% this year to $44 billion, while Samsung plans to invest $150 billion in its foundry business through the end of the decade.
IC Insights estimates that the semiconductor industry’s capital spending could increase 24% in 2022 to a new all-time high of $190 billion. It won’t be surprising to see the trend of higher capital spending continue in the long run as the semiconductor industry is expected to generate annual revenue of $1 trillion by 2030 as compared to $600 billion in 2021, according to McKinsey.
So, Applied Materials has a lot of room for growth in the future. The company had an order backlog worth $8 billion in the first quarter of fiscal 2023, which increased further in the second quarter, though the company didn’t give an exact figure. The good part is that Applied Materials expects its order inflow to remain strong going into 2023 and beyond.
All this indicates that Applied Materials could turn out to be a top growth stock in the long run, and the stock’s slide gives investors a great opportunity to buy on the cheap.