Investors looking to exceed the returns of the S&P 500 and the Nasdaq 100 may want to start their search with hypergrowth tech stocks. The tech sector is filled with corporations that have outperform the stock market over many years. Some of those stocks have matured but others can keep going.
While mega-cap stocks have proven track records, smaller tech companies can also tap into hypergrowth and reward long-term investors. If you’re looking for promising hypergrowth tech stocks, you may want to take a closer look at these top picks.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is one of the best hypergrowth tech stocks in the market and is a staple in many mutual funds and ETFs. The tech giant is up by 63% over the past year and surged by 276% over the past five years.
The company’s main growth engine is still churning along at a nice pace. Microsoft Cloud revenue was up by 24% year-over-year in Q2 FY24. Overall revenue was up by 18% year-over-year while net income increased by 33% year-over-year.
Microsoft Cloud makes up more than half of the company’s total revenue. However, the firm has exposure to other exciting verticals like gaming, business software, and artificial intelligence. Microsoft has made big investments in the latter and is positioning itself as one of the leaders in the industry.
Microsoft also offers a dividend yield which stands at 0.72%. The company has regularly increased its dividend by 10% or more each year.
Visa (V)
Visa (NYSE:V) is a fintech company that has a large percentage of the credit and debit card market. The company earns revenue on every Visa credit or debit card transaction. And many investors use this stock as a bellwether to measure the economy’s strength.
Visa’s latest financial report pointed to resilient consumer spending. Revenue increased by 9% year-over-year while net income was up by 17% year-over-year. Visa is a stable company that has delivered reliable returns and financial growth over the years. Shares have recorded a 1-year gain of 27% and a 5-year gain of 92%.
The company also has a dividend yield hovering above 0.70%. The company recently hiked its quarterly dividend from $0.45 per share to $0.52 per share. That’s a 15.4% year-over-year increase. Visa should continue to perform well as consumer spending rises. Even if people have to cut back on purchases, most of them will still use credit cards due to the great reward programs.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) has produced millionaires thanks to an AI-fueled rally. Shares are up by 244% over the past year and have gained more than 2,000% over the past five years
Unlike most AI stocks, Nvidia is living up to the hype. The company posted another dominant quarter which featured 265% year-over-year revenue growth and 491% year-over-year net income growth. Those growth rates help support the recent stock price movement and give the rally a better foundation.
Nvidia only trades at 34x forward earnings. The company’s significant net income growth makes the valuation easier to justify and presents an opportunity. Despite massive gains already, Nvidia still has room to run.
The company’s rapid growth and excitement around the stock create the possibility of it becoming the largest publicly traded corporation. Nvidia shares have to gain an additional 50% from current levels to reach that milestone. It may not happen right away, but the string of “Buy” ratings suggest that Nvidia can eventually become a more valuable company than Microsoft.
Alphabet (GOOG, GOOGL)
It’s easy to forget how well-run Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) main revenue drivers are. The corporation is behind in the artificial intelligence race but is still the leading advertising giant. Alphabet has significantly increased net profit margins due to its cost-cutting measures, and the latest earnings report put those efforts on full display.
Alphabet grew its revenue by 13% year-over-year and increased net income by 52% year-over-year in the fourth quarter of 2023. The company’s net profit margin rose to 24.0%.
The advertising network and Google Cloud continue to perform well. More advertisements related to the Olympic Games and the Election will help Alphabet report higher earnings. Net profits should grow at a faster rate than revenue and lead to higher profit margins.
Despite having a strong business model, many investors are fixated on the company’s recent AI blunders. The stock offers a generous 25 price-to-earnings (P/E) ratio and has still outperformed the market. Shares are up by 47% over the past year and have gained 142% over the past five years.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is the other leading advertising giant. After a strong resurgence in 2023 centered around cost-cutting and a return to revenue growth, the company continued its rally into 2024.
Results from the fourth quarter of 2023 suggest the company can connote to reward investors. During that quarter, revenue increased by 25% year-over-year while net income surged by 201% year-over-year. Full year revenue was up by 16% year-over-year while full year net income increased by 69% year-over-year. Meta Platforms is accelerating its growth rates leading into a year that normally sees more demand for advertisements.
The company also achieved impressive growth rates for its social networks. Daily active users increased by 8% year-over-year while monthly active users were up by 6% year-over-year.
Facebook drove impressive growth, but other social networks within the Meta Platforms umbrella performed even better. The company even announced a $0.50 dividend. Meta Platforms will likely have many years of 10%+ year-over-year dividend increases for its new program.
Duolingo (DUOL)
Duolingo (NASDAQ:DUOL) has everything going for it except its valuation. Investors who are willing to wait a few years for the valuation to become more reasonable may benefit from adding a small position. Waiting for a dip is also a great choice.
The educational app has experienced high revenue growth for many years. The company continued with that trend by reporting 45% year-over-year revenue growth in the fourth quarter of 2023. Daily active users and monthly active users were also up by impressive numbers.
The big story for this stock was the dramatic surge in net income. Duolingo reported $12.1 million in net income which was a big turnaround from a $13.9 million net loss in the same period last year. Duolingo made the switch to profitability earlier in 2023, but this quarter demonstrates how quickly profit margins are expanding.
Higher profit margins can result in a lower valuation and make sure look like a bargain in a few years for investors who accumulate positions now. However, the stock currently has a 141 forward P/E ratio. You’ll have to keep that in mind before buying this educational tech company.
Intuit (INTU)
Intuit (NASDAQ:INTU) is a fintech company that has many software products under its umbrella. The corporation owns Turbotax, Quickbooks, Mailchimp, and other resources. The stock has consistently outperformed the market and has gained 171% over the past five years. The company is also up by 63% over the past year.
Intuit once again reported revenue growth in the second quarter of fiscal 2024. The company’s $3.4 billion in revenue was 11% higher than the same period last year. However, investors got more excited about the company more than doubling its revenue year-over-year. The significant growth brought the stock’s forward P/E ratio to 41.
Intuit is still growing at a respectable pace and offers vital tools with monthly subscription plans. Many taxpayers use the company’s tools to make the tax season less stressful. In addition, many companies rely on Mailchimp to communicate with their audiences.
Analysts are also feeling optimistic about the stock. The fintech company has a “Strong Buy” rating from 22 analysts and an average price target that indicates more upside from current levels.
On this date of publication, Marc Guberti held long positions in MSFT, NVDA, and GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.