Over the last few years, growth stocks have experienced volatility across sectors as investors favored some of these businesses and driven stock prices upward while others fell out of favor. Ultimately, the right stocks for your portfolio should align with your investing goals, while reflecting businesses that you understand. You should aim to hold these quality additions to your portfolio over a minimum of three to five years.
If you're looking for two no-brainer growth stocks to buy with $1,000 right now, here are two names to consider for your list of potential contenders.
1. Pinterest
Pinterest (PINS -1.20%) was a popular stock with investors a few years ago. However, the shifting tide of investor sentiment amid a difficult ad spending environment has impacted the performance of shares since that time. For a while, unfavorable comparisons to peak pandemic growth along with a legitimate deceleration in overall user growth resulted in unprofitability, shifting user figures, and tepid revenue increases.
Over the last few quarters, these trends seem to be slowly but surely reversing as Pinterest finds its footing for ad spending. Some advertisers are still being cautious with capital, but the landscape for ad spending is certainly experiencing more favorable tailwinds compared to a few years ago. Pinterest makes its revenue by selling ad space to companies, including smaller businesses as well as large global brands.
These "pins" will often link directly to a product or service that a user can decide to buy. Accordingly, the overall state of ad spending, the consumer spending environment, as well as user growth, are key metrics that impact Pinterest's ability to steadily grow revenue and remain profitable. Pinterest has been rolling out numerous initiatives to attract more advertiser dollars, including artificial intelligence (AI)-driven ad options.
The company's Performance+ product suite was launched Oct. 1, and combines the platform's AI offerings with automation to streamline ad campaigns while bolstering ad impressions. From the beta testing and early launch, the company has determined that Performance+ allows advertisers to achieve a 20% improvement in cost per action. A related offering, Performance+ Creative, enables advertisers to put generative AI backgrounds on their shopping ads.
Early testing has also shown that advertisers who use Performance+ Creative enjoy a 14% average increase in conversion rate and a 9% lower cost per action for advertisers. A lower cost per action means that the advertiser is paying less money to get a preferred result from a customer, whether that is a sign-up or purchase of a product or service.
Pinterest's constant push to innovate to meet the needs of advertisers and users who become shoppers on its platform is integral to growth, and it's executing well on these goals. In the third quarter of 2024, revenue rose 18% from the year-ago period to $898 million. It also brought in profits of $31 million, which was an eye-popping 354% improvement compared to its bottom line one year ago.
Meanwhile, Pinterest now has 537 million monthly active users (MAUs). That figure is up 11% from just one year ago. Compared to just two years ago, that MAU figure is up 21%. Pinterest has also brought in operating cash flow of approximately $969 million over the trailing 12 months. With shares trading down by double digits from the beginning of this year (as of this writing), forward-thinking investors might want to consider buying on the dip.
2. Spotify
Spotify Technology (SPOT -0.33%) has had a significant run-up in 2024. From the beginning of the year to the time of this article, shares are trading up by a whopping 145%. While price in and of itself doesn't tell you much -- other than what investors value a stock at in a given point in time -- it is helpful to look at the factors behind those movements when deciding whether you want to buy in.
As the world's largest music streaming platform, Spotify has a dominant footprint in an incredibly lucrative space, but its addressable market is only expanding. Management believes that its total addressable market of potential Spotify users is more than 1 billion people, well beyond its current user base.
The company further estimates that it is on track to account for at least one-quarter of the digital music listening population worldwide. That global figure is estimated to be anywhere from 3 billion to 4 billion individuals.
In short, Spotify has not even come close to exhausting its growth runway. At last count, Spotify has 640 million MAUs. That is up 11% from just one year ago. Of that MAU figure, 242 million are premium subscribers while the remaining 402 million are ad-supported users.
Spotify makes money from a few different sources. These include fees it charges for premium subscriptions, which allow ad-free listening and other perks, as well as advertising revenue generated from its unpaid membership tier.
In the third quarter of 2024, Spotify generated total revenue just shy of 4 billion euros. That top-line total was up 19% from one year ago. Of that revenue total, 3.5 billion euros came from premium memberships while the other 472 million euros was attributable to ad-supported revenue. Those figures were up 21% and 6%, respectively, from one year ago.
Spotify is profitable, too, with net income totaling 300 million euros for the three-month period, a notable 362% increase from the same quarter in 2023. While Spotify's valuation has risen given the stock's run-up, investors who want to become part owner in this high-growth business can still benefit from a multiyear investment. Even a modest investment in Spotify now can be expanded gradually with methods like dollar-cost averaging and can pay off in the long run.
