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3 Large-Cap Stocks Set for Monster Growth

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In the big world of the stock market, there are a whole bunch of growth stocks that have 50%-plus revenue growth with strong margin drivers.

But, a bet on any one of those growth stocks comes with a ton of risk. After all, such growth stocks usually have growth valuations. But, if the growth part of the company falls apart, so does the growth part of the valuation, and the stock tends to drop - by a bunch.

Look no further than Fitbit Inc (NYSE: FIT ), GoPro Inc (NASDAQ: GPRO ), Shake Shak Inc (NYSE: SHAK ), Twilio Inc (NYSE: TWLO ), or Applied Optoelectronics Inc (NASDAQ: AAOI ) to see proof of this.

Thus, if you are looking to invest in growth stocks but want to mitigate risk exposure, you might want to focus specifically on the large-cap, high-growth category.

These are companies that are big growers, and have been big growers for a long time. This robust track record of huge growth decreases the likelihood of growth coming off the rails, and thus mitigates downside risk.

With that in mind, here is a list of three large-cap growth stocks that should remain big growers into the foreseeable future:

Large-Cap Stocks Set for Monster Growth: Alibaba Group Holding Ltd (BABA)

China e-commerce giant Alibaba Group Holding Ltd (NYSE: BABA ) has a market cap of $525 billion. The company also grew revenue by 60% last quarter.

Large Cap Stocks Set for Monster Growth: Alibaba Group Holding Ltd (BABA)

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That combination of $100 billion-plus market cap and 60% revenue growth doesn't exist all that often. After all, once a company reaches scale with a $100 billion-plus market cap, growth is supposed to cool off. That is the law of large numbers.

But, Alibaba defies the law of large numbers, and with good reason. The company is at the heart of an unprecedented boom in China consumerism, both through its market-leading e-commerce business and a rapidly growing offline retail business. Considering that annual per capita spending in China is just ~$3,600 (versus ~$23,000 for the U.S.), it looks like this boom in China consumerism still has a long runway for growth ahead of it.

Because Alibaba is China commerce, that means Alibaba also has a big growth runway ahead of it.

And that is just the commerce business.

Alibaba also has one of the biggest and fastest-growing cloud businesses in the world. Over the past several quarters, Alibaba Cloud has grown revenue at a triple-digit pace. Much like the China consumerism growth narrative, the global cloud growth narrative is also in its relative infancy. As such, the Alibaba Cloud growth narrative is likewise in its relative infancy.

With its biggest growth business still in the early innings, Alibaba is guaranteed to have huge revenue growth over the next several years. Margins are currently depressed, but that is due to growth-related investments. Eventually, those investments will moderate and margins will ramp back up. At that point, Alibaba's earnings growth will follow an exponential growth trajectory, much like Amazon.com, Inc. (NASDAQ: AMZN ).

Large-Cap Stocks Set for Monster Growth: Facebook Inc (FB)

Despite the lower valuation and negative media coverage of late, Facebook Inc (NASDAQ: FB ) is actually the biggest revenue grower in the entire FANG group, sporting 50% revenue growth.

Large Cap Stocks Set for Monster Growth: Facebook Inc (FB)

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This speaks to the company's dominance in the secular growth digital advertising market. With 2 billion-plus users on Facebook, the company offers unparalleled reach, and as such, everyone dedicates at least some portion of their advertising budget to Facebook.

Today's 50% revenue growth comes despite the company not even scratching the surface with respect to monetizing WhatsApp and Messenger. Both of those apps have 1 billion-plus users. A simple $20 annual ARPU for each platform would translate into a $40 billion-plus revenue opportunity. Facebook's revenue this year is expected to be just $57 billion, so we are talking about a 70%-plus revenue boost through monetizing WhatsApp and Messenger.

The company also hasn't even scratched the surface when it comes to monetizing Watch, Marketplace, and Workplace. Each of those Facebook segments has huge growth potential, and it is only a matter of time before Facebook leverages its unparalleled size to unlock the significant value in Watch, Marketplace, and Workplace.

Thus, in the big picture, Facebook is a large-cap growth stock that is presently only using two of its growth drivers (Facebook and Instagram core advertising). Over the next several years, the company will start to pull more growth levers, like WhatsApp and/or Messenger monetization, and overall growth rates will consequently remain robust.

This robust growth will occur alongside some of the healthiest margins in the world (50%-plus operating margins). As such, profit growth will be very healthy over the next 3-5 years.

Large-Cap Stocks Set for Monster Growth: Alphabet Inc (GOOGL)

Anyone who is counting out Alphabet Inc (NASDAQ: GOOGL ) as a big grower over the next several years misunderstands just how important data is, and how much more important it will become in the future.

Large Cap Stocks Set for Monster Growth: Alphabet Inc (GOOG)

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In the big tech world, data is everything. Data is the basis for creating AI. It is also the basis for creating automated technology. And, last but not least, it is what allows big tech companies to create micro-targeted and highly effective advertising solutions.

Google has the biggest and most valuable data set in the world. Yet, it's not even close. Just think about how much you tell Google every day through various searches.

This robust data set gives Google the most powerful asset in the tech world over the next several years. Google will eventually weaponize that asset and turn it into market-leading AI, automated, and micro-targeting solutions.

On the AI front, Google will leverage data to create the best voice assistant in the world. That will power the company's smart home business, which will then gather even more data on consumers and allow the company to further enhance its AI capability.

On the automation front, Google will leverage data to turn Waymo into a self-driving Uber service. That has billion-dollar implications on Google's financials and valuation.

On the mico-targeting front, Google will leverage data to remain the world's go-to digital advertising platform.

Overall, this is a big top-line growth company. Margins are on watch because the mobile shift hurts Google ad margins, but eventually, margin ramp through Waymo and AI should help offset mobile margin compression headwinds.

Long-term, like BABA and FB, GOOGL is a big-growth company on both the top and bottom lines.

As of this writing, Luke Lango was long BABA, AMZN, FB, and GOOG.

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The post 3 Large-Cap Stocks Set for Monster Growth appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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