"Seohak Ants, Now It's Time to Focus on New Growth Stocks Rather Than Large Growth Stocks"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Song Hwajeong] As global big tech companies that showed remarkable growth since last year are expected to experience a slowdown in growth rates starting next year, there is an opinion that attention should be paid to new growth stocks that can replace the existing growth stocks.

According to Hanwha Investment & Securities on the 11th, the sales of five big tech companies?Apple, Microsoft, Alphabet, Amazon, and Facebook?increased by 20.4% last year, and a 21.3% growth is expected this year. However, the expected sales growth rate for next year is forecasted to slow down to 15.2%.

Researcher Kim Suyeon of Hanwha Investment & Securities analyzed, "Along with the slowdown in sales growth, these large growth stocks are acquiring characteristics of value stocks," adding, "As they enter a mature stage, the proportion of investment decreases, while shareholder returns such as share buybacks and dividends have increased."

If the current growth stocks are no longer growth stocks, new growth stocks must be found. Researcher Kim said, "In the future, companies with higher growth rates than big tech companies could be one option," and added, "Especially when the expected profit growth rate of the global stock market is slowing down as it is now, companies with visible sales growth can show a new cycle."

Hanwha Investment & Securities analyzed stocks in the Russell 3000 (the top 3,000 companies by market capitalization listed on the U.S. stock market) whose sales have continuously increased and whose expected sales growth rate next year is higher than the big tech average of 15%. The sectors with outstanding growth potential were identified as electric commercial vehicles and charging infrastructure, aerospace, vegan food, and game platforms. Excluding vegan food, these are themes that can create high added value when combined with data industry growth. Researcher Kim explained, "The reason for expecting sales growth in companies belonging to these sectors is that they are still in the growth stage, so although they do not generate profits yet, expanding their scale is important," and added, "In fact, stock prices tend to react strongly when sales exceed expectations."

Blink Charging, an electric vehicle charging station company, had annual sales of only about $3 million from 2014 to 2019, but as the electric vehicle market expanded last year, sales increased to $6.23 million. Especially in the fourth quarter of last year, sales reached $2.45 million, exceeding expectations by 36%, causing the stock price to rise from below $10 at the end of last year to $60 at the beginning of this year. The current stock price is in the low $30 range. Skills, an e-sports platform that was listed through a SPAC merger at the end of last year, is also considered a notable company in the metaverse. Users directly develop games and compete, sharing development costs and prize money. Since there are not many companies included in the metaverse theme yet, the increase of such companies is expected to expand the sector.

Researcher Kim said, "In the second half of the year, due to the base effect from last year, the profit growth rate of large growth stocks may slow down, and stock prices may also be sluggish," and added, "At this time, opportunities should be sought in companies whose sales can grow based on new themes."

This content was produced with the assistance of AI translation services.