Identifying potential growth companies often comes with a dilemma. If these have become overbought and is there further upside potential. However, stocks with good business models and fundamentals often resolve overbought issue by time correction or minor retracements. The best growth stocks to buy now are
Xero Limited (ASX: XRO)
Xero Limited (ASX: XRO) reported a strong performance for the half year ending 30 September 2024 (H1 FY25), showing continued growth and effective execution. Operating revenue increased by 25% to $995.9 million, with a notable rise in annualised monthly recurring revenue (AMRR) by 22%, reaching $2.2 billion. The company achieved a 51% increase in EBITDA to $311.7 million, and free cash flow surged to $208.7 million, contributing to a free cash flow margin of 21%, up from 13.3% the previous year.
Xero is among the top growth stocks, its growth being driven by a balanced strategy, focusing on adding more subscribers and increasing revenue per user (ARPU) in its main markets. In Australia and New Zealand, Xero saw revenue rise by 24% (23% in constant currency) to $567 million, with 84,000 new subscribers in Australia and 9,000 in New Zealand. International markets also saw strong results, with revenue growing by 25% (23% in constant currency) to $428.8 million, and ARPU rising 20% to $45.59. Despite the removal of long idle subscriptions, Xero added 186,000 net new subscribers, reinforcing its market position. Product development also accelerated, with new features like Tap to Pay in the Xero Accounting mobile app and new integrations, including the acquisition of Sy Analytics to enhance reporting and analytics capabilities for customers.
Xero’s focus on building solutions aligned with its "Win the 3x3" priority contributed to the company’s momentum. This includes ongoing product improvements and new partnerships, such as the extended collaboration with payroll partner Gusto for a new embedded payroll solution in the US. Xero’s market growth in regions like the UK, North America, and the Rest of World was also driven by continued cloud adoption, with strong momentum in the UK and solid growth in the US despite a seasonally weaker half. Xero’s international markets, particularly in South Africa, continued to deliver robust revenue growth. The company’s disciplined investment approach and purposeful mergers and acquisitions were key to supporting its ongoing strategy to provide seamless, value-driven solutions for small businesses.
Life360, Inc. (NASDAQ: LIF) (ASX: 360)
Life360, Inc. delivered an impressive Q3 FY24 performance, reflecting strong execution across its subscription, advertising, and hardware businesses. The company achieved record highs in Monthly Active Users (MAUs), Paying Circles, and Subscription Revenue, marking an 18% YoY increase in total revenue to $92.9M. Core subscription revenue was a standout, growing 34% YoY to $66.2M, while Annualized Monthly Revenue (AMR) increased 30% YoY to $336.2M. The U.S. back-to-school period proved to be a significant growth driver, contributing to 6.3M net new MAUs (+32% YoY) and a record 159K net new Paying Circles (+35% YoY). This brought total Paying Circles to 2.2M, supported by improved conversion and retention rates. Average Revenue Per Paying Circle (ARPPC) grew 6% YoY due to a shift toward higher-priced products and successful premium tier launches in international markets such as the UK and ANZ. Life360 also made significant strides in international markets, with international MAUs rising 51% YoY and Paying Circles increasing 37% YoY. Enhanced pricing strategies and product mix optimization in these regions drove a 53% YoY increase in ARPPC, showcasing the company’s ability to scale globally while capturing higher-value customers.
The advertising business demonstrated early potential, highlighted by the Uber partnership, which leverages Life360’s first-party location data to deliver highly relevant offers. Initial results significantly outperformed industry benchmarks, validating the platform’s ability to monetize user signals. Management envisions advertising as a future revenue stream comparable in scale to its subscription business, supported by ongoing backend and sales platform development. On the hardware front, the launch of Life360’s in-house designed Tile lineup positioned the company as a differentiated player in safety devices, integrating unique SOS functionality. Despite temporary supply chain disruptions, direct-to-consumer sales doubled YoY in the first six weeks post-launch. Management is optimistic about Black Friday sales setting a new baseline. Looking ahead, the planned launch of GPS-based pet and elder care devices in 2025-2026 represents an additional avenue for subscription growth.
Profitability remains a core focus. Life360 reported its eighth consecutive quarter of positive Adjusted EBITDA at $9.0M, a 64% YoY improvement, alongside a 55% YoY increase in positive operating cash flow to $6.3M. The company achieved its first net income ($7.7M) in the period, driven by a one-time investment gain and a tax benefit. With disciplined cost management (operating expenses up 10% YoY vs. 18% revenue growth), Life360 remains on track to achieve sustained positive EBITDA by 2025. Guidance for FY24 reflects continued confidence, with consolidated revenue expected at $368M-$374M (+25% YoY in core subscription revenue), positive Adjusted EBITDA of $39M-$42M, and a year-end cash balance of $150M-$160M. Strategic partnerships with Placer.ai and Hubble further enhance its growth trajectory, bolstering data monetization and hardware capabilities. Life360’s Q3 results underscore the scalability of its subscription-led model, international expansion, and emerging advertising and hardware strategies, positioning the company for sustained growth and profitability.
Source: Company’s Report
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