Many growth stocks have experienced pullbacks in recent weeks. Investors are concerned that interest rates could rise and this has impacted sentiment towards higher-growth companies.
Personally, I see this share price weakness as a buying opportunity. Yes, growth stocks could continue to be volatile in the short term. However, in the long run, the best growth stocks are likely to deliver strong returns for investors.
Here, I’m going to highlight two UK growth stocks I’d buy for my own portfolio today. In my view, both have significant long-term potential.
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A play on the 5G revolution
One growth stock that I think has enormous potential is Calnex Solutions (LSE: CLX). It’s an under-the-radar UK technology company that specialises in testing and measurement services for telecommunication (5G) networks.
The reason I’m bullish here is that Calnex is very well placed to benefit from emerging technologies such as autonomous vehicles and ‘smart cities’ technology. These kinds of new technologies require mobile networks to be rapidly expanded. As a provider of network testing services, Calnex appears to be in a great position to capitalise.
Calnex recently posted a very encouraging trading update. The company said that the strong levels of customer spend experienced in the first half of the financial year (ending 31 March) continued into the second half of FY21. As a result of this continued strong performance, it said that revenues and profits for FY21 are expected to be ahead of market expectations.
There are some risks to the investment case. One is that around 85% of the company’s orders are made in US dollars. So, a weaker dollar could hurt profitability. This appears to have hit the share price recently. There’s also some valuation risk. Currently, the P/E ratio is about 29.
Overall, however, I think the long-term risk/reward proposition here is attractive. I’d buy this growth stock today.
A FTSE 100 growth stock
Another growth stock I’d buy right now is Rightmove (LSE: RMV). It operates the largest property website in the UK. Its website, rightmove.co.uk, was the 14th most popular website in the UK last year.
Rightmove has been impacted by Covid-19. Full-year results, posted on Friday, showed a 29% fall in revenue and a 36% drop in earnings per share for 2020.
I expect the company’s financial performance to pick up as the UK reopens in the months ahead, however. This year, City analysts expect revenue growth of 43% along with a 60% rise in earnings per share. If Rightmove can achieve this kind of growth (forecasts are not always accurate), its share price should rise.
There are risks to consider here, of course. While Rightmove has a large market share currently, it does face competition from rivals such as On The Market and Zoopla. A high P/E ratio of 29 also adds some valuation risk.
All things considered, however, I see a lot of appeal in this growth stock. Rightmove is a high-quality company and I think recent share price weakness has provided an attractive buying opportunity.
