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When growth stocks hit short-term challenges, share prices can fall sharply. And these are the kind of opportunities long-term investors can aim to take advantage of.
I think this has been the case with a few companies recently. So investors looking to build wealth over time might consider some names that usually trade at much higher valuation multiples.
Amazon
Amazon (NASDAQ:AMZN) saw its share price fall almost 10% after the firm’s Q2 earnings report. The main reason was the threat of tariffs, which are still a risk that investors need to consider.
Results from AWS – Amazon’s cloud computing division – were also a cause of concern. That’s because the 17% sales growth the unit posted was worse than its rivals Microsoft and Alphabet.
CEO Andy Jassy, though, is very positive. As artificial intelligence (AI) moves from training to inferencing, Jassy thinks Amazon’s differentiated products put the firm in a strong position.
If that’s right, the company could have a lot more growth still to come. And I think that means the stock is worth considering as the market expresses its concerns about the latest earnings.
Judges Scientific
Judges Scientific (LSE:JDG) is another growth stock I’ve got my eye on at the moment. It’s a UK small-cap that can be volatile and the share price fell sharply after its update last month.
The company has been battling against a weak trading environment in the US. Put simply, research funding has been harder to come by and this has meant lower demand for scientific instruments.
Importantly, though, the firm’s competitive position still looks to be very much intact And I think its growth strategy based on acquiring other businesses to add to its network can be very effective.
At a price-to-earnings (P/E) ratio of 21 (based on 2025’s adjusted earnings), the stock doesn’t look particularly expensive. That’s why I’m looking to take advantage before the share price recovers.
Palo Alto
Lastly, shares in cybersecurity giant Palo Alto Networks (NASDAQ:PANW) are down 16% in the last month. But the firm has a strong position in a growing sector where spending is becoming less discretionary.
The firm has announced a deal to acquire CyberArk Software for $25bn. A general rule with deals like this is that the bigger they are, the more risk they involve – and that’s especially the case here.
Palo Alto is financing the deal using stock, but it’s planning to pay a higher price-to-sales (P/S) multiple for CyberArk than its own shares currently trade at. That makes the deal especially risky.
Despite this, I think the stock is worth considering. I think increasing political tensions could drive higher spending in cybersecurity and the company is well-positioned to benefit from this.
Buying opportunities
Most of the time, the stock market is capable of recognising quality companies with strong future prospects. And growth shares typically trade at valuations that reflect this reality.
While this doesn’t prevent them from being good investments over time, it does make them less attractive. Fortunately, unusually good opportunities sometimes present themselves.
Amazon, Judges Scientific, and Palo Alto might all be good examples. Investors will need to judge for themselves which is the most attractive, but I think all three are worth looking at right now.
