Growth spurt: 2 ASX growth shares set to skyrocket

Looking for promising ASX growth shares to add to your portfolio? The Australian share market is a great place to begin. As a reminder, a growth stock is a company that is expected to grow revenues and profits faster than the overall market.

Investors often pay high prices for these companies, but all that glitters is not always gold. While the allure of “growth at all costs” is appealing, one has to look for high-quality businesses in the space.

Here are two top ASX growth contenders that I think could offer significant upside potential.

Flight Centre Travel Group Ltd (ASX: FLT)

The first ASX growth share on the radar today is the Australian-based travel group Flight Centre. Trading at $18.85 per share at the market close on Friday, the stock is down more than 11% this month.

Flight Centre, one of the largest travel groups globally, has a footprint in leisure and corporate travel across the Asia-Pacific region, the Americas, Europe, the Middle East, and Africa. This huge wingspan (pardon the pun), in my opinion, places the company well amid the travel sector’s ongoing recovery after COVID-19 smashed the sector in 2020 and 2021.

The team at Morgans gave Flight Centre a buy rating in a recent note. The broker said the company had the “greatest risk-reward profile” of travel stocks it covered, adding that it was particularly attractive because the business targeted a 2% net profit margin in FY 2025.

Morgans also noted that Flight Centre’s risk lay in executing its changing business model. But, the company was “well placed over coming years” to capitalise on trends in travel recovery.

The broker rated the ASX growth share as an add with a $27.27 price target. This represents a 44% upside potential.

NextDC Ltd (ASX: NXT)

NextDC has been a stellar performer in the ASX growth space, with its shares rising from $8.15 in October 2022 to $17.79 at Friday’s close.

It provides colocation services through its Tier III and Tier IV data centres. These are located in Australia and the APAC region.

The company looks to benefit significantly from the surge in demand for cloud computing and artificial intelligence (AI). As noted recently, AI global revenues are expected to grow at a compound annual growth rate (CAGR) of 72%, according to UBS.

Morgan Stanley rates NextDC a buy with a $20 valuation, whereas fellow broker Morgans values it at $19 per share. This implies a potential gain of 13.5% at the time of publication.

Should you consider these ASX growth shares?

Although past performance is never a guarantee of future results, I think Flight Centre and NextDC represent two interesting opportunities in the ASX growth space.

Both names have strong analyst backing. Flight Centre’s strategic transformation and recovery in travel demand, combined with NextDC’s leadership in data centre services, could be underlying themes that rally both shares.

The post Growth spurt: 2 ASX growth shares set to skyrocket appeared first on The Motley Fool Australia.

More reading

• Brokers name 5 fantastic ASX growth shares to buy in June
• 3 ASX growth stocks I’d buy with $5,000
• 1 ASX growth stock that turned $10,000 into $21,000 in less than 2 years
• Holidays on hold: How will this affect ASX travel shares?
• Joining the revolution: How I’d invest in ASX AI shares right now

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.