Top ASX growth shares to buy for a stock market rebound

Are we heading for a global recession in 2023 or is the worst behind us? With so many conflicting expert opinions floating around, it’s impossible to know for sure.

But what we do know for sure is that the stock market has never come back to new highs following its down periods.

While the rebound may not happen next week or next month, if history is anything to go by, it will definitely happen.

So, we asked our Foolish contributors which ASX growth stocks they think are worth jumping on now to make the most of the coming bounce.

Here’s what the team came up with:

7 ASX growth stocks to return to (smallest to largest)

  • Temple & Webster Group Ltd (ASX: TPW), $516.22 million
  • Jumbo Interactive Ltd (ASX: JIN), $887.81 million
  • Life360 Inc (ASX: 360), $1.02 billion
  • Webjet Limited (ASX: WEB), $2.34 billion
  • Altium Limited (ASX: ALU), $4.61 billion
  • Domino’s Pizza Enterprises Ltd (ASX: DMP), $5.67 billion
  • Xero Limited (ASX: XRO), $10.3 billion

(Market value as of December 21, 2022)

Why our nerdy writers love these ASX stocks

Temple & Webster Group Ltd

What it does: Temple & Webster is Australia’s largest online retailer of furniture and homeware. It sells over 200,000 products from hundreds of suppliers, and also has a drop-ship model, where products are sent directly to customers by suppliers. This allows for “faster delivery times, reduces the need to hold inventory and enables a greater variety of products.”

The company also has a variety of private brands and a named website the construction which focuses on home improvement products such as flooring, cabinets, plumbing, lighting, curtains, etc.

By Tristan Harrison: Temple & Webster’s share price is down more than 60% in 2022, which I think makes it look like a pretty great value.

While the closures 12 months ago make it difficult for the company to beat its year-on-year numbers, it expects to return to “double-digit growth during this financial year”.

Temple & Webster also focuses on unit economics and profitability. It expects a profit margin before interest, tax, depreciation and amortization (EBITDA) of between 3% and 5%. Longer term, margins may improve thanks to more private label sales, marketing and variable costs, and large-scale benefits for key costs such as freight and cost of goods.

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The adoption of digital shopping for home items in Australia is expected to increase from its current level of 17% of the total market. In the UK, online shopping for furniture and homeware was around 30% of the entire market in 2021. This points to significant positive potential for online retailers like Temple and Webster over time.

Motley Fool contributor Tristan Harrison does not own shares of Temple & Webster Group Ltd.

Jumbo Interactive Ltd

What it does: Jumbo Interactive operates an online platform for the sale of lottery tickets and fundraising activities. The company’s platforms are now active across Australia, the UK and Canada – reaching 4 million active players.

By Mitchell Lawler: This year has not been kind to Jumbo Interactive’s share price, despite fairly solid results. Since the beginning of 2022, shares of the online lottery operator have fallen by about 26%.

But, in my eyes, Jumbo is in the strongest position it has ever been. The company completed the acquisition of StarVale in November, further strengthening its position in the UK. The deal marks another demonstration of management’s ability to deploy its earnings to make profit-enhancing acquisitions around the world.

This is a company that generates profits after tax with a difference of 30% and has zero debt. If Jumbo’s management team can continue to effectively use capital to expand operations, today’s share price may look cheap in the event of a market recovery.

Motley Fool contributor Mitchell Lawler owns shares of Jumbo Interactive Ltd.

Life360 Inc

What it does: Life360 is the technology company behind the freemium mobile app called Life360, which boasts 47 million monthly active users. It offers users features ranging from communication to driving safety and location sharing.

By James Mickleborough: It’s been a rough year for Life360 stock. The market’s sudden aversion to losing technology companies means that the company’s shares have fallen by almost 50% year to date. This is despite Life360 expecting to more than double its revenue from $225 million to $240 million this calendar year.

The good news is that its losing days are almost over, with management expecting the company to be cash flow positive next year. Meanwhile, Life360’s cash balance of about $85 million is substantially more than needed to break even.

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With that in mind, I think now is the time to focus on the company’s very strong long-term growth potential in a massive $12 billion total addressable market, worldwide. I also suspect that a re-rating of Life360 stock may occur when the market recovers and the company achieves positive cash flow.

Motley Fool contributor James Mickleborough owns shares of Life360 Inc.

Webjet Limited

What it does: Most Australians are likely to know Webjet as an online travel agency, but the company’s business covers a lot more ground than that. Perhaps its most notable other foray is the business-to-business offering of WebBeds – a provider of hospitality services to the travel industry.

By Brooke Cooper: Vobjet’s share price has outperformed in 2022, up nearly 20% year-to-date and trading at $6.18 at the time of writing. However, this is still about 37% lower than it was before the start of the COVID-19 pandemic.

Fortunately, Goldman Sachs dropped the stock to regain prominent ground. The broker believes Webjet is a conviction buy and recently slapped a $6.90 price target on it.

Such confidence comes when society emerges from the epidemic far greater than it entered. And this growth may just be the beginning.

As my Foolish colleague reported last week, Goldman Sachs expects Webjet’s earnings to boast a six-year compound annual growth rate (CAGR) of 15.3%.

Motley Fool contributor Brooke Cooper does not own shares of Webjet Limited.

Altium Limited

What it does: Altium is a multinational software company focused on electronic design systems for 3D printed circuit (PCB) design and embedded systems development.

By James Mickleborough: Another ASX growth stock that I think could be a buy right now is Altium. Although its shares have fared better than some other tech stocks in 2022, they are still significantly underperforming the benchmark S&P/ASX 200 Index (ASX: XJO).

And when the market recovers, I think Altium can recover along with it. Especially in light of the company’s brilliant long-term growth prospects.

Thanks to Altium’s leadership position in the industry, and positive tailwinds such as increased demand for the Internet of Things and artificial intelligence, management aims to increase revenues to $500 million by 2026 with an EBITDA margin of 38% to 40%.

That would be more than double FY2022 revenue of $220.8 million and an improvement on FY2023 EBITDA margin guidance of 35% to 37%. I expect this to build on strong earnings growth in the coming years, which could help push Altium stock higher.

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Motley Fool contributor James Mickleborough owns shares of Altium Limited.

Domino’s Pizza Enterprises Ltd

What it does: Domino’s is the largest pizza chain in Australia, offering delivery services, takeaway and dining in restaurants throughout the country. It also operates internationally, with a total of over 2,800 stores in 10 markets.

By Matthew Farley: Domino’s Pizza’s share price is down nearly 45% year-to-date, but some experts believe that low price now offers great value to investors.

That includes one Morgan broker who slapped a $90 price target on Domino’s stock earlier this month. This gives a potential upside of 38% from the current share price, at the time of writing.

The broker went on to say that Domino’s is struggling with the headwinds of lower sales and a higher cost base for its products. However, these issues were described as “transient in nature”. If this turns out to be true, the company’s revenues and margins may improve significantly, down the road.

Motley Fool contributor Matthew Farley is not a shareholder of Domino’s Pizza Enterprises Ltd.

Xero Limited

What it does: Xero is a provider of cloud-based accounting software. The platform helps small business users effectively manage the financial and regulatory requirements of running their companies.

By Sebastian Bowen: Xero shares have had a very rough year or so. It was an ASX 200 stock trading at more than $150 a share in November 2021, more than double the current price. So you’d think Xero’s business was facing some kind of disaster.

Well, not entirely. Back in May, Xero reported that it had grown subscriptions by 19%, revenue by 29% and profits by 11% in the 12 months to 31 March 2022.

Recently, Xero again reported a 30% rise in revenue for the six months to 30 September 2022, with an 11% rise in profits and a 16% increase in subscribers.

If there is a recovery in the stock market next year, I think investors are likely to find a new appreciation for this growth share of the ASX.

Motley Fool contributor Sebastian Bowen is not a stockholder of Xero Limited.


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