2 top growth stocks I’d invest £500 in right now

Despite falling between 17% and 25% from their all-time highs, these two growth stocks still appear to have plenty left in the tank.

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The unstoppable rise in zero-commission trading accounts means I don’t need a shedload of money to start investing. £500 is easily enough to get going. Here are two growth stocks I’d buy now if I had that amount to invest.

Cash machine

First up is Airbnb (NASDAQ: ABNB), the home-sharing rental platform that I’m sure needs no introduction.

At $160, the share price is down 25% since early 2021. Yet over 448m nights and experiences were booked on Airbnb in 2023, exceeding pre-pandemic levels.

This helped annual revenue grow 18% year on year to $9.9bn. Adjusted net profit reached $2.9bn, which translated into a very healthy 29% net profit margin.

Airbnb acts as an intermediary between hosts and guests. It doesn’t own the properties listed on its platform and this means it has low capital requirements.

When guests book and pay for a listed room or property, the firm holds this money and distributes it (minus fees) to hosts after check-in. These bookings can sometimes be weeks or months in advance, enabling the firm to earn interest income from the cash on its balance sheet. Last year that was $721m.

Looking ahead, regulation affecting short-term rentals in some places is a risk. And the shares aren’t cheap at 35 times forecast earnings.

However, with the global lodging market still largely under-penetrated, Airbnb looks to have many years of growth left.

Breakfast king

From summer rentals to sausage rolls now with Greggs (LSE: GRG). At first glance, this might not seem like a growth stock. After all, the baked goods chain has been a fixture on many UK high streets for over three decades.

Yet the numbers don’t lie. It has grown revenue impressively, achieving a compound annual growth rate (CAGR) of 11.9% over the past five years. Net profit has grown at a CAGR of 16.7%.

This has been reflected in a market-beating 50.5% rise in the share price over that time. That return doesn’t include dividends and Greggs has been serving them up too.

It has increased its payout from 35p per share in 2018 to 62p last year. And brokers see that rising to 72p in 2024.

Greggs has taken market share during the cost-of-living crisis, with new shops opening in train stations and airports, as well as cafes inside Primark and Sainsbury’s.

I can also get steak bakes dropped off at home now due to delivery partnerships with Uber Eats and Just Eat. Oh, and it’s opening more drive-throughs and now trades later into the evening.

It’s even overtaken McDonald’s to become the UK’s most popular choice for breakfast takeaway.

More franchised stores are on the horizon, which could boost profits long term as they generally involve less upfront capital. Management’s targeting more than 3,000 shops in total, up from almost 2,500 today.

One potential concern is high inflation, especially in relation to workers’ pay. The company raised prices last year and may have to do so again. That could turn some customers off.

Nevertheless, I’m a satisfied shareholder and remain confident in the company’s future. I’d invest at 2,769p.

Foolish takeaway

With both stocks down between 17% and 25% from all-time highs, I reckon they could lay a solid foundation for a well-diversified portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has positions in Airbnb, Greggs Plc, and McDonald's. The Motley Fool UK has recommended Airbnb, Greggs Plc, J Sainsbury Plc, Just Eat Takeaway.com, and Uber Technologies. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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