Are opportunities emerging for long-term investors? Absolutely. Here are two growth stocks down 40% or more that have a ton of potential.

The number one company in public safety

First up, we have Axon Enterprise (NASDAQ: AXON). The maker of Taser technology, it’s a global leader in public safety solutions.

This stock’s been a phenomenal long-term investment. Over the last 10 years, it’s risen more than 2,000%. Recently though, it’s come crashing down. Currently, it’s about 45% off its highs.

So I think it’s time to give it a closer look. I certainly am.

Axon’s recent Q4 2025 results showed why this company’s been such a good investment. For the year, revenue was up 33% year on year to $2.8bn, marking the fourth consecutive year of annual growth above 30%.

For 2026, the company expects revenue to grow 27%-30%, which would take its top line to around $3.6bn. Looking further out, it’s targeting revenue of $6bn by 2028.

What’s driving this growth? Well, right now, the company’s benefitting from a ‘perfect storm’ of factors – increasing levels of unrest globally, lower levels of police staffing, and more demand for policing transparency.

Looking ahead, the company has a huge opportunity in terms of global expansion. Today, the majority of its revenue comes from the US.

Now, the downside to this stock is that it’s still expensive, even after the 45% share price drop. The forward-looking price-to-earnings (P/E) is currently about 59 – this doesn’t leave any room for a slowdown in growth.

Taking a five-year view though (our preferred time horizon here at The Motley Fool), I’m pretty confident that the company will grow into its valuation and reward investors. So I think it’s worthy of further research today.

A play on the Great Wealth Transfer

The other stock I want to highlight is Robinhood Markets (NASDAQ: HOOD). It operates one of the most popular – and fastest-growing – investment and trading platforms in the world.

Back in October, its share price was above $150. Today however, it’s around $70. At that price, the forward-looking P/E using next year’s earnings forecast is only 24. I see value at that earnings multiple.

Like Axon, this company’s growing at breakneck speed. Last quarter, revenue was up 27% year on year to $1.3bn. One factor behind this growth is the company’s incredible level of innovation. Today, it offers commission-free stock trading, options trading, crypto, prediction markets, tokenised stocks, private markets, banking, social trading, and more.

In the long run, I see a ton of growth potential. Because Robinhood’s platform is immensely popular with younger investors, over the next few decades these investors are likely to inherit trillions from older generations.

Of course, a major meltdown in the financial markets could derail the growth story here. This could see people lose interest in investing.

Taking a five-year view though, I like the risk/reward set-up. I believe the stock’s worth a look.

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Recently, I added two new moonshots to my ISA. Here are the stocks I bought.

A stock for the AI automation age

First up, we have Palantir (NASDAQ: PLTR). It’s a fast-growing technology company that helps government organisations and commercial businesses generate AI-powered insights from their data.

Now, I view this growth stock as extremely risky. That’s because its valuation is insanely high.

Currently, it sports a price-to-earnings (P/E) ratio of about 100 and a price-to-sales ratio of about 70. Those multiples don’t leave any room at all for a major slowdown in growth (which is a possibility).

Taking a five-year view though (our preferred investment horizon here at The Motley Fool), I see the potential for explosive returns. Because this company’s the clear leader when it comes to AI transformation.

We can see this in its recent results. For the fourth quarter of 2025, its revenue was up 70% year on year with US corporate revenue up a whopping 137%.

That kind of growth suggests that the company’s AI platform is the real deal. No other AI software company is generating anywhere near that kind of growth today.

Looking ahead, I’m backing this company to continue doing well as businesses embrace AI in an effort to automate their operations. That said, I expect the company’s share price to be volatile, so this investment’s likely to be a wild ride.

A play on the Great Wealth Transfer

The other stock I bought was Robinhood Markets (NASDAQ: HOOD). It operates one of the world’s fastest-growing investment and trading platforms.

I’ve invested in this company for several reasons. One is that I’m extremely impressed with its level of innovation. This company makes UK brokers like Hargreaves Lansdown and AJ Bell look like dinosaurs. Today, it offers commission-free stock trading, options trading, crypto, prediction markets, tokenised stocks, private markets, banking, social trading, and more.

I’ll point out this innovation is driving strong growth. Last quarter, revenue was up 27% year on year (and that was with a major bear market in crypto).

I also think that in the long run, this company could be a major beneficiary of the ‘Great Wealth Transfer’, as trillions are passed down to younger generations in the decades ahead. So this company could prosper given its user base today is mainly younger investors.

Like Palantir, this is a high-risk stock. Its valuation isn’t crazy (the P/E ratio’s only 32) but it operates in a competitive industry and there’s no guarantee its user base will remain as interested in investing as it is today.

Taking a long-term view though, I’m bullish on its prospects.

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Including dividends, the US’s flagship index has generated a return of almost 16% since January. In terms of money, that’s enough to transform a £50,000 initial investment into roughly £58,000 in the space of 10 months – firmly ahead of the long-term historical average of 10%.

But for some stock pickers, the gains have been even more explosive, reaching into triple-digit territory!

A 235% return for stock pickers

While artificial intelligence (AI) stocks like Nvidia and Palantir have been getting most of the attention, another S&P 500 enterprise has been quietly surging. I’m talking about Robinhood Markets (NASDAQ:HOOD), the commission-free trading platform.

With investors getting excited about growth opportunities within the stock market, demand for Robinhood’s services has organically ramped up. And since the group earns its keep through a payment-for-order flow (PFOF) model, more trading and investing activity equals more revenue and profits.

Looking at its latest quarterly results, total net revenues climbed 45% to $989m while net profits more than doubled to $386m. This all comes paired with a 41% increase in net deposits across its user accounts. Throw in the fact that subscriptions to its premium Robinhood Gold service have jumped by 76% to 3.5 million, and it’s not so surprising that the shares are now 235% higher since the start of 2025.

In other words, anyone who invested £50,000 in January has not just beaten the market, but dominated it with a £167,500 reward for their efforts.

But with so much growth under its belt, is it too late for investors to hop aboard the gravy train?

What to watch

Of the 25 institutional analysts watching this business, 17 currently rate the stock a Buy or Outperform with an average share price target of $145. That’s about 10% higher than where the stock’s trading today, suggesting there’s still some growth potential on offer.

Digging deeper, this bullish sentiment seems to revolve around the company’s steady evolution into a diversified financial superapp offering investing, crypto, trading, saving, and digital banking features.

It’s certainly a promising strategy and opens up many new avenues for long-term growth and shareholder value creation. However, it’s important to recognise that in 2025, most of the revenue and profits still come from trading activity. And that’s often highly cyclical.

As we’ve seen in the past, when the stock market’s thriving, Robinhood outperforms. But when stocks stumble, the losses can be quite painful. And investors actually experienced this first-hand in 2022 when the stock fell by over 80% during the last market correction.

Throw in the regulatory uncertainty surrounding the PFOF business model alongside a lofty 69.2 price-to-earnings ratio, and the risk just feels too high for my tastes. That’s why I’m hunting for other investing opportunities within the S&P 500 right now.

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Personally, I don’t see much appeal in Robinhood stock at the moment. In my view, the stock’s risk/reward profile isn’t favourable. Having said that, there’s one meme stock I’d consider investing in right now.

Robinhood stock: the risks

Looking at the investment case for Robinhood, I see several big risks. The first is the company’s business model. Robinhood generates the bulk of its revenues (81% in Q1) from selling customer orders to institutions. This is called ‘payment for order flow’.

The issue here is that regulators don’t like this model. Currently, the US Securities and Exchange Commission (SEC) is in the process of reviewing it. If the SEC was to ban payment for order flow, it would impact Robinhood significantly.

A second issue is that growth could slow significantly. Last year, conditions were very favourable for the online broker. People were stuck at home in lockdown, casinos were closed, and sports events were cancelled (no sports betting). This led to huge growth. As the world reopens and people go back to their jobs, they’re likely to spend less time on the trading app.

Finally, there’s the valuation. When Robinhood came to the market in late July, many people thought the valuation was expensive (the trailing price-to-sales ratio was about 30). Today, the valuation is over 40% higher. If growth does stall, the stock could fall significantly.

Of course, there are some reasons to like Robinhood. The company does have a strong brand. It also has over 20m accounts, an impressive achievement.

Overall, however, I don’t see the risk/reward proposition as attractive.

The meme stock I’d buy

But one meme stock that does look interesting to me right now is semiconductor group Advanced Micro Devices (NASDAQ: AMD). It’s received a lot of attention on Reddit’s WallStreetBets forum recently.

I can see several reasons to like AMD. Firstly, the company – which develops high-performance computing products – has a huge amount of momentum at present. Just look at the company’s second-quarter 2021 results. For the period, revenue was up 99% to $3.9bn while earnings per share leapt 346% to $0.58.

“We are growing significantly faster than the market with strong demand across all of our businesses,” said CEO Lisa Su.

Secondly, the company looks set to benefit from the growth of a number of industries. Not only is it likely to gain from the growth of video gaming but is also likely to benefit from the growth of the data centre/cloud computing.

Third, the valuation doesn’t seem unreasonable. Analysts expect the group to generate earnings of $2.83 per share next year. That puts the stock on a forward-looking P/E ratio of about 37.

Of course, there are risks associated with this meme stock too. AMD operates in a very competitive industry and is up against the likes of Intel and Nvidia. These companies could steal market share. The company also operates in a cyclical industry.

However, I’m comfortable with the risks. I like the long-term growth story here.

The post Forget Robinhood. Here’s the ‘meme stock’ I’d buy right now appeared first on The Motley Fool UK.

The online share-dealing broker listed on the Nasdaq stock exchange just last week, but initial investor appetite was lacklustre. It also listed at the lower end of the anticipated price range.

However, interest in Robinhood shares picked up this week. At the time of writing, its share price had almost doubled since Monday.

Why are Robinhood shares soaring?

It’s unclear why there’s been a sudden surge in interest in the shares. There’s no apparent news from the company or industry. That said, there are several potential reasons why the shares could soar.

Speculative targeted activity from online chat rooms could be a possible cause. Earlier this year, heavily-shorted stocks like AMC and GameStop experienced similar volatility when their shares were targeted online.

Ironically, Robinhood was caught up in the drama at the time when it was forced to halt trading in the two stocks.

Some traders may also have gained confidence after seeing popular investor Cathie Wood buying Robinhood shares on Tuesday.

The popular trading app

Robinhood was launched in 2013 and has become popular with a younger demographic. It appealed to new traders and investors with fee-free trading and fractional shares. According to Robinhood, more than half of its customers are first-time investors.

Robinhood’s mission is to “democratize finance for all”. The ethos that everyone should have access to financial markets became particularly popular with its target market.

But how does it make money? As it doesn’t charge users for transactions, it needs another source of income. Much of its revenue comes by selling order flow and data to third parties. It also earns by charging interest on users’ cash and by offering premium services.

Should I buy Robinhood shares?

For me, Robinhood shares are currently far too volatile. I prefer to buy shares that don’t fluctuate so much every day. That said, the popular trading app is growing fast. Total revenues grew 309% to $522m in the second quarter of 2021 vs the same period in 2020.

Also, its easy-to-use app is designed for mobile users first and provides an intuitive experience. It’s not hard to see why the technology-focused broker is popular with young, tech-savvy investors.

And it looks like there are many avenues for future growth. For instance, by adding users in the US and expanding internationally.

However, I think its recent growth has come in a short period of time. It has limited operating experience and there is much room for error when growing a fast-moving business. Also, keeping up with and not falling foul of regulators is a critical factor in this industry. Any major regulatory mistakes could negatively affect Robinhood shares.

Overall, I can see far better growth shares that I’d rather invest in so I won’t be buying Robinhood shares anytime soon.

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