Morgan Stanley’s Highest Conviction Stocks: Top 20 Stocks To Buy

1. LifeStance Health Group, Inc. (NASDAQ:LFST)

Share Price Upside: 77%

Number of Hedge Fund Investors In Q2 2024: 14

LifeStance Health Group, Inc. (NASDAQ:LFST) is an Arizona based company that provides mental health care services. The firm has yet to turn a profit over the last four years, but its revenue has grown rapidly since 2019. LifeStance Health Group, Inc. (NASDAQ:LFST)’s revenue was $212 million in 2019 and it sat at $1 billion in 2023 to mark a 372% growth. This is unmatched across most firms, and comes close to AI giant NVIDIA’s revenue growth over recent years. However, since it is unprofitable, cost control is a key tenet for LifeStance Health Group, Inc. (NASDAQ:LFST)’s hypothesis. Additionally, investors should also be on the watch out for visit volumes and total revenue per visit coupled with the number of doctors that it can bring under its brand. These metrics signal LifeStance Health Group, Inc. (NASDAQ:LFST)’s market share capture and operating efficiencies.

However, LifeStance Health Group, Inc. (NASDAQ:LFST) has to be on its toes for competition especially since technology barriers to entry are low. Here’s what management had to say on this front during the Q2 2024 earnings call:

“I think there’s been, from a competitive standpoint, some movement back toward in-person visits. We saw this quarter about a 1.5% bump toward in-person versus virtual. And in terms of the competitive environment, obviously, the — there’s still a great demand for mental health clinicians, but we will continue to work on both, bringing in the right clinicians through the front door and trying to mitigate the outflow on the back door. And our — to that point, our retention has stabilized. It’s slightly better than where it was last year, but it’s not where we want it to be. So we will continue to work on that.”

LFST tops Morgan Stanley’s conviction stocks when it comes to analyst upside. But our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LFST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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