These three tech stocks have room to grow and continue to enjoy strong tailwinds.

It hasn’t been easy for technology stock investors this year. The Nasdaq Composite index has fallen into a bear market, declining 31% year to date, taking the share prices and valuations of growth stocks to levels not seen in a while. The highest inflation in the U.S. in four decades combined with sharp hikes in the federal funds rate by the Federal Reserve has caused this swoon. We are now witnessing a sharp correction as higher rates cause growth stock valuations to plunge, making it more expensive for companies to take on debt.

I choose to see corrections as a great way to buy into new companies cheaply, or to increase my shareholding in existing positions. There’s no better time to buy strong, well-run companies than a bear market, but the caveat is that you must be prepared to hold them over the long term. These businesses can latch on to tailwinds and are strong in their respective industries, thus making them perfect for buying and holding through volatility.

Here are three stocks that are good buys during the current correction. Image source: Getty Images. Okta

If you’ve ever struggled to remember a whole list of different passwords to access different apps or websites, Okta ( OKTA -2.47%) can help out. The identity management specialist provides cloud-based software to help manage access privileges within an organization and ensure proper user authentication for different software. The company’s services are in high demand after digitalization swept across the globe during the pandemic and more businesses required safe and secure online access controls.

Okta’s financial numbers demonstrate its rapid growth — revenue for its fiscal year 2020 (ending Jan. 31) stood at $586.1 million. By fiscal 2022, the top line had more than doubled to $1.3 billion. Although the company is currently operating at a net loss, it generates healthy free cash flow that has more than tripled from $27.7 million to $87.4 million from fiscal 2020 to 2022. The momentum has carried on into the first half of fiscal 2023, with revenue jumping 53% year over year to $866.8 million.

Operating metrics remain healthy for Okta, with a trailing-12-month dollar-based net retention rate hovering at 122% for the second quarter of fiscal 2023 (Q2 2023). Total customers rose 26% year over year to 16,400 in Q2 2023, while customers with annual contract value of more than $100,000 climbed 35% year over year to 3,525, signaling that Okta is garnering not just more customers, but larger ones. The company believes it has a large total addressable market of around $80 billion per year that it can continue to tap for further growth, and investors should feel confident that Okta has the reputation and clout to achieve its goals. Adobe

Adobe ( ADBE -2.67%) provides a comprehensive suite of software tools for design, image editing, digital signatures, and other services. The company’s cloud-based subscription services have seen impressive growth over the years as more customers hop onto its platform for creativity, tools, and ideas. Total revenue has grown from $11.2 billion in fiscal 2019 (ending Nov. 30) to $15.8 billion in fiscal 2021. Net income has climbed 63.4% over that period to $4.8 billion. Adobe’s free cash flow has also surged in tandem with the top line, rising nearly 72% to $6.8 billion from 2019 to 2021.

For the first nine months of fiscal 2022, Adobe continued to post decent top-line growth. Revenue increased by 12% year over year to $13.1 billion but net income stayed flat year over year due to higher provision for income taxes. The highlight for Adobe, however, was its recently announced acquisition of Figma for approximately $20 billion in cash and stock. Figma offers a collaborative design platform that Adobe is confident it can use to deliver better services and experiences to its customers.

The benefits seem impressive — the acquisition will add $400 million in annual recurring revenue by the end of fiscal 2022 with a net dollar retention rate of 150%. Figma also boasts gross margins of around 90% and generates positive operating cash flows. It remains to be seen if Adobe can integrate this mega-purchase to take the company to new heights, but the company’s long track record of helpful buyouts should reassure investors that it can do so. PayPal

PayPal ( PYPL -3.12%) operates an online payments platform that supports quick, secure, and convenient online money transfers between customers and merchants. The surge in e-commerce and […]

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