These stocks hold the potential to disrupt industries and earn outsize returns.
Perhaps no type of stock has suffered more than growth tech stocks . The Ark Innovation ETF , which invests most of its assets in this sector, has dropped by over two-thirds from its 2021 high, and a few individual stocks have fallen by more than 90%. Unfortunately, such conditions make investing painful for even the most seasoned investors, and others may want to exit the market completely amid such disappointments.
However, the market has historically recovered from downturns worse than this current one. Moreover, attractive price points on many growth stocks await investors who can keep their faith in the market amid the pain. Given their massively discounted valuations, growth-oriented investors may want to consider Shopify ( SHOP -7.02%), Roku ( ROKU -2.76%), and SoFi Technologies ( SOFI -3.35%). Image source: Getty Images. Shopify: Making commerce better for everyone
Brian Withers (Shopify): The average consumer hasn’t heard of Shopify, but its platform enabled 597 million shoppers to buy $175 billion in goods online in 2021. Millions of merchants large and small use its software and services to manage all aspects of their online business, from running websites to warehousing their products and shipping to end customers. The stock has sold off more than 75% since mid-November, but I think the market is underestimating the long-term potential of this gem. Let’s take a look at some recent results. Gross merchandise value (GMV) $17.4 billion $37.3 billion $43.2 billion Change (YOY) 46% 114% 57% Revenue $470 million $987 million $1.2 billion Change (YOY) 47% 110% 22% The table above gives investors a good picture of what happened to the company’s growth during the pandemic. The first quarter of 2020 was the beginning of the pandemic before the company saw an incredible boost in sales as people were cooped up at home. As in-store retailers are once again open, it’s not surprising growth has slowed. But comparing the revenue and gross merchandise value over the two-year period, it’s astounding. Revenue from the most recent quarter is 2.6 times the value from Q1 2020, and GMV is up 2.5 times. But somewhat unbelievably, the stock is down over 50% during that period.
Bears would say the company is spending more and the operating income in its most recent quarter turned negative. With growth slowing, the market is looking for companies to turn profits. But, since the beginning, leadership hasn’t been focused on the short term. In his 2015 letter to shareholders, co-founder and CEO Tobi Lütke said: “Shopify has been about empowering merchants since it was founded, and we have always prioritized long-term value over short-term revenue opportunities. We don’t see this changing.”
This idea still holds true today as the company is making significant investments in simplifying fulfillment for its merchants. The Shopify fulfillment network gives entrepreneurs and small businesses access to state-of-the-art fulfillment capabilities including a fleet of robots by way of its purchase of 6 River Systems in 2019. Recently, it’s taken another step to simplify fulfillment by announcing a $2.1 billion acquisition of Deliverr , which will provide merchants with end-to-end logistics services. These investments will drive additional expenses in the short term, but create incredible value for customers over the long term.
I’ve been a shareholder for more than five years and this e-commerce platform is one of a small handful of my “never sell” stocks . Even though the bears may be scared off with additional spending, the balance sheet is still incredibly strong, boosted by $7.25 billion in cash and cash equivalents. It can afford to run a negative operating margin for years as it bolsters its platform for customers. With the stock down considerably, it’s a great opportunity for patient investors to add some shares of this e-commerce specialist on a mission to “make commerce better for everyone.” Image source: Getty Images. Think you know Roku? Think again.
Danny Vena (Roku): Streaming video has gotten a bad rap lately, giving investors a big dose of uncertainty. Content spending has gone through the roof and competition has ratcheted up to levels few could have imagined just a few years ago. As a result, any company associated with streaming is being viewed as suspect. That suspicion has resulted in a compelling opportunity for Roku investors.
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While the streaming pioneer has dabbled in originals, the amount of programming has been small by Hollywood standards, so Roku isn’t at risk of getting caught up in the spiraling content budgets that […]
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