Nasdaq Bear Market: 3 Battered Growth Stocks You’ll Regret You Didn’t Buy in the Drop

Tech investors have been experiencing a sell-off this year. heavy technology Nasdaq Composite Indexnow more than 20% below its peak, it is officially in bear market territory, while the Ark Innovation ETFwhich invests in many prominent growth tech stocks, has lost around 60% of its value.

However, the business case for many of the industry’s growth names remains intact. Recognizing that, investors may want to consider buying shares of companies like Pager (P.S -7.10%), nvidia (NVDA -9.24%)Y PayPal (PYPL -2.63%) while sitting in the bargain bin.

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PagerDuty: Boosting Software Development Productivity

Brian Withers (Pager): Although most people don’t use pagers anymore, PagerDuty started in 2009 to replace the dreaded “duty” of having a software engineer answer the pager on call.

When a software issue arises for one of your clients, PagerDuty’s flagship platform ensures that the right members of that client’s team are called in to fix it and makes sure they have the information they need to do so. It has built an annual revenue run rate business of over $300 million by providing software development productivity tools for incident management, AI-assisted event monitoring, and maintenance automation.

In mid-March, it reported results for the fourth quarter of its fiscal year 2022, which ended on January 31. PagerDuty’s top line grew at a 32% year-over-year rate thanks to its land-and-expansion business model. Dollar-based net revenue retention was in the more than 120% range, and the number of large customers spending more than $100,000 a year with the company is growing at a dizzying pace. He even has 43 clients who spend more than $1 million a year.

The company is losing money on the bottom line as it is investing heavily in its growth. But his war chest of $543 million in cash and investments gives him the flexibility to operate at a negative operating margin for years as he builds his business.

Metric

Q4 fiscal 2021

Fiscal year 2022 Q3

Q4 fiscal 2022

quarter to quarter change

Change year over year

Income

$59 million

$72 million

$79 million

10%

32%

Clients with ARR of $100,000+

426

543

594

9%

39%

Dollar-Based Net Income Withholding

121%

124%

124%

3 pages

Operating margin

(30%)

(35%)

(35%)

(5 pages)

Source: PagerDuty Earnings Presentations. ARR = Annual Recurring Revenue. pp = percentage points. PagerDuty’s fiscal year 2022 ended on January 31, 2022.

Although PagerDuty is listed on the New York Stock Exchange, its shares have sold in sync with tech stocks on the Nasdaq recently. The stock is down 35% from its September high, and would likely drop even lower had it not been for the market’s positive response to its most recent earnings report.

But smart investors know this is a long game. This fast-growing software-as-a-service company is now trading at a more reasonable price-to-sales ratio of 9, presenting an opportunity for patient investors. With a compound annual revenue growth rate of 34% over the past three years and a $36 billion market opportunity, this gem of a company is just getting started.

The gamer enjoys playing a game on a PC.

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Nvidia: Increased sales and profit growth at a discount

Danny Vena (Nvidia): While corrections and bear markets are painful when they are ongoing, the best thing about them is that when they do occur, traders tend to throw the baby out with the bathwater, so to speak. Best-in-class stocks take a beating along with their lesser-quality peers. That gives investors the opportunity to buy blue-chip growth stocks at discount prices. Such is the case with Nvidia.

The graphics processing unit (GPU) specialist has been a consistently strong performer for years, and its growth has accelerated recently. Over the last five years, Nvidia’s revenue has grown at a compound annual rate of 31%, but in the fourth quarter of its fiscal year 2022 (ending January 30), its revenue grew 61% year over year.

What fueled Nvidia’s growth in recent years was its pivot to cloud computing and data center processors. The semiconductor and software stacks the company develops for its customers further solidify their insights, providing all-in-one solutions for their most complicated and challenging problems, including artificial intelligence (AI) applications. This fueled growth in its data center segment, which grew 58% in its fiscal year 2022. This is not your grandfather’s chip company.

At the same time, Nvidia hasn’t lost sight of its biggest revenue driver and was actually able to increase its presence in the discrete desktop GPU market, where it has an unmatched 83% share. Their GPUs are the gold standard for serious and casual gamers alike. This helped push its gaming revenue up 61% last year.

The company’s fiscal fourth quarter results help illustrate the extent of its dominance. Nvidia generated record quarterly revenue of $7.64 billion, up 53% year over year. Record performances from its gaming, data center and professional display segments fueled that top-line result. Even more impressive was the end result. Net income more than doubled, boosting earnings per share by 103%.

Nvidia is not resting on its laurels and has no intention of giving up its advantage to rivals. The company spent approximately 24% of its revenue on research and development in its fiscal year 2022. Its constant innovation is driving the development of the next generation of its next-generation processors.

Yet for all its successes, Nvidia has just scratched the surface of its big and growing opportunity. The company generated record revenue of $26.9 billion in its 2022 fiscal year, which still pales in comparison to its total addressable market, which management estimates will reach $250 billion by 2023.

Amid the recent Nasdaq bear market, Nvidia shares have been dragged down by more than 40%. Given the company’s industry leadership position, the secular tailwinds driving gaming, cloud computing, AI and data center adoption, and its large and growing addressable market, investors who If you miss out on buying semiconductor stocks at this discount, you’ll regret it later.

A young shopper makes a purchase from a smartphone while sitting on a skateboard.

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PayPal: Consider the selling price at this payment leader

will cure (PayPal): (PYPL -2.63%) PayPal pioneered the fintech business by facilitating online payments and brought those capabilities to nearly every country in the world. And while digital payments still account for the majority of its transaction volume, it continues to expand its offerings.

Among its offerings is the social payment platform Venmo. This peer-to-peer platform claimed more than 83 million users at the end of last year, and its first quarter payment volume grew to $58 billion, an increase of 12% year over year. PayPal has also added features like buy now pay later (BNPL), Honey for coupons, Zettle for point of sale, and PayPal Ventures for fintech and blockchain investments.

But despite its numerous offers, many traders were angry with the stock after its fourth-quarter earnings report. Management indicated that it wanted to shift PayPal’s focus from adding customers to better monetizing the current customer base. Shortly after, its decision to close its operations in Russia put further pressure on its growth.

Consequently, net income in the first quarter of 2022 grew just 7% year over year to $6.5 billion. That was a dramatic slowdown from its 17% revenue growth rate during 2021.

Non-GAAP earnings in the first quarter fell to just over $1 billion, down 29% from the prior year period. Higher transaction expenses and higher credit and transaction losses weighed on earnings. Additionally, a one-time tax benefit of $225 million in the first quarter of 2021 boosted revenue in that quarter. For comparison, PayPal paid $120 million in income taxes in the first quarter of 2022.

But despite concerns about the size of the customer base, net new additions of 2.4 million increased its total active accounts by 9% year over year to 429 million. And in the first quarter, total payment volume increased 13% to $323 billion. In addition, management forecasts a recovery in growth, pointing to an 11% to 13% increase in net income by 2022. Meanwhile, analysts forecast 17% revenue growth in 2023, which would match the PayPal growth rate in 2021.

Finally, your current rating could help PayPal even more. The stock is now trading at a discount of more than 70% from its 52-week high, and its price-earnings ratio has fallen from 75 last summer to just 31. Compare that to its fintech peer. Block (formerly known as Square), which is trading at a P/E ratio of around 340. PayPal is a leading financial technology in the world, and given its bargain valuation and extensive footprint, investors should not overlook this opportunity. to buy.

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