Lately it has been difficult for the market. The Nasdaq Composite (NASDAQ INDEX: ^IXIC) it is currently more than 20% below its late-March high and nearly 30% below its November high. And of course, for some Nasdaq-listed stocks, the past few weeks have been much, much worse.
However, if you’re thinking that many of these severely sold names are now priced too low to pass up, you’re right. Here’s a closer look at three of the Nasdaq’s hardest-hit stocks that could be close to bottoming and are poised to rebound.
okta (NASDAQ:OKTA) It is a cybersecurity team. The company offers a way to ensure that only authorized users log on to a network, whether they are employees or customers of a company.
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There was a need for such services before COVID-19 set in, but when millions of people began working from home during the pandemic, the need for such security measures increased. And it’s still swollen. Okta’s revenue is expected to grow 37% this fiscal year and nearly 34% next year. While still unprofitable, next year’s growth should absorb a large chunk of that loss, putting earnings in the offing for the foreseeable future.
This rate of progress has not impressed investors lately. The stock is down 66% since November, hitting new 52-week lows earlier this month.
However, Okta’s lead in a tech sector sell-off appears to be rooted in a misconception. That’s the assumption that as the coronavirus pandemic subsides, so will the demand for secure logins. it won’t. If anything, it keeps growing. In the laboratories of Arkose 2021 Fraud Status rreport, the digital fraud prevention team noted a 70% increase in fake new account registrations early last year, adding that so-called “credential stuffing” accounted for 29% of all cyberattacks it monitored.
To this end, Mordor Intelligence estimates that the digital authentication management market will grow at an average annual rate of 22% from 2018 to 2026. Okta has already shown that it is more than capable of earning more than its fair share of that market growth. market.
If you want proof that even the most beloved stocks in the market can sometimes fall from grace, chew on this: Amazon (NASDAQ:AMZN) shares are now priced 35% below the March high and are down more than 40% from the November high.
Surprised? don’t be The higher prices seen since the middle of last year aren’t just annoying. Higher fuel costs, material costs, and labor costs can be downright problematic for a company like Amazon, which despite its size operates on razor-thin profit margins. And, as CFO Brian Olsavsky explained during the company’s disappointing first-quarter results conference call, “[T]The cost of fuel is about one and a half times higher than it was a year ago. Combined with year-over-year increases in wage inflation, these inflationary pressures have added approximately $2 billion of incremental costs compared to last year.”
For perspective, the company generated $3.7 billion in operating income for the quarter in question, more than half less than the prior-year comparison despite higher revenue. Also, the only profitable company Amazon ran last quarter was its cloud computing business, Amazon Web Services. Its consumer-facing online retail operation actually lost money during the three-month period ending in March.
So why get in on the action now? Because it’s Amazon. It has been here before and has been adjusted as needed. She will do it again. As CEO Andy Jassey noted in the first quarter report: “Today, as we are no longer looking for physical or staffing capacity, our teams are fully focused on improving productivity and cost efficiency across our fulfillment network.”
Finally add Adobe (NASDAQ:ADBE) to its list of humble Nasdaq stocks ready to rally.
Most computer users will recognize Adobe as the name behind the pdf (Portable Document File) file type that has made it possible to deliver print-friendly documents over the web. Veteran investors may recall that Adobe also pioneered a large part of the digital image creation, management, and enhancement software market with a program called Photoshop. Although there are many alternatives today, Photoshop also exists, as does the pdf file.
However, what most investors may not realize is that Adobe is so much more than just Photoshop and PDFs these days. It offers comprehensive platforms that help enterprise-grade clients create and optimize websites and online ad campaigns, and yes, create digital photography and imaging. The so-called Experience Cloud allows its clients not only to manage and promote an e-commerce site, but also to collect and analyze data about its users and traffic. You can even help your business users change the appearance of a website to suit different visitors.
The other, Creative Cloud, is a digital imaging creation and enhancement tool that can do more with a photograph than most people thought possible. There is nothing else out there like either offering. Even in a tough economy, customers can’t just give up access to these tools.
These platforms are largely rented rather than sold outright, available as a cloud-based application rather than downloaded software. The end result is an increasing degree of recurring revenue. However, the change in the company’s business model is not hampering growth. Analysts expect sales growth of 13% this year to accelerate to almost 15% next year, with similar earnings growth in cards.
Given this kind of steady advance, the stock’s 44% drop since November is an opportunity to plug in at a bargain price.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Adobe Inc., Amazon and Okta. The Motley Fool recommends the following options: $420 long calls in January 2024 at Adobe Inc. and $430 short calls in January 2024 at Adobe Inc. The Motley Fool has a disclosure policy.