Unless a portfolio is made up entirely of mega-cap stocks, it’s probably experiencing more red days than green lately. The market can look like a popularity contest, and small and mid-cap growth stocks aren’t cool right now.
But it would help if investors looked at the positives of all this selling pressure. With so many stocks on liquidation, now is the perfect time to buy stocks at unbeatable prices. The market has recently hammered on these three stocks, but they have long-term potential that could make them huge winners over time.
1. Affirm holdings
Buy Now, Pay Later (BNPL) took 2021 by storm, roughly quadrupling to $ 100 billion last year. Experts believe it could reach 15 times its current volume by 2025. The simple structure of fixed payments that often bear no interest is rapidly gaining popularity over traditional consumer credit cards.
To assert (NASDAQ: AFRM) is one of the main BNPL companies. He works with his business partners to offer installment payment plans on products. Users can purchase directly from the Affirm app and use Affirm’s payment tools during checkout. Retailers are encouraged to use BNPL as it increases order size and customer loyalty. Buyers can put more in their cart, and they like the easy financing. In other words, it has become a sales tool for retailers.
Affirm has entered into numerous partnerships with leading e-commerce merchants, including Amazon, Walmart, Shopifyand Target. During its first quarter of 2022 (period ending September 30, 2021), the company reported that its merchant partnerships grew 1,468% year-over-year to 102,200. Affirm didn’t even commented on its forecast since announcing the partnership with Amazon, so it seems reasonable that its 84% ââyear-on-year merchandise volume growth in the first quarter of 2022 could continue from there.
Despite this good news, the stock was caught in a wave of broader tech selling in the market and has fallen more than 50% from its highs. At $ 80 a share, the stock is trading almost as low as it was before Affirm announced the partnership with Amazon.
Affirm is not profitable, but spends a lot to create new products and services; it has ambitions to become a larger financial services company, bringing a financial superapp and a debit card to market in the coming quarters. As these products are launched and revenues increase, investors should look for the business to start heading towards a positive operating profit.
2. Crowds strike holdings
The world is becoming more and more digital at a rapid rate. Yet the tools for consumers and businesses to protect themselves from digital threats are still largely outdated. Someone could do a simple internet search and find countless cases of companies being violated, hacked, or compromised.
CrowdStrike (NASDAQ: CRWD) is a cloud-based leader in endpoint security, in which a network protects user devices such as computers and mobile devices from digital threats. In the old days, people would download antivirus software, get occasional updates from the security company that ended up telling the antivirus program what the threats looked like.
CrowdStrike’s Falcon platform offers various protections through the cloud, giving the software real-time information and updates. The devices connected to Falcon are linked, like a massive network. If an attack occurs on a device, the system instantly learns and shares this information with other devices on the network. As more and more devices are connected, it creates a network effect and the Falcon platform learns more, faster.
The stock has had an excellent run since the onset of COVID-19, but has since fallen about 40% from its highs. CrowdStrike increased its subscription revenue by 67% year-over-year in its final quarter, the third quarter of 2022 (October 31, 2021), to $ 357 million. The company records net losses but increases its free cash flow; it stood at $ 123.5 million in the third quarter of 2022, a 62% year-over-year increase. Free cash flow is a positive step towards profit making, so investors should look for cash flow that continues to grow and net losses to reduce over the next few quarters.
3. Limited sea
The people of Southeast Asia are tech-friendly; the region has a population of around 670 million people, half of whom are under 30 years old. They also tend to spend eight hours on the Internet each day, which is more than the global average. In other words, they’re a great target market for digital businesses.
Limited sea (NYSE: SE) is an internet company with various digital business segments including e-commerce, mobile games, and financial services. Garena, its gaming business, is powered by FreeFire, one of the world’s most popular mobile games. It is also the most profitable part of the business, responsible for all of Sea’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
The company uses these profits to strongly develop other parts of its activities. For example, Sea has expanded its e-commerce business, Shopee, to other regions of the world, including Latin America, Europe and India. The business is aggressively pumping its cash back into the business to pay for the employees, buildings, and resources needed for these new markets, so the business as a whole is losing money right now. However, I expect expenses to stabilize eventually and revenue growth will exceed the money Sea spent pushing the company towards profit. Investors will want to be careful about whether losses rise or fall over the next few quarters.
Sea’s total revenue grew 122% year-over-year in its final quarter, Q3 2021, and there is reason to believe that rapid growth may continue in the years to come. Ecommerce, gaming, and fintech are all massive addressable markets, and Sea’s ambition to attack them on a global scale gives the company a virtually endless avenue for growth. The stock is at 50% of its highs, so investors who have the patience to hold for the long term could get stocks back at a nice discount.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.