The start of 2022 has been incredibly difficult for Wall Street and investors. After hitting all-time closing highs in the first week of January, the widely followed S&P500 and iconic Dow Jones Industrial Average both pulled back more than 10%, reaching official correction territory.
Although steep declines in the stock market can tug at investors’ emotions, the story is pretty clear that buying stocks during corrections and bear markets is an incredibly smart move. Over time, any notable declines in major indices, including the Nasdaq Composite, are eventually erased by a bullish rally.
With the Nasdaq falling into a bear market, now is the perfect time for opportunistic investors to go on the offensive. The following are three mind-blowing growth stocks you will regret not buying on the low.
The first amazing growth stock you are going to give yourself if you don’t buy soon is cybersecurity company CrowdStrike Holdings (CRWD -8.94%). Shares of the company have fallen 33% since hitting an all-time high.
The obvious worry right now for fast-paced businesses is that historically high inflation, and the Federal Reserve raising rates to stamp out that inflation, will send the US economy into a recession. This would generally be bad news, at least in the short term, for cyclical companies.
However, cybersecurity is not a cyclical activity. Over the past two decades, it has become a fundamental necessity that businesses of all sizes rely on. No matter how the US economy or stock market performs, hackers and bots aren’t taking days off from trying to steal consumer and business data. As more companies moved their data online and into the cloud during the pandemic, third-party providers like CrowdStrike saw demand skyrocket.
What makes CrowdStrike tick is the company’s Falcon security platform. Falcon was built entirely in the cloud and is guided by artificial intelligence. These factors – which help it monitor approximately 1 trillion events per day – enable Falcon to quickly assess and respond to potential threats. While CrowdStrike isn’t the cheapest option when it comes to end-user security, its 98% raw retention rate suggests it’s one of the best and well worth the cost. .
CrowdStrike’s operating results show that it has had no problem attracting new customers. Over the past five years, the number of customers subscribing to CrowdStrike has seen an average annual growth of 105% (from 450 to 16,325).
But what could be more impressive that’s how successful it has been in enticing existing customers to spend more. In the past 16 quarters (four full years), CrowdStrike’s dollar retention rates have not dropped below 120%. In other words, each year, existing customers spend at least 20% more the following year. Additionally, the percentage of customers purchasing four or more cloud module subscriptions has increased from 9% to 69% in five years.
CrowdStrike has all the attributes of a company that can continue to blast Wall Street’s highest expectations.
A jaw-dropping second growth stock you’ll regret not picking up on the downside is biotech stocks Novavax (NVAX -2.32%). If you think CrowdStrike has struggled, Novavax shares are down nearly 80% from their 52-week high.
Wall Street’s big concern with Novavax is the delayed rollout of its COVID-19 vaccine, NVX-CoV2373.
Last year, Novavax completed two large-scale studies of its vaccine, which demonstrated efficacy of 89.7% (UK study) and 90.4% (US and Mexican trial) respectively. It also reported 80% vaccine effectiveness in adolescents earlier this year. NVX-CoV2373 is one of only three COVID-19 vaccines to reach the 90% efficacy threshold in any late-stage study. This would presumably give him a good shot at becoming a key player in initial inoculations and booster shots.
However, Novavax has delayed its Emergency Use Authorization (EUA) filings until the end of 2021 in many developed markets, and has struggled somewhat to ramp up production to meet orders. These short-term concerns weighed heavily on its share price.
The good news is that Novavax expects $4-5 billion in sales this year. That suggests it will have no trouble meeting its vaccine production obligations. Even though some developed countries are returning to some semblance of normalcy, the global pandemic is still ongoing, and mutations in the SARS-CoV-2 virus give NVX-CoV2373 plenty of lead as a booster option.
Additionally, an advisory committee of the U.S. Food and Drug Administration plans to review Novavax vaccine on June 7, 2022, which could lead to a possible EUA. Even though most Americans who wanted a COVID-19 vaccine received one, Novavax can still play a key role in booster shots for adults and perhaps initial inoculations for teenagers.
The company also has the option of become a leader in combination vaccines, such as those targeting both influenza and COVID-19. While Novavax has followed other drugmakers to market with its COVID-19 vaccine, it could be one of the first to market with a combination vaccine.
Novavax can be bought for less than 3 times Wall Street’s projected earnings for 2022 and has about $1 billion in net cash. It’s a hell of a deal.
PayPal’s issues tend to mirror those I’ve described with CrowdStrike. The difference is that PayPal is cyclical and not a business necessity, and so could feel the pinch of rising inflation and reduced spending, especially among lower-income consumers. Historically high inflation and an uncertain economic outlook forced PayPal to lower its earnings forecast three times in the past year.
Yet even with these short-term negatives, many of PayPal’s key performance indicators are moving in the right direction. Although net new account (NNA) growth slowed, the company still increased its NNA by 2.4 million in the first quarter. Keep in mind that US gross domestic product in the first quarter came in at negative 1.4%, but PayPal still grew its digital user base.
Total payment volume is also expected to increase by a double-digit percentage at a time when consumers are taking it on the chin. Even PayPal’s pared-back forecast predicts over $1.4 trillion in POS in 2022, with overall growth of 11%-13% from 2021. If it’s a bad year for PayPal, I look forward to see what will happen when economic activity normalizes in a few quarters.
Perhaps most exciting is the fact that active PayPal accounts are rely more on digital payments with each passing quarter. In 2020, active users made an average of 40.9 transactions on a 12 consecutive month (TTM) basis. But in the last quarter ended, PayPal noted 47 transactions per active user on a TTM basis. This statistic, among all others, suggests that PayPal is on the right track and that this latest pullback in its stock is a monster buying opportunity.
Bearing in mind that Wall Street’s earnings forecast for the company remains fluid, stocks may be gobbled up now for 18 times earnings in the coming year. Simply put, this fintech juggernaut has never been cheaper.