Growth stocks in general are experiencing a volatile year in 2021. Many growth stocks were also ones that benefited from the stay-at-home trend during the pandemic. Now that economies are reopening, investor attention is shifting to stocks that stand to gain as consumers leave their homes.
That does not completely explain why these three growth stocks have crashed by more than 20% in 2021, but it does start to tell the story. Nevertheless, each of these companies has good long-term prospects that have improved during the year. Let's take a look at why you should consider each one of these beaten-down growth stocks.
Skillz (NYSE:SKLZ) is a gaming platform on a rapid growth trajectory. What makes it unique is it offers players the chance to wager on the games they are playing. The ability to wager makes them more interesting than free-to-play games. The outcome of a game has the tangible benefit of prize money.
Importantly, it costs Skillz far less to acquire customers than the value it derives from them. Indeed, from 2018 to 2020, lifetime customer value exceeded the expense of acquiring them by 3.8 times. That leaves room for Skillz to spend on acquiring new customers to power its flywheel profitably. More players means developers will be more interested in making games for the platform.
Since developers spend time and resources adding games to the platform, Skillz does not incur these costs. It merely stands in the middle of players and developers and takes a percentage of wagers on games. The asset-light business model gives it the potential to scale efficiently.
Penn National Gaming
Penn National Gaming (NASDAQ:PENN) was devastated during the pandemic when it had to temporarily close the doors to its land-based casinos. It is benefiting from reopening and a largely vaccinated population in the United States. Revenue is nearly back to 2019 levels. And Penn is not exposed to the business convention market the way Las Vegas casinos are, so there should be no long-term damage from reduced business travel.
Moreover, Penn invested in launching an online sportsbook that can be a growth engine driving revenue and engagement with its land-based casinos. Customers who visit one of its land-based casinos can be marketed and converted to online sportsbook customers. On the flip side, folks who sign up to its online sportsbook before visiting a casino can be sent promotional offers to visit the closest Penn casino near them.
The online sportsbook is just getting started, with 400,000 registered players. Compare that to one of its competitors, DraftKings (NASDAQ:DKNG), which has already signed up 1.5 million monthly unique players. Given that Penn has the added advantage of land-based casinos to attract online players, it could surpass DraftKings over time.
Peloton Interactive (NASDAQ:PTON) is a popular manufacturer and seller of exercise equipment. The company was growing revenue by triple digits even before the onset of the pandemic. When the pandemic forced gyms to shut their doors temporarily, it supercharged Peloton's sales, creating backlogs of orders up to 12 weeks. Management acted quickly, increasing capacity and fixing other supply chain issues, bringing order to delivery times back to normal.
It's clear to management that people love the products, and now that the company has increased manufacturing capacity, it's expanding internationally.
In addition to selling customers the equipment, Peloton offers live and recorded classes that come with a monthly membership fee. The feature is one of the main draws of buying a Peloton bike as folks enjoy the camaraderie of joining in group exercises in the comfort of their home.
Overall, Peloton offers more convenience, higher-quality equipment, and similar monthly prices compared to gyms, which should allow it to continue attracting new customers despite reopenings.