It's never fun when our stocks take a price hit, but we should be excited about the long-term opportunities that market corrections give us. Right now, there are several high-quality growth stocks that are 40%, 60%, or even 70% less expensive than earlier this year.
Let's take a closer look at three such stocks that have seen significant price pullbacks in the past couple of months. Their growth opportunities make them "no-brainer" picks for patient investors who don't hesitate.
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1. Affirm Holdings
Buy Now, Pay Later (BNPL) is quickly changing how consumers access short-term credit. BNPL purchases could reach $100 billion by the end of 2021, up four-fold from 2020, and grow 15-fold by 2025, according to various estimates.
Affirm Holdings (AFRM -9.25%) is poised to be at the center of this growth, thanks to its various partnerships with key U.S. retailers like Amazon, Shopify, Walmart, and Target. Affirm's business is simple; it's able to originate short-term loans at the point-of-sale, where consumers can fund a purchase and pay it off in a small number of payments, sometimes interest-free.
The company's position as a leading player in BNPL is supercharging growth. Its fiscal 2022 first-quarter earnings showcased an 84% year-over-year increase in gross merchandise volume, the total value of transactions on Affirm's platform, which drove 55% revenue growth over 2021 Q1.
Like many growth stocks across the market recently, shares of Affirm have fallen from their highs. Affirm was trading around $176 per share and is now under $115. At a price-to-sales (P/S) ratio of 34.25, the stock still doesn't seem cheap.
But when you consider the massive potential growth driver that Amazon can be over the coming years and the looming roll-out of Affirm's Debit+ card in 2022, the pullback could be an opportunity to buy shares at a price that the company can grow into in a reasonable amount of time.
2. Monday.com
The way that people work inside organizations has remained the same for decades. Sure, there are emails and spreadsheets, but true teamwork is disjointed and clunky. Monday.com (MNDY 0.42%) is trying to change that. Its software-as-a-service platform lets employees build custom software tools for their company in a simple, "low-code" manner that doesn't require technical skills.
Employees can collaborate in a single space and in one that is designed specifically around their own needs. Monday.com's 2021 third-quarter earnings showed the strong momentum that the business has; revenue grew 95% year over year.
Monday.com offers a free tier for up to two users and then has tiered pricing, depending on how large the organization is. This makes it easy for someone to test Monday.com on behalf of an organization, and if they like it, they can purchase the tier they need based on how large the organization is. In 2021 Q3, the number of customers spending $50,000 or more grew 231% year over year, illustrating how easy spending is to increase once Monday.com becomes an essential tool within a customer's organization.
Shares have fallen from highs of $450 per share, down to around $308. At a P/S ratio of 52, it's challenging to argue for the shares being cheap, but quality stocks often command a premium valuation, and the stock price is 30% off its highs. Investors might need to wait for the business to grow into its valuation, but at a market cap of $13.5 billion, the stock is small enough to reward investors with a long-term mindset.
3. Hims & Hers Health
Healthcare is one of the largest and most complex industries in the United States, where total spending is approaching $4 trillion per year. Despite a lot of competition, Hims & Hers Health (HIMS -4.88%) is making headway in carving out its niche in the space.
The company offers telehealth consultations, prescriptions, and supplements for several healthcare conditions that affect both men and women. Hims & Hers started with conditions that people are often too embarrassed to see their primary doctor for; these include skincare, hair loss, and erectile dysfunction, among others. However, the company has expanded its range of treatments, using these taboo ailments to get a foot in the door with patients.
There isn't anything proprietary about what Hims & Hers does, which might have investors worried about competitors, but the company's results are telling a positive story. The company grew revenue 79% year over year in its 2021 third quarter, helped by a 95% increase in subscriptions, bringing the customer base to 551,000 strong. Roughly 88% of paying customers are still ordering by year three of being on the platform, so this shows that patients are sticking around. I think this can alleviate some of the concerns about competition; it's a vast industry with much room for winners.
Unlike the other stocks on this list, Hims & Hers isn't only on a pullback -- it's flat-out cheap. Shares trade at a P/S ratio of just under 5, despite growing its revenue by 79% in its most recent quarter. If Hims & Hers can continue to post strong growth, investors may begin to trade the stock at a higher valuation as competition concerns go away. The stock's market cap of $1.2 billion leaves a lot of room for great returns if Hims & Hers can make its mark on the massive healthcare industry.
