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2 Surefire Stocks That Are Screaming Buys in December

By Keithen Drury – Dec 15, 2021 at 3:25AM

Key Points

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While 2021 hasn't been kind to these stocks, each business is still executing.

Before investors flip the calendar to 2022, they should look for stocks that can be picked up at a discount. Some investors sell losing stocks during December to capture losses for their tax returns. This selling pressure can push beaten-down stocks lower, giving long-term investors a buying opportunity.

Two stocks that have lost money during 2021, but are surefire long-term bets, are Match Group (MTCH 2.07%) and Okta (OKTA 2.25%). Each operates in massive industries and has seen 2021 growth despite losing value.

Person using a dating app on a mobile device.

Image source: Getty Images.

1. Match Group

Online dating has become one of the most common ways for couples to meet. In 2019, the popular wedding planning website The Knot found 22% of spouses met online. With a growing cohort meeting this way, Match Group stands to benefit from brands in its dating app portfolio like Tinder, Plenty of Fish, and OurTime.

Aside from being down more than 10% in 2021, Match Group has been executing well. It grew revenue 25% year over year during its third quarter to $802 million. Paying customers increased 16% to 16.3 million, and revenue per payer (RPP) was up 8% to $16.06. An exciting catalyst for Match Group is that its highest RPP region is Asia-Pacific at $17.71; the region also grew revenue the fastest at 59% compared to Europe and the Americas.

About 72% of smartphones use the Android operating system worldwide, making Alphabet's Google Play store the largest app marketplace. Google's original policy was to take 30% of payments processed through apps downloaded through its store. In October, Google announced it was cutting fees to 15%, unlocking an additional $0.15 for every dollar spent on Match's apps.

Match Group trades at a hefty 54 times forward earnings but earns that multiple by being the best operator in this space. Competitor Bumble grew revenue at a slower Q3 rate and brought in much less revenue overall. 2022 is shaping up to be a good year for Match, and investors should consider scooping up some of its stock before December ends.

2. Okta

Okta operates in the cybersecurity space with its leading access management platform. Its software regulates who can access what sections of a business network at the right time. Having identity security is critical as Okta estimates it reduces security breach risks by 75%, potentially saving $3.8 million -- the average cost of a data breach.

More than 14,000 organizations trust Okta for their access management needs, including massive brands like Major League Baseball, Nasdaq, and T-Mobile. Unsurprisingly, Okta has been growing its revenue rapidly. From FY19 to FY22 estimates, it has grown its revenue by 47% annually. More recently, its third-quarter ending Oct. 31 saw revenue increase 61% and remaining performance obligations (RPO) grow 49% to $2.4 billion. International growth made up 21% of total revenue and increased at a 114% clip. Accelerating already impressive revenue growth is a key investment checkpoint.

Despite Okta's growth, its stock has also lost more than 10% throughout 2021. Similar to many tech stocks, its valuation has taken a hit as well.

OKTA PS Ratio Chart

OKTA PS Ratio data by YCharts

Okta is nearing its pre-COVID valuation levels, signaling it has returned to a normal level. Still, a 27 price-to-sales (P/S) ratio isn't cheap. However, investors must realize they will have to pay up for best in class, a title Forrester has bestowed upon Okta in the enterprise identity-as-a-service category.

The total addressable market approximated by Okta is $80 billion, leaving a huge revenue chunk still to be captured. Okta is targeting revenue of $4 billion in FY26 -- ending Jan. 31, 2026 -- and free cash flow (FCF) margins of 20%. For reference, Okta's Q3 FCF margin was 10% -- allowing Okta to fund itself without outside capital -- and trailing-12-month revenue was $1.2 billion.

The pandemic has changed how and where employees work, and many companies have obliged when employees requested freedom to continue choosing where they work. Now that employees must be able to access the company network from any location, identity management becomes even more critical. This transition will be a driving force behind Okta's growth for 2022 and beyond.

Both Match Group and Okta have had a rough 2021. Some impatient investors may be dumping these stocks or harvesting losses to offset gains. Either way, December presents a great buying opportunity for both stocks. With impressive tailwinds and strong execution, Match Group and Okta have huge potential in front of them. Investors may want to consider buying their shares before 2022 arrives.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Keithen Drury owns Alphabet (C shares) and Match Group. The Motley Fool owns and recommends Alphabet (A shares), Alphabet (C shares), Match Group, and Okta. The Motley Fool recommends Bumble Inc., Nasdaq, and T-Mobile US. The Motley Fool has a disclosure policy.

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