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3 Favorite Growth Stocks for 2022

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2021 was a tough year for growth stocks, but many now trade on the cheap.

After enduring a year's worth of abuse, many growth stocks are now trading for an incredible long-term value. First there was the worry of a post-pandemic slowdown for tech, now higher interest rates and inflation fears are taking their toll -- but for top companies, neither negative situation will bring an end to the growth trend that they're riding higher.

As 2022 approaches, three contributors share some of their favorite growth stocks for the new year: Zoom Video Communications (ZM 2.50%), Coinbase Global (COIN 5.32%), and Amazon (AMZN 1.26%).

Two people reviewing paperwork in front of a laptop.

Image source: Getty Images.

The most obvious long-term bargain around?

Nicholas Rossolillo (Zoom): All fast-growing stocks inevitably take their lumps. Take a look at any of today's top tech giants, and you'll see many periods of steep double-digit percentage sell-offs.

Despite becoming a household name over the course of a year, Zoom is in just such a pullback right now. Shares are 70% down from their all-time highs posted over a year ago. Granted, enthusiasm had gotten way out of hand in 2020 when Zoom was an indispensable tool during lockdowns. But now the current has changed, and we could be at or near the low tide mark.  

I realize that a lot of investors have been burned as Zoom has done nothing but tumble for what has now felt like an eternity. But hear me out. The company is still growing sales at a double-digit percentage pace, and it's wildly profitable -- adding over $1.5 billion in cash to its balance sheet on an annualized basis last quarter. And speaking of cash, Zoom has nearly 10% of its current $58 billion market cap in cash and short-term investments on balance at the bank. As the cloud-based video communications movement starts to refocus on enterprise use (Zoom Phone, Zoom Engagement Center, and other new use cases to replace legacy big business telecom services), Zoom has ample ability to spend on growth initiatives or to make acquisitions.

Trading for just 32 times trailing-12-month free cash flow-to-enterprise value, Zoom looks more like a value stock than it does a growth stock. Enduring vicious drawdowns like this is often the name of the game, but if this company's momentum continues into 2022, sooner or later shares will find a bottom and start rising again. I'm adding to my position as I ride out the Zoom storm.

The ultimate low-risk cryptocurrency investment

Anders Bylund (Coinbase): Cryptocurrency trading specialist Coinbase Global (COIN 5.32%) is my go-to recommendation for anyone who wants to invest in the newfangled digital assets market without picking individual cryptocurrencies.

If current market leaders Bitcoin (BTC 0.13%) and Ethereum (ETH 0.35%) hold on to their market dominance for years to come while the market itself expands, that's a big win for Coinbase. If other blockchain tokens kick Ethereum and Bitcoin off their thrones in 2022 or 2030, Coinbase doesn't really mind -- as long as the trading activity in cryptocurrencies generally continues to rise.

And the company is actively staying on top of upcoming trends in the cryptocurrency sector. Coinbase started investing in non-fungible token (NFT) specialists way back in 2018, for example, and is preparing to launch an NFT service in the near future. This service might be a bit different from other NFT platforms.

"We'd like to make the Coinbase NFT a little bit more like Instagram as opposed to, say, an auction like eBay or something like that," CEO Brian Armstrong said on November's third-quarter earnings call. He continued: 

I think having people that you can follow, your favorite artists or creators, and having a feed of content that is populated from those people you follow, that could be really powerful. And in addition, you can go in there and buy an NFT if you really like it and showcase in your own social profile. In addition to that, I think we can just make NFTs much easier to use. That's kind of a hallmark of what Coinbase tries to do out there to bring more and more people into the crypto space.

So I'm convinced that Coinbase should be able to stay relevant and profitable in nearly any market environment, as long as cryptocurrencies and blockchain protocols are here to stay. The only reason I don't own any Coinbase shares myself is because of the Motley Fool disclosure rules, which often won't let me touch various stocks -- including Coinbase today.

But those trading restrictions don't apply to you, dear reader, and this looks like a fantastic time to pick up some Coinbase shares. The stock is down 28% over the last month due to massive volatility in the cryptocurrency market -- which only boosts trading volumes, and that's good news for this company. I really would have bought some Coinbase stock today, if I only could.

The worst-performing FAANG stock of 2021 could be the best in 2022

Billy Duberstein (Amazon): As far as stocks go, Amazon has probably been the most boring one this year. After quickly doubling in the early days of the pandemic, the stock has flatlined for basically a year and a half. That made it the most underwhelming large-cap tech stock of 2021. 

AMZN Chart

AMZN data by YCharts.

You can probably chalk up the malaise to Amazon's e-commerce business, which makes up an outsized portion of revenue. While that business boomed during the pandemic, growth has rapidly decelerated as the economy reopened in the second and third quarters. Last quarter, online stores saw only 3% revenue growth and third-party sellers saw 18% growth, far below the 37% and 53% respective growth in the prior-year quarter during the height of the pandemic. Meanwhile, supply chain disruptions and labor shortages have caused Amazon's costs to skyrocket. So its e-commerce business is suffering from lower revenue growth and higher costs -- not a great combination.

However, while e-commerce makes up the vast majority of its revenue, its two most profitable businesses are Amazon Web Services (AWS) and digital advertising, which falls under the "other" category in its financial statements. This year, those two segments actually accelerated their growth. Yet because Amazon's e-commerce business has underperformed, the company's overall top line may have disappointed investors looking at that one crude number. 

I'd expect another year of strong growth for both AWS and digital ads in 2022, as the shift to cloud computing shows no signs of slowing, and digital ads continue to take share from traditional channels in a strong economy. Meanwhile, Amazon's e-commerce business will now have easier "comps" next year, and the company will have had more time to get its exploding costs under control.

As the worst-performing FAANG stock over the past year, I can easily see Amazon flipping the script in 2022.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anders Bylund owns Amazon, Bitcoin, and Ethereum. Billy Duberstein owns Amazon, Bitcoin, and Ethereum. His clients may own the companies or cryptocurrencies mentioned. Nicholas Rossolillo owns Bitcoin, Ethereum, and Zoom Video Communications. His clients may own the companies or cryptocurrencies mentioned. The Motley Fool owns and recommends Amazon, Bitcoin, Coinbase Global, Inc., Ethereum, and Zoom Video Communications. The Motley Fool recommends eBay and recommends the following options: long January 2022 $1,920 calls on Amazon, short January 2022 $1,940 calls on Amazon, and short January 2022 $82.50 calls on eBay. The Motley Fool has a disclosure policy.

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