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Market Sell-Off: 2 Tech Stocks to Buy Right Now

By Anthony Di Pizio – Dec 19, 2021 at 8:15AM

Key Points

  • DocuSign's stock price is down, but it's now consistently profitable and growing its product line.
  • Redfin has just 1.16% share of the U.S. real estate sales market, but it could have a dominant position in the future.

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Short-term market volatility might be the opportunity investors have been waiting for to buy high-growth tech stocks.

The technology-centric Nasdaq 100 index was down almost 3% last week, as the omicron coronavirus variant continues to spark fear of economic turmoil. It's still too early to tell whether it will have a lasting impact, but since many stocks were near all-time highs recently, investors have taken the opportunity to cash in some gains. 

As the pandemic persists, new variants are likely to be a common occurrence. But given that most of the U.S. economy has managed to reopen and operate despite the virus, life should eventually return to normal. For investors, that points toward taking a long-term approach and looking beyond the short-term market noise. 

A lawyer signing a digital tablet with a lady of justice statue on the desk.

Image source: Getty Images.

This latest market sell-off presents a great opportunity to buy stocks that have recently seen a selloff. One possibility is digital signature leader DocuSign (DOCU 0.47%), which is shifting focus to advanced technologies like artificial intelligence. Another is real estate innovator Redfin (RDFN 3.69%), which stands to snatch a greater share of total U.S. home sales. Let's find out more about why these two tech stocks are good buys right now.

1. The case for DocuSign

DocuSign is one of the technology companies that drew significant benefits from the stay-at-home economy triggered by the pandemic. While office life is slowly making a comeback, some companies like major consulting firm PricewaterhouseCoopers have announced that the majority of their employees can work remotely on a permanent basis. 

DocuSign is the leader in digital signature technology with over 1.1 million paying customers, but it has leveraged its recent tailwinds to invest in its business to expand its product offering. Even though remote work is likely to be more common going forward, the company knows it must innovate to maintain its growth in revenue and users. 

Take its DocuSign Insight platform, for example. It applies artificial intelligence that can read and analyze contracts to identify potentially harmful clauses or even opportunities. For organizations that receive and issue large volumes of legal paperwork, this technology could save significant amounts of money by replacing some costly lawyer hours. 

In fiscal 2019, DocuSign generated $701 million in revenue for the full year. In the current fiscal 2022 year, analysts predict the company will generate $2.09 billion in revenue. So in just three years, sales are on track to almost triple. But perhaps more significant is the fact that DocuSign is now consistently profitable; in fiscal 2021 it earned $0.90 per share on a non-GAAP basis, which excludes one-off costs, and in fiscal 2022 it's expected to grow that metric by 120% to $1.98 per share. 

DocuSign is trending in the right direction financially, and also with the technology it's developing. Considering its stock price is down 41% in just the last month on concerns of slowing growth (and a broader tech sell-off), now might be the time to pounce with the long term in mind. 

A smiling couple that just moved into a new home, looking at a tablet device while sitting on the stairs.

Image source: Getty Images.

2. The case for Redfin

The U.S. real estate market is on fire. In 2020 -- the pandemic year -- it added over $2.5 trillion in value, bringing the total housing market size to over $36 trillion. In 2021 so far, the House Price Index published by the St. Louis Federal Reserve is up a further 11.3%. This growth is driven by a combination of low interest rates and a shortage of family homes, but whatever the reasons, higher home prices means more commissions for realtors.

Selling a home can be time consuming, expensive, and outright daunting, so that's why most people hire a professional. But thanks to Redfin, 2.5% listing fees are a thing of the past. The company has built scale through its army of employed real estate agents, and it's able to charge just 1% instead, saving its customers over $1 billion to date. 

Naturally, the reduced commission is a major draw for willing sellers, yet despite Redfin's rapid growth, it represents just 1.16% of all U.S. home sales. Put simply, in a market that's over $36 trillion in size, there's an enormous opportunity in front of this company.

Redfin delivered $486.9 million in revenue during 2018, and it's on track to more than triple that by the end of 2021, to $1.88 billion. Innovation has been key, with the company building a small but effective iBuying segment, where it acquires homes directly from sellers and flips them for a profit. iBuying made up 44% of Redfin's revenue in the recent third quarter, but the largest player in the iBuying space -- Zillow Group -- has dropped out of this business after making large losses, so the door is open for Redfin to selectively capture more opportunities. 

So far, iBuying is a breakeven business for Redfin, with most of its gross profit coming from broking instead. However, if it can grow the segment with a focus on quality home purchases, it has a chance to capitalize on the misfortune of Zillow -- which still has a market valuation more than triple that of Redfin's, by the way. 

The real estate sales industry is primed for disruption after decades of operating under the status quo, and Redfin is in a great position to deliver for consumers. 

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool owns and recommends DocuSign, Redfin, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool recommends Nasdaq and recommends the following options: short February 2022 $65 puts on Redfin. The Motley Fool has a disclosure policy.

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