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3 Cathie Wood Stocks That Could Soar in 2022

By Cory Renauer – Dec 28, 2021 at 6:37AM

Key Points

  • PayPal's exposure to underperforming buy now, pay later loans has had an outsized effect on this diversified fintech stock.
  • Demand for Zoom Video Communications is growing fast, albeit not at the same pace as during the height of COVID-19-related lockdowns.
  • DocuSign is another high-growth tech stock that recently fell hard in response to slackening coronavirus-related demand.

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These beaten-down growth stocks could stage a strong comeback for patient investors.

Has the internet's favorite stock picker lost her edge? Many of the high-growth tech stocks that made Cathie Wood famous tumbled in 2021.

The stock market is throwing a fit in response to the Federal Reserve's warning that there could be up to three interest rate rises in 2022. Investors will be happy to learn that the underlying businesses that made these stocks big winners in the past aren't necessarily sensitive to rising interest rates. Here's a closer look at why they have a chance to bounce back in 2022 and continue outperforming for the long run.

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1. PayPal Holdings

PayPal Holdings (PYPL 4.79%) shares are down about 38% from the peak they reached this July. Analysts on Wall Street who get paid to follow the fintech giant expect a swift recovery. The average price target for PayPal is 42% above the stock's recent price.

Shares of PayPal have been tumbling recently in response to buy now, pay later (BNPL) troubles that hammered its smaller payment processing peers. In recent months, investors are finding it harder to ignore the fact that underwriting loans to customers traditional banks won't touch might not be a terrific business model.

It's important to remember that PayPal has the top optionality in the fintech space. In the beginning, eBay (EBAY 0.21%) marketplace transactions used to be all this company did. The company processed payments totaling $310 billion in the third quarter, and only around $9 billion originated on eBay.

Venmo payments processed grew 36% year over year to $60 billion, and this revenue stream could accelerate. In 2022, Amazon customers will be able to check out using their Venmo accounts.

Unlike Affirm and similar BNPL start-ups that are still bleeding money, PayPal is a strongly profitable business that generated around $5 billion in free cash flow over the past year. That means PayPal can afford to be a lot more discerning about which customers are eligible for its BNPL service. 

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2. Zoom Video Communications

Zoom Video Communications (ZM -0.07%) shares peaked over a year ago. The company is earning heaps more now than it did a year ago, but shareholders aren't seeing the success in their portfolios.

Shares of Zoom fell by more than half in 2021, but the average analyst paid to follow the company thinks it can bounce back in 2022. The consensus price target at the moment suggests a 56% gain once the rest of the stock market sees the company's future in a positive light again.

The U.S. Food and Drug Administration's recent authorization of Pfizer's anti-coronavirus pill is good news for America, but not so great for Zoom's already stalling growth trajectory. Luckily, Zoom is already strongly profitable and will likely remain so once the pandemic finally ends.

The company's increasingly popular, cloud-based private phone network, Zoom Phone, makes it a lot easier for businesses to allow their employees to work remotely. Third-quarter Zoom Phone revenue grew by a triple-digit percentage compared to the previous-year period.

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3. DocuSign

DocuSign (DOCU -1.21%) shares recently tanked more than 40% overnight in response to a downward revision to the company's forward outlook. Analysts following this provider of digital agreement services may have lowered their expectations, but the stock is still 27% below its consensus price target.

DocuSign fell out of favor after reporting fiscal third-quarter billings that missed expectations. Instead of reaching a predicted range between $585 million and $597 million, third-quarter billings came in at just $565 million. 

Despite slightly lowered expectations, DocuSign has what it takes to bounce back in 2022 and continue performing for years to come. Recognized revenue soared 42% year over year to $545 million, and cash generated by operating activities jumped 84% to $104 million.

New business isn't beating a path to DocuSign's door as it did during the strictest pandemic-fueled lockdowns, but it doesn't look like customers are jumping to competing services either. Management was able to boast a net dollar retention rate of 121% during the third quarter.    

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns and recommends Affirm Holdings, Inc., Amazon, DocuSign, PayPal Holdings, and Zoom Video Communications. The Motley Fool recommends eBay and recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, 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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