2021 has been a volatile year for growth stocks, with many seeing stock price pullbacks that were not necessarily a result of how well or poorly the businesses were performing. As we head into a new year, there are three companies that took a stock price hit in 2021 but are poised for a bull run.
Let's dig in and see why these three growth stocks should be on your radar.
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1. Zoom Video Communications
Zoom Video Communications (ZM -1.38%) jumped into the investing spotlight nearly two years ago because of its video conferencing software that has allowed people to connect during the pandemic. After seeing parabolic growth in 2020, both its rate of growth and its share price have come back to earth. However, it would be a mistake to label Zoom a "pandemic stock" and write off its future potential.
Zoom is still acquiring customers and increasing its revenue, albeit not at the pace investors had become accustomed to. In the third quarter, revenue increased 35% year over year and net income rose from $192 million to $291 million. Customers contributing more than $100,000 in revenue increased 94%, and customers with more than 10 employees grew 18%. Taken without the context of what came before, these would be considered strong growth numbers.
Zoom is also actively seeking to expand its product offerings, with an emphasis in the near term on Zoom Phone, a hardware device for enterprise customers looking to overhaul their legacy phone systems. Management stated Zoom Phone had triple-digit percentage revenue growth year over year in the third quarter. Investors can expect more innovation from Zoom, as it has $5.4 billion in cash and marketable securities on the balance sheet that it can use to continue to invest in the business.
2. Boston Omaha
Boston Omaha (BOC 2.27%) is a holding company that mainly owns businesses in the billboard, broadband, and insurance space. Although it may be premature, it's easy to make comparisons to Berkshire Hathaway's business model. While it's not the flashiest of growth stocks, this year should see one important investment come to fruition.
In September of 2020, Boston Omaha sponsored a Special Purpose Acquisition Company (SPAC), which is essentially a public company with no actual business other than to find a private company to acquire and take public. This SPAC, Yellowstone Acquisition (YSAC), has identified its target and should complete the acquisition in 2022. Once this happens, Sky Harbour, a private aviation infrastructure company, will be a publicly traded company with Boston Omaha holding a portion of the shares.
Obviously, the outcome of this investment for Boston Omaha will depend on the newly formed public company's success. However, Boston Omaha has a track record that should instill confidence in shareholders. In its annual letter, management stated that their investment in newly public company Dream Finder Homes, which began as a $10 million investment in 2018 while the company was still private, is now worth $100 million.
3. Asana
Asana (ASAN -2.90%) provides work-collaboration software to individuals and businesses of all sizes, and its success as a public company speaks for itself. As of the time of this writing, Asana shares are up 269% since its debut through a direct listing in late September 2020, handily beating the S&P 500's 43% return over the same timeframe. However, after getting caught up in the tech sector's 2021 sell-off, the company is poised for a bull run in 2022.
In Q3, Asana posted year-over-year revenue growth of 70% while improving its gross margin to a record 91%. Even more impressively, this has come with a slow march toward profitability. In Q3 Asana's net loss was $69 million, a small improvement from the year prior when the net loss was $73 million.
Asana is also growing its largest customers and seeing its existing customers spend more. In Q3, customers spending over $5,000 grew 96%, while customers spending over $50,000 increased 132%. These same cohorts also had a dollar-based net retention rate -- a metric showing how much more a customer spends compared to the prior year -- of 130% and 145% respectively.
