While the broader market surged, the last few months of 2021 weren't kind to growth stock investors. That negative trend accelerated in the first trading week of the new year. The tech-heavy Nasdaq started 2022 with a 5% dive, and many Wall Street favorites fell even harder.
These declines were sparked by worries about stretched valuations, slowing growth, and a financial drag from rising interest rates. But there are some companies that are much better positioned to navigate these challenges than others. With that in mind, let's look at why you might want to consider adding Netflix (NFLX -9.09%) and Garmin (GRMN -0.85%) to your watch list for 2022.
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1. Netflix doesn't need to borrow
Netflix stock is down over 10% in the last three months while the broader market has gained 6%. The streaming video giant is well below the all-time highs it set of nearly $700 per share back in late November.
Investors shouldn't ignore that price cut.
Yes, Netflix is on track to add fewer subscribers this fiscal year compared to booming results in 2020. But management is still projecting over 8 million additions in the fourth quarter thanks to a flood of exclusive TV and film releases. Executives back in October described the schedule as "our strongest Q4 content offering yet," packed with new movies like Don't Look Up and returning franchises like The Witcher and Cobra Kai.
While a surprisingly strong finish to fiscal 2021 might quickly energize Netflix stock, bigger-picture trends are even brighter. The company is enjoying soaring profitability, with operating margin headed toward 25% of sales. And its positive cash flow position insulates it from any sharp rise in interest rates. Netflix's next earnings report is set for Jan. 20, and these financial wins will likely be obvious in that announcement.
2. Garmin sees far ahead
Garmin will announce its fiscal Q4 results in mid-February, but investors don't have to wait until then to snap up shares of this underperforming, yet impressive, stock. The tech producer's last operating update contained all the great news that shareholders have been seeing for several years now.
Sales trends were strong across its wide portfolio that spans smartwatches, fitness trackers, and aviation and marine navigation devices. Sales are up 27% in the three months ended in late September, in fact, and earnings have jumped 25%.
Garmin likely had a good finish to its 2021 year thanks to solid demand and just modest supply chain issues. But investors have more to look forward to in the years to come. Garmin has a chance to boost its profit margin to a market-trouncing 25% of sales with help from rising prices overall and a tilt toward premium products like aviation platforms. It's an attractive way for growth investors to gain access to the wearables space, too.
Despite that bright future, the tech specialist's stock has fallen in the last three months even as the wider market moved higher. Now might be the right time to capitalize on that weakness if you're happy to endure some volatility on the way toward market-beating investor returns.
