Many of the high-growth stocks that soared in early 2021 are in freefall this year. It might not feel like it at the moment, but this is great news for investors who take the long view.
Now isn't the time to shy away from stocks backed up by highly successful businesses and these are some of the most successful new companies you'll find anywhere. Here's why buying more shares of these former highflyers at their recently depressed prices could do wonders for your portfolio's performance down the road.
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Global-E Online
Global-E Online (GLBE +1.23%) outperformed in early 2021, but the stock has fallen by more than half since reaching a peak last September. Wall Street analysts think it can bounce right back in 2022. The consensus price target for Global-E Online right now represents a 116% premium over the price it's been trading at recently.
Fear of rising interest rates is the reason shares of this cross-border e-commerce facilitator tumbled. Higher interest rates could raise Global-E Online's cost of capital, but the business appears strong enough to overcome the challenge. Third-quarter revenue soared 77% year over year to $59.1 million and it looks like the company's on the way to producing a sustainable profit. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) more than doubled year over year to $7.7 million.
Consumer electronics brands like Sennheiser, luxury goods manufacturers like LVMH, and individual sellers on Shopify are big fans of direct-to-consumer (D2C) sales models because they allow for closer relationships with customers. Without help from Global-E Online, though, few of these businesses have the means to sell their products directly to a global audience.
Global-E Online is still somewhat small on its own, but a partnership with Shopify is driving heaps of new small business owners into its arms. With DHL International as its exclusive international shipping partner, Global-E's clients quickly gain access to more international markets than they could ever hope to reach on their own.
PubMatic
PubMatic (PUBM +1.14%) shares peaked last February and they've been getting hammered ever since. Again, interest rates were to blame and not poor performance. In fact, a blowout third quarter persuaded investment bank analysts who follow this stock to raise their expectations. The consensus price target at the moment suggests a gain of around 117% could be ahead.
In a nutshell, PubMatic lets publishers and app developers with free ad space access online auctions with advertisers. At the end of September, PubMatic's three largest clients accounted for 58% of all accounts receivable but they must be satisfied. During the trailing 12 months ended Sept. 30, the company was able to boast a net dollar retention rate of 157%. This means ad space buyers are coming back and committing larger portions of their available budgets to PubMatic.
PubMatic isn't the only supply side advertising platform out there, but it's quickly becoming one of the larger players on a competitive field. Third-quarter revenue rose 54% year over year to $58 million and the company hasn't been slashing prices to wrestle advertising dollars from its competition. Management expects to report adjusted EBITDA for 2021 that works out to around 38% of revenue.
Lovesac
Shares of Lovesac (LOVE +1.50%) climbed in December after the company reported earnings for its fiscal third quarter ended Oct. 31. General fear of increasing interest rates, though, has already wiped out those gains and left the stock at a 52-week low.
Wall Street analysts who follow the stock market's favorite furniture builder expect a swift recovery. The average target for Lovesac stock right now represents a 129% premium over its recent price.
Excitement for Lovesac's future is easy to understand. The company's sofas are gaining popularity at a breakneck pace. Net sales during the nine months ended Oct. 31 soared 58% year over year to $302 million.
Sales of Lovesac's high-end sofas are outpacing all the expenses associated with producing them. During the first nine months of its fiscal year, Lovesac reported adjusted EBITDA that reached $23.6 million.
Investors can expect the company to remain profitable for the foreseeable future. Lovesac's main product is a highly customizable sectional sofa or Sactional. With interchangeable parts and removable upholstery that customers can only order from Lovesac, Sactionals might be the coziest cash cows of all time.
