The stock market has been brutal in 2022, and many investors who own tech and growth stocks have had a rough past three months. Established businesses are getting hammered, including industry leaders like Coinbase (COIN -7.68%) and Doximity (DOCS 1.89%).
Coinbase and Doximity are 50% and 58% off their all-time highs, respectively. But despite these falls, the companies are stronger than ever. Coinbase -- which IPOed in April 2021 -- got caught up in the cryptocurrency rise, and now that the market is falling, the company is crashing along with it. Doximity, another 2021 IPO, had a rapid rise because of its newness to the public markets, but despite strong financial results as a public company, the hype faded as newer companies went public.
However, both of these businesses are still executing, which is why you might want to consider adding these two growth stocks to your portfolio while they are cheap.
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The normalized cryptocurrency investment
Coinbase is one of the leading cryptocurrency trading platforms, with over 73 million active users on the platform. It has grown into this position because it has developed an easy-to-use platform that anyone can use while still being secure. Other crypto platforms like Gemini and eToro, while very secure, do not make it as easy for the average person to buy and sell crypto. Coinbase keeps its app simple so that investors new to crypto can easily understand and learn about the industry.
With every trade made on the platform, Coinbase takes a cut off the top, so as the top trading destination, the company has exploded in line with crypto activity. In the company's third quarter -- which ended September 30, 2021 -- revenue grew 330% to $1.2 billion, and net income also skyrocketed 400% to $406 million.
However, while its business model has been very successful so far, that could change if the crypto economy slows down and fewer transactions are made. When the price of Bitcoin (CRYPTO: BTC), for example, sinks and fewer investors trade it, Coinbase's revenue will follow suit. Additionally, the crypto market could potentially travel a path similar to other stock trading platforms and get rid of fees per transaction. Many stockbrokers now allow commission-free trades, and if the crypto market moves that way too, Coinbase would have to find a new revenue stream.
These risks are certainly ones investors should consider, but these aren't deal-breakers. While the crypto market might go commission-free eventually, the industry is still in its early stages, and it will likely be a long time before this takes place. Moreover, Coinbase is looking to expand into the non-fungible token (NFT) marketplace. NFTs are in their infancy, and the company's business model could thrive there.
The company trades at 16 times earnings -- a rock-bottom multiple for any stock, especially one that grew its top line at triple-digit rates in Q3. With valuations now at extremely appealing levels, it might be time to consider adding this top dog to your portfolio.
A niche social media leader
Like Coinbase, Doximity is also a dominant platform in its industry. The company provides an app that allows healthcare professionals to do nearly everything they need to work and better their careers. The app has a telehealth service, secure messaging for doctors to communicate with patients and colleagues, and a personalized newsfeed with information on the newest practices and innovative drugs. Doximity's app also has a career page where medical students and professionals can network to find job opportunities. As a result of this all-in-one app, Doximity has become one of the largest platforms for healthcare professionals, having over 1.8 million medical workers on its platform.
Most of the company's revenue comes from advertisements from drug makers looking to commercialize their products, and considering that doctors dictate where 73% of the $4 trillion in U.S. healthcare spending goes each year, advertising to doctors is extremely valuable for Doximity's customers. As the dominant app with 80% of U.S. physicians on the platform, Doximity has become the go-to advertising spot for these drug makers to get in front of the biggest number of eyes, and this has resulted in incredible success. In the most recent quarter ending Sept. 30, 2021, the company brought in revenue of $79 million -- which translates to growth of 76% year-over-year -- and $36 million of that was net income.
The company is priced at 31 times sales -- a high multiple, especially when considering how many stocks have been crushed recently -- so the stock could potentially continue to see immense volatility. However, with such a dominant lead in this industry and a user base that finds its platform incredibly valuable, this stock might be one worth paying up for if you're looking to hold it for the next decade.
