The Nasdaq 100 market index, which features many of the largest technology companies in the world, is currently down 13% for the year. It's only February, so the magnitude of that decline has some investors concerned, especially since many individual tech stocks have been plunged into bear market territory, losing 20% (or more) of their value.
But history highlights the benefits of taking a long-term approach for the best investment results. After all, over the last 10 years, the Nasdaq 100 has returned 4,515%. In other words, a $10,000 investment in February 2012 would be worth $451,500 today.
For that reason, the recent decline might be an opportunity to buy these three stocks at a discount, with a focus on holding for the next decade (or longer).
Image source: Getty Images.
1. The case for GoPro
Action-camera market leader GoPro (GPRO 1.17%) is no stranger to stock market turmoil. Shortly after listing publicly in 2014, its stock reached an all-time high of $93.85, and has since endured a slow, painful decline of 90% to the $8.75 per share it trades at today.
Investors were concerned about its one-dimensional business model, with competition looming in the camera industry and limited opportunities for expansion into new verticals. But GoPro has turned things around by building a brand-new subscription business, and by streamlining its sales channels to now sell 34% of its products direct-to-consumer, cutting out large retailers and keeping more of the profits for itself.
At the end of 2021, the company had 1.576 million GoPro.com subscribers paying $49.99 per year for exclusive product discounts, unlimited cloud storage, and the ability to livestream directly from their GoPro cameras. It represented 107% growth compared to 2020, and the company could earn over $78 million in revenue from subscriptions this year.
But the most important metric is GoPro's consistent profitability. It delivered $0.90 in earnings per share in 2021, and analysts expect that to grow to $0.94 in 2022, and $1.12 in 2023. Considering its stock trades at a price-to-earnings multiple of just 9.7, it's no surprise Wall Street investment bank JPMorgan Chase thinks it could soar 71% from here.
Image source: Getty Images.
2. The case for Latch
Latch (LTCH -1.30%) is a high-tech security company focused on new apartment buildings and commercial buildings, but it also offers products designed to be retrofitted to older, existing structures. The company's Smart Access technology allows the user to unlock their doors through its smartphone app or through a key code, and it has building managers rethinking their approach to guest management.
Latch is cementing its position in the industry, with three out of every 10 new apartments using its products. But in addition to selling security hardware, the company has built a software-as-a-service business, which allows it to earn recurring revenue from its intercom and smart home systems. These products help residents control in-home comforts like lighting and temperature, plus the flow of guests and deliveries even when they're not home.
When Latch reports its fourth-quarter 2021 results on Feb. 24, it expects to have $360 million in total bookings, which should convert to revenue once its customers complete the construction of their projects. Analysts expect revenue to really begin ramping up in 2022 as those bookings are realized.
|
Metric |
2021 (Guidance) |
2022 (Estimate) |
Growth |
|---|---|---|---|
|
Revenue |
$40 million |
$148 million |
270% |
Data sources: Latch and Yahoo! Finance.
Latch stock has tumbled 66% from its all-time high price of $17.30, and since it's not a profitable company yet, it does carry some risk. But its meteoric growth is undeniable, and could eventually result in earnings per share in the next few years for patient investors.
Image source: Getty Images.
3. The case for DocuSign
DocuSign (DOCU -0.26%) is the world's leading e-signature company, but over time, it has evolved into so much more than that. It's leveraging exciting new technologies like artificial intelligence (AI) to build new digital-document products, making the company an essential part of the new economy, in which many companies are incorporating remote working arrangements for their employees.
The company's Insight platform uses AI to scan contracts, flagging clauses that might be of interest to the user, from either a risk or opportunity perspective. Companies that handle a high volume of legal paperwork tend to incur significant costs to retain lawyers, and as the Insight tool becomes more advanced over time, it could cut those budgets down materially.
But that's just one of many tools DocuSign offers. Its Agreement Cloud consists of a suite of applications designed to prepare, sign, and manage contracts on an entirely remote basis. Its comprehensive Negotiate for Salesforce tool allows parties to digitally collaborate on a contract document with the ability to make edits and amendments throughout the process.
The pandemic was a major catalyst for DocuSign, helping it to grow its paying user base from 477,000 in January 2019 to over 1.1 million today. Analysts expect the company to have generated $2.09 billion in revenue for fiscal 2022 when it reports its full-year results in March, which would represent 39% growth compared to fiscal 2021.
But most notable is DocuSign's soaring profitability on an adjusted basis, from $0.31 per share in fiscal 2020 to $0.90 in fiscal 2021, and an estimated $1.98 in fiscal 2022. With its stock down 61% from its all-time high, the tech sell-off might be a great time to build a position.
