As I pointed out just a few days ago, just because a stock's been badly beaten down doesn't inherently mean it's a buy. Sometimes the market knows exactly what it's doing.
There are those times, however, where the trading crowd loses sight of the bigger picture, too distracted by near-term noise that isn't all that flattering. This is seemingly what's happened with three great growth stocks of late. Here's a closer look at all three of these stocks, each of which is not only at or near new 52-week lows but also well below highs hit within the past year.
In retrospect, it can't be too surprising that Shopify shares(SHOP -1.16%) have tumbled from their November's peak near $1,763 to their current price of $660 with a big piece of the loss taking shape just last week. The stock soared to an unsustainable price in the midst of the pandemic when a swarm of consumers and companies were going online to shop when they couldn't do so at brick-and-mortar stores. (When the coronavirus contagion first made landfall in the United States, Shopify shares were only priced around $360 apiece.)
Last week's news that the e-commerce support outfit intends to spend heavily to expand its fulfillment capabilities merely exacerbated selling that was already in place. Investors were hoping profitability would continue to improve rather than be crimped from this point on.
Largely lost in the upheaval, however, is that these investments will pay off in a big way in the long run. Not that Shopify's growth translates into an existential crisis for online shopping venue Amazon.com or any other e-commerce platform, but it would be naive to believe Shopify's model isn't working.
The company already empowers millions of small and not-so-small businesses with the tools they need to build and control their own online selling platform. As the company adds subscription-based offerings to its customers -- merchant solutions revenue eclipsed the $1 billion market last quarter -- the ability to handle more logistics work stands to create an exaggerated fiscal benefit.
This evolution leads the analyst community to believe Shopify will see top-line growth of 31% this year, and more than 33% next year, when profit growth is expected to soar almost as much.
Catalent (CTLT -2.60%) isn't a household name. But there's a good chance you or someone in your household uses its products. The company is a contracted manufacturer of several different drugs as well as a variety of personal care items. Gene therapy and biologics are in its wheelhouse, but so are things as simple as beauty products and nutritional supplements.
Like Shopify, Catalent shares rallied for most of the pandemic. Also like Shopify though, the stock ultimately paid the price for what was clearly overzealous buying. Catalent shares are down more than 30% since September's peak, and getting comfortable below lows established last year. In fact, the stock's less than four dollars away from falling under the new 52-week low made just last month.
Don't be too intimidated by the apparent weakness, however, as it's more of a buying opportunity than a warning. The company's profit centers are numerous and varied. From over-the-counter chewables to drug trial support to making prescription capsules, Catalent can do it all for an industry that never slows down.
In this vein, analysts believe this year's likely 20% uptick in sales will push per-share earnings up from last year's $3.04 to $3.68. Not bad.
Finally, add social media name Pinterest (PINS 1.02%) to your list of growth stocks that have undeservedly plummeted in just the past few weeks. This ticker's down nearly 70% since the middle of last year -- and seemingly still sinking.
That's a somewhat understandable sell-off in light of similar weakness suffered by other social media names like Meta Platforms -- you know it better as Facebook -- and Twitter. Arguably growing too big to effectively control, social networking has turned too toxic for many of its consumers as well as many of its much-needed advertisers. Pinterest shares have been lumped into this group.
If anything though, Pinterest is a beneficiary of the brewing demise of social media's titans like Twitter and Facebook. See, weary of the never-ending political bickering, overwhelming news feeds, and increasingly picky engagement rules that have all become the norm of traditional social media, a wide swath of consumers are now looking for something simpler and more hospitable.
That's Pinterest to be sure. The site simply allows users to "pin" things that interest them to their personal page and then share these pins with a like-minded community. There's no real way of getting into a digital argument at pinterest.com.
This nuance hasn't made much of a difference to most investors since the middle of last year. With the company continuing to refine its product and platform though, investors are apt to take notice if and when it produces the 21% and 26% in sales growth analysts say is in the cards for this year and next year, respectively. Earnings growth shouldn't be too far behind that pace.