The recent market sell-off has been painful for investors. The S&P 500 is down 8% year to date, and many growth stocks have tumbled even farther. Long-term investors know that market drops are the price of admission for the upside investing in stocks can provide over many years, but that doesn't make it any less painful to experience.
Many companies that have seen their stock prices fall are still strong businesses that should reward investors over time, and now their shares can be purchased for a steep discount. Let's take a look at two stocks I think are no-brainers to own, each trading for less than $85 per share.
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1. Pinterest
Pinterest (PINS -0.64%) has a unique position in the world of social media companies. Users come to Pinterest to be inspired for whatever interest or project they might be searching for. Pinterest hopes to grow this user base and ultimately monetize it. In its recently reported fourth quarter, the company posted results showing that this plan is working.
While Pinterest's monthly average users declined 6% year over year, that was bound to happen as 2020 saw a huge pull-forward of activity while users were locked down due to the pandemic. The good news was that the average revenue per user (ARPU) was up 36% for the year, ending at $5.79. More importantly, international ARPU increased 80%. International users only accounted for 22% of revenue in 2021, so this is an important growth opportunity.
In Q4, revenue increased 20% year over year, and while net income decreased, adjusted net income (which removes the impact of a few one-time expenses) increased 15%. At the time of this writing, Pinterest's share price is around $26, and it trades for seven times trailing sales, a multiple similar to what it was in the spring of 2020. A quality business like Pinterest is very attractive at this price.
2. The Trade Desk
The Trade Desk (TTD -0.54%) is the leader in buy-side advertising. The company helps buyers of advertisements do so in the most effective manner. At one point in 2021, The Trade Desk's shares reached over $100, but today it trades for under $85, down more than 27% from its high. Despite the share price fall, the company has been achieving impressive results.
Revenue in Q4 2021 reached $396 million, good for a 24% increase year over year. This growth was impacted by the fact that the comparable quarter in 2020 included the increased ad spending from the U.S. presidential election. Without that income in Q4 of 2020, the year-over-year growth would have been 36%.
One trend investors are watching with The Trade Desk is the increased importance of connected TV (CTV) advertising. While management didn't give specific numbers, they did share that CTV led growth by a wide margin. Management also pointed out that CTV spending in the EMEA international region is still only a fraction of what it is in North America, signifying the growth opportunity that exists there.
The Trade Desk has a price-to-sales multiple of 34, which isn't cheap. However, in January of 2021, this multiple was over 60, and it rarely has been below 30 in the time since the pandemic crash of March 2020. Investors should expect to pay a premium for the leader in its space.
The bottom line for investors
Both of these companies were worth buying even when their share prices were higher due to their track records of success and the opportunities ahead of them. With both companies selling at steep discounts, now is a great time to add these no-brainer stocks to your portfolio.
