While some companies took a step back during 2021 because of COVID-19-related boosts subsiding, others succeeded in expanding with many customers established during the pandemic. With 2021 in the books, investors have a chance to reflect on how each business did as well as examine how the business is shaping up for 2022.
Three stocks with fantastic 2021 earnings and strong 2022 potential are MercadoLibre (MELI -1.98%), Datadog (DDOG 1.19%), and Procore (PCOR -0.04%). Adding to this trio's allure is their stock price. Each is off significantly from its all-time high and Wall Street analysts have price targets above where the stocks are trading. If you're looking for stocks with strong market-beating potential, these companies are poised to do it.
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MercadoLibre
With an average price target (i.e. the midrange of the projection) of $1578, MercadoLibre has an implied upside of around 40%. The Latin American e-commerce giant had a successful 2021, with 82.2 million unique active users spread across 18 countries. The company showcased strength across the board during the quarter.
Its fintech division grew its revenue a currency-neutral (FX) 81% during the fourth quarter, resulting in $773 million in revenue, making up 37% of its total. Its commerce business -- including its e-commerce platform and shipping division -- generated $1.36 billion and grew at a 67% clip. Overall, the business grew revenue at 74% with a net loss margin of 2.2%.
Management doesn't give forward-looking guidance, but it did say it would continue investing in the business to capture the addressable market. This won't lead to profits in the near term but will set the business up for success in the future.
In addition to being down from its high, MercadoLibre's price-to-sales ratio of 8 is lower than it has been at any time over the last five years. When a company's valuation is slashed, it typically means the market isn't confident in its future prospects. However, MercadoLibre's future is bright and investors should take advantage of the sale price.
Datadog
Many cloud software solutions give companies greater business insight and increase employee productivity. However, understanding how each piece of technology interacts with the other can be difficult. Datadog's software lets IT teams understand how these programs are functioning together and automate some of the troubleshooting processes using artificial intelligence (AI).
With countless companies adopting tech solutions during 2020 to facilitate working from home, Datadog had a huge boost in 2021 when IT teams realized they needed a solution to manage everything. In 2021, revenue was up 70% to $1.03 billion and converted 24% of its revenue into free cash flow. While 2021 was strong, 2022 is looking just as good. Management guided 48% sales growth to $1.52 billion with about the same operating margin as 2021 because of business reinvestment.
Datadog only has 216 customers spending $1 million or more per year, leaving plenty of expansion room across its 2,010 customers spending $100,000 or more. These tech solutions aren't going away and Datadog will be needed to oversee how each one works together. Wall Street analysts believe Datadog's stock has 33% upside, investors who hold on to the stock for longer will likely see higher returns.
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Procore
Procore's construction management software links all project stakeholders together. It creates a single point of truth where engineers, contractors, and project owners can access the most updated information. By facilitating better interaction, Procore can help reduce some of the $500 billion in construction rework caused by poor data and communication worldwide.
About half the size of Datadog, Procore brought in $146 million during the quarter and $515 million during 2021. It grew at a 29% clip for the full year, which is basically the same as management's 2022 guidance at 28% to 29% growth.
Procore's software is best in class and JBKnowledge named it 2021's top project management software. Additonally, G2 found 97% of users rated it four or five stars out of five and 92% recommend Procore. With great user enthusiasm, Procore's software does a good job of selling itself.
Of the three companies, Wall Street sees the most upside with Procore's stock 45% away from its average price target. Procore has vital software in an important industry, investors should take note before the stock takes off.
Each company has great expansion opportunities ahead that the stock prices aren't factoring in. With current market sentiment against tech stocks, these companies have been heavily sold off. Growth investors with an appetite for risk should consider purchasing this trio for the next three to five years. By getting in now, you can lock in a low price for rapidly growing businesses that should produce solid returns over a long holding period.
