Stock Market Correction: These High-Growth Companies Are Screaming Buys

The stock market correction of 2022 has been particularly harsh on technology stocks, with the Nasdaq-100 Technology Sector index down roughly 19.9% so far this year.

Several technology stocks have seen bigger even declines than the broader index. Meta Platforms (META -10.56%) and Himax Technologies (HIMX) are two companies that have been battered badly so far this year.

^NDXT data by YCharts

The common link between these two companies, apart from their plunging stock prices, is that they are fast-growing businesses. As a result, the massive pullbacks in shares of Meta Platforms and Himax are opportunities for investors to buy companies with solid long-term growth potential at attractive valuations.

Let's look at the reasons why these tech companies could be prudent long-term bets right now.

Image source: Getty Images.

1. Meta Platforms

Meta Platforms stock lost over a quarter of its value following the release of its 2021 fourth-quarter results on Feb. 2. There were many reasons why investors pressed the panic button despite Meta's terrific revenue growth during the year.

The Facebook parent reported a 37% increase in revenue for 2021 to $118 billion, while earnings jumped 36% to $13.77 per share. Investors, however, took issue with the company's guidance, which calls for Q1 fiscal 2022 revenue between $27 billion and $29 billion, which would translate into year-over-year growth of just 3% to 11%.

Wall Street was looking for projections of $30 billion in revenue. But the impact of currency changes, tough year-over-year comparisons, and the changes made by Apple to its privacy policy are going to be headwinds for Meta. Apple introduced a feature in iOS 14.5 last year that allows users to prevent apps from tracking their online activity, and this has hindered Meta's ability to target and measure the effectiveness of ads. Meta estimates that Apple's move could cost the company $10 billion in revenue this year.

But it would be a good idea for investors to look past the doom and gloom, as Meta Platforms is expected to regain its mojo in the coming years. Analysts expect the company's top and bottom lines to pick up the pace in the next couple of years, while its earnings are expected to grow at an annual pace of 21% for the next five years.

Note: Growth is year over year. EPS = earnings per share. Source: Yahoo! Finance and YCharts

There are a couple of reasons why Meta's long-term outlook appears to be solid despite the near-term headwinds.

First, digital ad spending is expected to increase in the coming years. In the U.S., for instance, digital ad spending is expected to increase from $211 billion in 2021 to $315 billion in 2025, according to third-party estimates. On the other hand, total media ad spending is expected to hit nearly $1.1 trillion by 2025, as compared to $780 billion in 2021.

With a monthly active user base of 2.91 billion at the end of 2021, Meta Platform is in a solid position to benefit from the increased ad spending. The company's ad revenue increased 37% in 2021 to $114.9 billion, and it could continue to clock such impressive growth thanks to the lucrative end-market opportunity.

The second reason why Meta could step on the gas, in the long run, is its focus on the metaverse, a market that JPMorgan analysts say could create a $1 trillion annual revenue opportunity. Meta Platforms is already gaining traction in the metaverse with its Oculus virtual reality headset, and CEO Mark Zuckerberg said on the company's February conference call that customers have spent over $1 billion on content in the Quest store.

With Meta stock trading at just 14.5 times trailing earnings right now, compared to its five-year average earnings multiple of 30, investors are getting a good deal on a tech giant that could explode in the long run.

2. Himax Technologies

Himax Technologies looks like an enticing high-growth company to buy right now. That's because Himax stock is not just dirt cheap -- its revenue and earnings are soaring at an eye-popping pace, and the company's prospects indicate that its hot streak could be sustained for a long time to come.

Himax released its full-year fiscal 2021 results on Feb. 17, reporting a 74% increase in revenue to $1.55 billion. The fabless semiconductor company's adjusted gross margin nearly doubled in 2021 to 48.5% from 24.9% in 2020. As a result of the impressive expansion in Himax's revenue and margin, Himax's non-GAAP net income for the year jumped to $463 million last year from $52 million in 2020.

Himax's guidance for the current quarter indicates that its 2021 momentum is here to stay. The company expects $420 million in revenue this quarter as per the midpoint of its guidance, while adjusted earnings are expected to land at $0.70 per share. Himax delivered $309 million in revenue and $0.39 per share in earnings in the prior-year period, so the company is on track to deliver impressive growth this quarter.

A closer look at the markets Himax operates in will tell us why its top and bottom lines have been expanding at a terrific pace.

HIMX Revenue (TTM) data by YCharts

Himax sells display drivers that are used in a variety of areas, including smartphones, tablets, automotive displays, monitors, and televisions. The company is seeing solid demand for its products across the various markets that it operates in.

In the automotive segment, for instance, Himax's sales increased 110% last year. The company sees the automotive segment producing 25% of its revenue this quarter, and it points out that the segment is set for exponential growth this year and beyond. That's not surprising, as the automotive display driver market is expected to hit a size of $27 billion in 2029 compared to $14.5 billion last year, according to third-party estimates.

A similar trend can be seen in the smartphone display market, where Himax's sales increased 85% in 2021. This is another area where the company can expect robust long-term growth, as the size of the smartphone display market is expected to jump to $91 billion in 2026 from $52 billion in 2018.

These secular growth opportunities spread across various markets and Himax's terrific growth make the stock an enticing bet, especially considering that it is trading at just 4.6 times earnings and 1.3 times sales. This dirt-cheap valuation and Himax's growth potential make it an enticing tech stock to buy right now.