3 Tech Stocks Down 46% to 74% to Buy for 2022

The market has been a rough place for investors lately, especially shareholders of tech stocks. It always hurts to see your portfolio in the red day after day, but longtime investors know that it can be a great time to add quality companies to your portfolio.

We asked three experienced investors and Motley Fool contributors to highlight one stock that has sold off considerably but looks like a great opportunity today. They came up with MercadoLibre (MELI 8.27%), PayPal (PYPL -1.91%), and DocuSign (DOCU 1.77%). 

Image source: Getty images.

MercadoLibre -- Down 46%

Danny Vena (MercadoLibre): There's been a significant correction that has plagued tech stocks since mid-November, with the Nasdaq Composite Index slipping briefly into bear market territory this week. As a result, Wall Street is offering a long list of top-notch tech companies at a discount. History suggests that this could represent a massive opportunity for savvy investors, assuming they have the courage and resources to act.

MercadoLibre is one such stock. While the company isn't a household name in the U.S., you'd be hard-pressed to find online shoppers who aren't familiar with MercadoLibre's industry-leading, e-commerce, and fintech platform in its home market of Latin America.

Since the stock has lost nearly half its value in just a few months, you might suspect there are underlying problems with the company's business model or its growth, but nothing could be further from the truth. In the fourth quarter, MercadoLibre reported net revenue of $2.1 billion, up 74% year over year in local currencies. While that's impressive in its own right, consider this: That growth is on top of 149% gains in the prior-year quarter. 

Revenue from the company's e-commerce business climbed 67% year over year, an impressive feat in the face of record-setting comps. Growth within the fintech business was even more robust, with revenue that surged 81% on top of triple-digit gains in the prior-year quarter. Contributing to those impressive gains were gross merchandise volume (GMV) and gross payment volume (GPV) that set quarterly records for the company. 

While sales growth is tamer than this time last year, it's impressive considering MercadoLibre doesn't have the pandemic-related tailwinds driving its growth. Rather, it's the company's sticky ecosystem that is fueling the current results.

While e-commerce and payments are MercadoLibre's bread and butter, a large and growing list of ancillary services keep customers and merchants coming back for more. This includes website creation and maintenance, fulfillment and logistics, shipping and cross-docking, working capital loans, consumer credit, digital wallet, cryptocurrency transactions, and more.

One of MercadoLibre's biggest growth engines going forward is that of payments. Mercado Pago, the company's digital payments solution, was so successful on its platform that other online merchants began to adopt it for their own customers. It then made the leap to brick-and-mortar establishments and never looked back. In Q4, off-platform payments surged 97% year over year, bringing more physical retailers into the fold. 

Finally, MercadoLibre has never been cheap using traditional valuation metrics. That said, the stock is currently selling for a price-to-sales ratio of less than 8. To give that context, MercadoLibre stock hasn't been this deeply discounted since early 2016, marking its lowest valuation in six years.

Investors would do well to pick up shares of this Latin American e-commerce and fintech powerhouse while they're on sale. History suggests that the opportunity to get MercadoLibre at this price won't last long.

Image source: Getty Images.

PayPal -- Down 65%

Will Healy (PayPal): Fintech pioneer PayPal has struggled over the last year. Aside from a generalized sell-off in tech growth stocks, the end of its favored relationship with former parent eBay weighed heavily on profits. Also, a shift in emphasis from growing customer numbers to better monetizing its current customer base appeared to unsettle investors. 

However, the separation from eBay has become a huge benefit to PayPal. Despite PayPal's drop, its market cap is nearly four times as large as its former parent's. Moreover, despite an emphasis on its current customers, it still expects to add between 15 million and 20 million new users to its active customer count of 426 million this year.

Also, PayPal has positioned itself to better monetize its current customer base. The Venmo app has grown to a user base of over 83 million, and it has made deals to allow Amazon and Roku customers to pay with Venmo, increasing the app's usability. Additionally, its integration of Honey into both PayPal and Venmo could help to further monetize the user base by offering customer discounts.

Such moves boost revenue, which came in at $25.4 billion in 2021, an 18% increase from year-ago levels. Also, net income fell by under 1% over the same period to just under $4.2 billion as lower net gains on strategic expenses weighed on earnings.

But despite stagnant income, financial projections offer hope for a recovery. The company projects 15% to 17% higher revenue in 2022, and analysts forecast double-digit earnings growth to return in 2023. Additionally, its price-to-earnings (P/E) ratio has fallen to 30, down from the 75 range in July. That drop likely prices in the near-term challenges for the stock, helping to make PayPal stock a buy.

Image source: Getty Images.

DocuSign -- Down 74% 

Brian Withers (DOCU): It's been two years since the U.S. started shutting down due to early COVID-19 cases. As companies scrambled to enable their employees to work remotely, DocuSign was being adopted to ensure business processes could continue without in-person physical signatures on paper. 

A lot has happened since then. The company has more than doubled its revenue and its enterprise and commercial customers, and nearly doubled customers paying more than $300,000 in annual contract value (ACV). It has gotten significantly more efficient, and operating cash flow has more than quadrupled. Despite all of these incredible gains, the stock is trading 74% off its high and at levels near where it was in March 2020.

Source: DocuSign Investor Presentation. Table and calculations by author.

With this share price, one can only assume that these incredible results are being ignored and the stock is being dragged down by world events and an overweight emphasis on its 18% year-over-year growth projection for the coming year. This gives investors a great opportunity to buy into a critical enabler for today's enterprise operations. Let me explain why.

The company has more than doubled its large enterprise and commercial customers, which account for 88% of its revenue. These 95,000 new customers over the past two years are just getting started with this e-signature platform and have only begun to tap into the full capability of the software. With net-dollar retention ranging from 117% to 125% over the last nine quarters, it's clear that existing customers find more opportunities to use the e-signature capability more often in more functions across the enterprise.

These strong net-dollar retention numbers don't even account for DocuSign's expansive Agreement Cloud suite of products that cover all phases of the agreement process: prepare, sign, act, and manage. The company has barely tapped the additional $25 billion of the market opportunity for the other phases of the agreement process outside of the e-signature business.

This stock will not stay down forever as the market will eventually realize that DocuSign's customers are never going back to pen-and-paper signatures. It's not too late to pick up a few shares of this software specialist that's become a critical part of everyday business.