Many factors can contribute to a stock's price decline, including those completely out of a company's control. A recent example was the decision by the Federal Reserve to raise interest rates. This month, the Fed raised rates 0.25% to a range of between 0.25% and 0.50%, and it warned that six more such increases may take place before the end of the year to tame inflation, which is at a level not seen in the last 40 years.
Many growth stocks have tumbled over the last six months in the wake of this decision, with the NASDAQ Composite Index recently falling into its second bear market since the pandemic broke out in 2020. However, investors need to remember that a falling share price does not necessarily imply a business is doing poorly. Many technology-related stocks continue to report growth for their latest quarters, but their share prices have been battered due to a lowering of valuations across the board.
Here are four growth stocks whose share prices have been cut by more than half but still enjoy strong prospects.
Image source: Getty images.
Fiverr International
Fiverr International (FVRR 4.03%) operates a platform that matches freelancers with companies that seek their services. The company has seen a surge in the number of users on its platform since the pandemic began as more people take on freelance work. Although Fiverr stock has plummeted 62% in the last six months, the company is still reporting healthy results.
NYSE: FVRR
Key Data Points
In 2021, revenue surged 57.1% to $297.7 million, while gross profit jumped by 57% to $245.9 million, good for a gross margin of almost 83%. Free cash flow also soared over 170% to $35.4 million. Its active buyer base expanded 23% to 4.2 million, and spending per buyer also improved 18% to $242. The company is guiding for revenue growth in 2022 between 25% and 27% while it continues to improve on its platform to attract more users.
PayPal
PayPal (PYPL +0.03%) provides a leading online payments platform that helps link merchants and buyers so they can carry out efficient and secure payment transactions. Its stock is down 56% over the last half year, but its business has never been stronger. Total payment volume (TPV) rose 33% in 2021, hitting $1.25 trillion. Net revenue grew 18% in tandem to $25.4 billion. Importantly, the business generated free cash flow of $5.4 billion, up 9% for the year.
NASDAQ: PYPL
Key Data Points
The company added a total of 49 million net new active accounts and ended the year with 426 million total. PayPal also rolled out new initiatives last year that helped to expand its presence, including a buy now, pay later acquisition, checkout with cryptocurrencies, and a new digital wallet. Growth should continue this year with TPV expanding 21% to 24% and revenue up about 20%.
DocuSign
DocuSign (DOCU +1.17%) is an electronic signature specialist that offers a cloud platform called the DocuSign Agreement Cloud. Shares lost close to 65% of their value in the last six months as investors worry about the company's ability to grow as the pandemic eases. In the last two years, the company has seen accelerated adoption of its services as businesses switch to remote work.
NASDAQ: DOCU
Key Data Points
For its latest fiscal year (ended Jan. 31), revenue climbed 45% to $2.1 billion as subscription revenue jumped 47%. Billings for future services also grew 37% to $2.4 billion. DocuSign's customer base continued to expand as total customers exceeded the one million mark, and they're spending more with the company. The number of customers with annual contract values exceeding $300,000 jumped from 599 in fiscal 2021 to 852 last year. DocuSign has guided for continued top-line growth of around 18% in the current year as management remains confident of its ability to capture new business.
Zoom Video Communications
Zoom Video (ZM +3.74%) has become a household name as millions of people make use of the company's videoconferencing tools to stay in touch with friends, family, and colleagues. However, investors are similarly concerned about slowing growth for the company as countries lift COVID-19 restrictions and economies fully reopen -- shares are down 57% in the last six months.
NASDAQ: ZM
Key Data Points
But Zoom reported a sparkling results for fiscal 2022 (ended Jan. 31). Revenue surged 55% to $4.1 billion, while net income more than doubled to $1.38 billion. Free cash flow inched up slightly to $1.56 billion, and the company enjoyed a growing customer base. The number of customers contributing more than $100,000 in trailing 12-month revenue jumped 66% to 2,725. Zoom introduced its new contact center during the year, and research firm Gartner estimates the total addressable market for this opportunity will be around $18 billion by 2024. The company believes it can continue to grow its top line around 11% in fiscal 2023.
