Once darlings of the U.S. equity market, many growth stocks have been witnessing dramatic corrections in the past few months driven by rising inflation and the interest rate hikes initiated to slow it. In March 2022, the Consumer Price Index rose year over year by 8.5%, the highest surge in the last four decades. If the Federal Reserve now responds with a sudden jump in interest rates, it can prove quite damaging for the stock market, at least in the short run.

This time of uncertainty, however, can also prove to be an opportunity for retail investors. Many fundamentally strong stocks with solid competitive advantages and improving financials have cratered unjustifiably.

Asana (ASAN 0.44%) and Affirm Holdings (AFRM -0.24%) are two such high-quality beaten-down stocks where the sell-off now seems quite unjustified. Here's why it would make sense for retail investors to buy these stocks this month.

Businesswoman studying market data charts on desktop screen.

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1. Asana

Share prices of work- and project-management software player Asana are down about 78.5% from 52-week highs. The stock has been on a downward trajectory since mid-November 2021, along with several other tech stocks.

More recently, investors were disappointed with the company's fourth-quarter earnings report (for fiscal 2022 ending Jan. 31), in which Asana guided for a decline in its revenue growth rate and rising operating losses for fiscal 2023 (ending Jan. 31, 2023). Despite these challenges, the current pullback seems unjustified.

There are still several positives that support a bullish hypothesis for this software-as-a-service (SaaS) company, which enables customers to effectively schedule and manage daily tasks as well as cross-functional strategic initiatives.

Asana is currently targeting a huge underserved market opportunity that is expected to grow from $22.6 billion in 2020 to $50.7 billion in 2025. The company has been quite successful in rapidly expanding in this market, as is evident by the 55%-plus year-over-year revenue growth reported in the past three fiscal years.

In the fourth quarter, Asana's revenue was up 64% year over year to $111.9 million, while the dollar-based net retention rate (DBNRR) was over 120%, meaning the same clients spent 20% more as compared to prior-year fourth quarter. The company's paying customer count was up 28% year over year to 119,000.

And customers with an annual spend of over $5,000 and $50,000 grew at a much faster pace, at 52% and 125%, respectively. The DBNRR for those two customer cohorts was 130% and 145%, respectively. This highlights the increasing demand for the company's offerings for big enterprises, thanks to robust network effects.

Asana is not yet profitable and is free-cash-flow negative. But this is quite common for an early-stage company that is spending aggressively on expanding its customer base.

ASAN PS Ratio (Forward) Chart

ASAN P/S ratio (forward). Data by YCharts.

Against this backdrop, with Asana's forward price-to-sales ratio near historical lows, this just might be the right time to pick up this high-growth stock in 2022.

2. Affirm Holdings

Leading buy now, pay later (BNPL) player Affirm also seems set for a major rebound after shares have now corrected by almost 80% from their 52-week high. With artificial intelligence algorithms, this company makes it easier for customers to secure credit at the point of sale to make mostly interest-free installment payments for goods and services. Affirm earns most of its revenue from fees paid by merchants.

However, macroeconomic challenges such as rising inflation and the Federal Reserve's hawkish stance toward raising interest rates -- as well as escalating geopolitical tensions -- have played a major role in pushing down the company's share prices. Affirm is also not yet profitable mainly due to high operating expenses. Investors have been disappointed recently about the delay in the sale of the company's asset-backed securities due to the backing out of a major investor.

Yet the long-term growth story of Affirm is mostly intact due to the growing adoption of BNPL options in online and offline commerce. Allied Market Research estimates that the global BNPL market is expected to have a compound annual growth rate (CAGR) of 45.7% from $90.69 billion in 2020 to $3.98 trillion in 2030. The increasing penetration of e-commerce is also a major tailwind for Affirm, as merchants are more likely to opt for BNPL due to improved conversion rates.

BNPL is also associated with higher-order sizes and a reduced rate of online "shopping cart" abandonment. According to RBC Capital Markets, BNPL results in a 20% to 30% increase in the retail conversion rate and a 30% to 50% rise in average order size.

Affirm's partnership with Shopify helped boost the company's active merchant count to 168,000 in the second quarter (ended Dec. 31, 2021), up from 8,000 in the same quarter of the prior year. Affirm's active customer count also rose by 150% year over year to 11.2 million. In the second quarter, the company reported a 77% year-over-year spike in revenue to $361 million and a 115% year-over-year surge in gross merchandise volume (GMV) to $4.5 billion.

Affirm expects to continue its strong performance in fiscal 2022 (ending June 30, 2022) despite macroeconomic challenges and the increasing possibility of customers failing to make payments on time. This is evident from the company's revised financial outlook for the year, which is mostly at the top end of the previous guidance. Affirm expects GMV of at least $14.78 billion, revenue of at least $1.31 billion, and an adjusted operating loss margin of 11% to 13% in fiscal 2022.

Management is currently targeting a very high-potential niche in the fintech market. With shares now trading at 8.3 times sales (almost at the bottom of its historical range), this could prove to be an attractive entry point for retail investors.