Technology stocks have been hammered recently by fierce inflation, rising interest rates, and global economic impacts from the war between Russia and Ukraine. With no signs of turning the corner anytime soon, the Nasdaq Composite -- which has already sunk 26% year to date -- could face additional pressure in the near future.
The sell-off has been intense, but it has also introduced some generational buying opportunities for investors with long time horizons. Once the market stabilizes, there are many companies that could deliver massive gains for patient shareholders. Let's check out two beaten-down Nasdaq stocks that should bounce back in the long run.
Image source: Getty Images.
1. Zoom Video Communications
Zoom Video Communications (ZM +0.45%), the pandemic darling that blossomed during widespread lockdowns, has watched its stock price nosedive 47% year to date. While it's true COVID elevated its business, the company's success story is far from over. Nearly two-thirds of the U.S. labor force still works remotely at least part time, and 85% of managers expect this to be the norm moving ahead.
NASDAQ: ZM
Key Data Points
This is great news for Zoom. The videoconferencing juggernaut reigns over almost half of the global market, solidifying it as the clear frontrunner in the space. And with the industry projected to have a compound annual growth rate of 16% to $24 billion by 2028, you can see the opportunity for Zoom is significant.
In its fiscal 2022, total sales soared 55% to $4.1 billion, and adjusted earnings per share (EPS) climbed 52% to $5.07. In the fiscal fourth quarter, the number of clients generating at least $100,000 in annual recurring revenue grew 66% to 2,725, showing the company's ability to rapidly expand its customer base, even in a post-pandemic world.
This upcoming year, analysts are modeling total revenue will increase to $4.6 billion while adjusted EPS retreats 30% to $3.53. While bottom-line growth is forecast to unwind from a year ago, Zoom is well positioned to rebound nicely once comparable metrics normalize. And given that the stock is trading below 19 times earnings today, the company offers investors a favorable risk-reward ratio and a strong margin of safety.
2. PayPal
PayPal Holdings (PYPL 1.14%), the global leader in fintech, has crashed 60% year to date despite having a long runway for growth in the coming years. With 429 million active accounts, it controls 50% of the global payment processing software industry, easily making it the most accepted digital wallet across North America and Europe.
NASDAQ: PYPL
Key Data Points
In 2021, total revenue surged 17% year over year to $25.4 billion, and adjusted EPS grew 19% to $4.60. Total payment volume surpassed $1 trillion for the first time ever, a remarkable achievement for what I view as the top dog in the fintech space. In its most recent quarter, the company posted a top and bottom line of $6.5 billion and $0.88 per share, respectively, in line with Wall Street estimates but indicating patchy results this year.
Growth is projected to dwindle in 2022 with $600 million of top-line pressure associated with eBay's shift to its own payment platform and 40-year high inflation, which might compress the company's total payment volume.
Analysts are forecasting total revenue of $28.3 billion, equal to 12% growth year over year, while adjusted EPS drops 15% to $3.91. Investors shouldn't fret, though: Growth should pick back up once the eBay transition concludes, and inflationary concerns ease.
PayPal's post-eBay revenue growth has been consistently above 20%, and the company's current price-to-earnings multiple of 25 is more than a 50% discount to the historical average, making this fintech a no-brainer for prudent investors.
