Due to the decline in stocks over the last few months, investing has become a painful exercise, particularly for tech investors. Even seasoned investors do not want to look at their portfolios, and many investors feel a deep temptation to sell, even if that means locking in dramatic losses.
However, such conditions allow investors to buy growth tech stocks at a discount and can also greatly profit investors with a long-term time horizon. If you only have an amount such as $3,000 to invest, companies with supercharged growth such as Advanced Micro Devices (AMD 2.33%) and Upstart (UPST +2.10%) could serve you well.
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AMD
One of the more dramatic comebacks in the semiconductor industry has involved AMD. It was left for dead in the middle of the last decade, but the leadership of Lisa Su brought about a dramatic comeback in the CPU and GPU spaces.
AMD's Radeon graphics cards have helped it win some competitive battles against Nvidia (NVDA 1.58%). In the latest quarter, it reported that the average selling price on its high-end graphics cards rose along with sales.
Its EPYC server processors and Ryzen PC processors have helped it gain market share over longtime rival Intel (INTC +1.15%). According to TechSpot, AMD made year-over-year market share gains in mobile markets.
Additionally, it grew market share in its server business. And thanks to its acquisition of supercomputing giant Xilinx, it can build further competitive advantages in the data center business. Furthermore, the company is in the process of acquiring Pensando, whose distributed services platform should enhance its edge computing capabilities.
Such moves should further bolster its already rapid growth. In the first quarter of 2022, its $5.9 billion in revenue increased 71% compared with year-ago levels. This led to $1.6 billion in non-GAAP net income, rising 148% over the same period. Year-over-year increases in gross margins from 46% to 48% and slower growth in operating expenses contributed to the surge in profits.
For all of 2022, AMD forecasts about $26.3 billion in revenue, a 60% increase year over year if the forecast holds. Nonetheless, it is unclear whether investors have punished AMD stock for this mild slowdown or the generalized stock decline. Even though the stock has risen 21% over the last year, it sells for more than 40% below its 52-week high.
NASDAQ: AMD
Key Data Points
Still, the company sells for around 35 times its earnings. Not only is that a bargain given the revenue growth, but it also remains cheaper than Nvidia, which sells for 43 times earnings. Amid its competitive edge and rapid growth, some investors may regret not buying AMD at these levels.
Upstart
Upstart continues to reel from bad news. A lower revenue outlook and the increased loans on its balance sheet caused the stock to briefly lose about two-thirds of its value in less than two trading days. Analyst downgrades have further weighed on the company. The stock now sells at a nearly 90% discount to the 52-week high it achieved last October.
NASDAQ: UPST
Key Data Points
But as bad as such news sounds, these risks do not change the fact that its artificial intelligence-based evaluation tool can approve more prospective loans compared to Fair Isaac Corporation's FICO score without increasing the risks of loan delinquency.
Moreover, the expansion into auto loans and small business loans and a planned move into mortgages give it room to run despite rising inflation. The company revealed on its first-quarter 2022 earnings call that over 500 auto dealerships now use the platform. The number of banks on the platform has risen to 57, up from 42 three months ago. And 11 of the banks have dropped minimum FICO requirements, a sign of confidence in Upstart's platform.
CFO Sanjay Datta vowed to limit loans on the balance sheet to research and development loans only, directly addressing the concern that led to the huge sell-off after earnings and helping the stock rally from its May 11 intraday low.
Even with a somewhat negative report, Q1 revenue of $310 million increased 156% versus the year-ago quarter. Net income for the quarter of almost $33 million was also up from $10 million the year before. Upstart boosted income by cutting interest expenses on convertible notes and some charitable donations.
Additionally, despite the lowered 2022 revenue estimate of $1.25 billion, revenue will grow 47% year over year if that forecast holds. Such increases arguably make the stock a bargain considering its price-to-earnings ratio of about 27.
Indeed, Upstart still has a lot to prove. But if banks increasingly replace the FICO score with its evaluation tool, this stock will probably soar over time.
