Tech investors have had a rough 2022. The Nasdaq Composite index, the bellwether for technology stocks, has fallen nearly 24% year to date. The market has been pessimistic because of rising inflation, supply chain challenges, and fears of an eventual recession.
However, the Nasdaq Composite index has always recovered and returned to all-time highs. So a rebound is most likely a matter of when and not if. Here's why I think these two companies could lead that rebound.
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1. Global-e Online
Global-e Online (GLBE 0.78%) helps e-commerce businesses expand internationally by breaking down barriers to entry into foreign markets. With the risk of a recession on the horizon and inflation running rampant on necessary goods, many consumers are buying fewer discretionary items on e-commerce sites. Considering Global-e's revenue is correlated to the gross merchandise volume that flows through its platform, it is seeing a decline in growth too.
That said, the company is still executing well. For example, even as inflation began to ramp up in Q1, Global-e reported strong revenue growth of 65% year over year to $76 million, spurred by revenue from U.S. businesses selling internationally, jumping 111% over the same period.
Global-e lowered its full-year revenue guidance by 5.5% from prior anticipations to $393 million, which shows that the company is expecting to be impacted by the worsening macroeconomic environment. However, this represents 60% year-over-year growth for 2022. The vast majority of its revenue comes from e-commerce businesses based in the U.K. and the U.S. With both countries having hit rough macroeconomic patches, this growth rate is still quite impressive.
Even if macroeconomic conditions worsen, Global-e is a mission-critical service that is enormously sticky for its customers. This could result in a reduced blow compared to other e-commerce stocks. Churn remained under 2% in Q1, and customers are increasing their usage of Global-e, despite these worsening economic conditions. Full Beauty Brands, for example, opened in more than 20 new markets this quarter with the help of Global-e.
Shares of Global-e are down 69% year to date, but this sell-off might have been overdone. The company is executing, and even after accounting for poor macro conditions, management is expecting strong top-line improvements. If Global-e can make it through this downturn and reach its current top-line projections, it could continue to take market share in the massive e-commerce space as the economy recovers. However, at 9.5 times sales, Global-e stock is at its lowest valuation since it went public, and trades at a similar multiple as Shopify. So this could be a deal that may not be around for a long time, as once the market sees a disconnect between the stock price and the company's true value, it will bid up the price.
2. Doximity
Doximity (DOCS -1.47%) is a digital platform for healthcare professionals to provide better patient care. The platform helps healthcare workers communicate with other doctors and patients, research new drugs, host telehealth visits, and grow their careers. The company makes money from advertising revenues from pharmaceutical manufacturers looking to promote their drugs and hospitals trying to recruit healthcare professionals. However, the market believes that these pharmaceuticals and hospitals could pull back their ad spending on the platform in a recession.
This concern has been part of why shares are down 31% in 2022 alone, but this might not be fully justified. Doximity is a top dog in this space, with 80% of U.S. physicians and 50% of U.S. physician assistants and nurse practitioners on the platform. Therefore, if a pharmaceutical company needs to pull back ad spending, it's unlikely to be on a leading platform like Doximity.
Customers have also seen excellent returns on investment (ROI). ROI on Doximity was 10-to-1 in the recent fiscal quarter -- which ended March 31, 2022 -- for pharmaceutical customers and 13-to-1 for hospitals. With this value proposition, customers are likely to continue spending on the platform, no matter the economic environment.
The company is adding features to boost user engagement, which will only enrich the value proposition for advertisers. Doximity recently acquired Amion.com, a scheduling platform for 200,000 physicians. This addition will likely increase the amount of time spent on Doximity's platform, which will make it an even more attractive place to advertise.
Even if Doximity did get hurt temporarily, it has profitability and cash flow generation to supplement this slower short-term activity. In its recent fiscal quarter, the company generated $45 million in free cash flow, representing a 48% margin. It also had more than $36.5 million in net income.
The company is making continual progress on increasing user engagement by adding new features, which makes its value proposition to advertisers more appealing. This could allow it to thrive both during the economic slowdown and longer-term. With shares down, Doximity could be worth buying today.
