The tech-heavy Nasdaq Composite soared 21.4% last year, but the index has since given up those gains and more, falling 25% from its November high. That puts the Nasdaq squarely in bear market territory.
Of course, no one likes to lose money, but the current situation gives patient investors a chance to turn a profit. High-quality businesses like Arista Networks (ANET 1.54%) and Adyen (ADYE.Y 0.10%) are well-positioned to benefit from powerful secular tailwinds, but the stocks have fallen 30% and 52%, respectively, from their all-time highs. That creates a buying opportunity.
Here's what you should know about these two surefire stocks worth consideration this month.
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1. Arista Networks
Cloud computing makes it possible to provision hardware and software through the internet. Driven by that convenience, the vast majority of consumer applications now run in data centers, and those applications are becoming more complex as use cases like artificial intelligence take root. That has created a need for faster, more reliable data center networks.
NYSE: ANET
Key Data Points
Arista was founded to meet that need. The company has disrupted the networking industry with two noteworthy innovations. First, its Extensible Operating System (EOS) runs across its entire lineup of switching and routing platforms, allowing clients to deploy a seamless network across their entire IT ecosystem. That differentiates Arista from legacy vendors, which often rely on multiple operating systems, making network management more complicated and costly.
Second, Arista exclusively sources chips from vendors like Intel and Broadcom rather than designing its own. That allows the company to focus on software development while still incorporating the latest silicon into its hardware. By comparison, legacy vendors often build their own custom chips, which translates into higher costs and less flexibility for customers.
More broadly, Arista's networking platform offers industry-leading capacity, speed, and power efficiency, and that has fueled strong financial results. Over the past year, revenue rose 28% to $3.2 billion, and free cash flow climbed 16% to $904 million.
Looking ahead, Arista's strong competitive position should help it maintain that momentum. As cloud computing sees greater adoption and the number of connected devices continues to grow, data centers will need faster networking solutions. As the leader in high-speed switching platforms, that trend plays to Arista's strength, and it should be a powerful growth driver for the company.
In fact, management says its addressable market will grow more than 50% between 2021 and 2025, reaching $35 billion. That's why this growth stock looks like a surefire investment.
OTC: ADYE.Y
Key Data Points
2. Adyen
Accepting digital payments means merchants typically have to work with several third-party providers -- acquiring banks, processors, and gateways -- and the situation becomes increasingly complex with each new geography and sales channel. That's where European fintech Adyen can make a difference. The company makes it possible for merchants to accept and manage payments from a single platform across digital and physical stores.
Better yet, by aggregating all of a merchant's transaction data into one interface, Adyen leans on artificial intelligence to surface insights, boost buyer conversion rates, and reduce the risk of fraud for its merchants. That value proposition has helped the company win several thousand customers, including enterprises like McDonald's and online marketplaces like Etsy.
Financially, Adyen is firing on all cylinders. Last year, payment volume soared 70% to 516 billion euros, and net revenue rose 48% to 1 billion euros, driven by particularly strong growth in North America and Asia. Adyen also generated 567 million euros in free cash flow, up 53% from the prior year.
More importantly, this fintech company has plenty of room to run. By 2026, research company Nilson says global payment card volume will exceed 52 trillion euros. That trend will be fueled by growing adoption of digital wallets and online shopping, and it puts Adyen in front of a massive market opportunity. That's why this growth stock is a smart long-term investment.
