There's no denying it -- the stock market got off to a harrowing start in the first half of 2022. In fact, the tech-heavy Nasdaq Composite index's nearly 30% drop across the stretch marked its worst-ever start to a year.
If you're a growth-focused investor, there's a good chance that your portfolio is feeling the squeeze, and it's possible that more volatility is on the horizon. However, the dramatic market turbulence may have also created once-in-a-lifetime buying opportunities. Read on for a look at two beaten-down stocks that could take your portfolio to the next level.
1. Airbnb
Airbnb (ABNB 1.09%) has already changed how the world travels and lives, and it's likely that the company's long-term growth story is still just getting started. With the stock down roughly 42% year to date and 56% from its lifetime high, investors have a chance to build a discounted position in a company with massive long-term return potential.
Airbnb is providing superior convenience, variety, and overall value on both sides of the travel-booking equation. Through its platform, travelers gain access to a massive array of potential accommodations, and owners can flexibly make their properties available to a massive pool of potential guests. The company has also branched out into offering booking for local events through its service.
Airbnb reported best quarterly sales and earnings performance in the first quarter, and it's likely that results will be very strong for the rest of 2022 as well. With pent-up demand being realized now that pandemic restrictions have eased, the travel specialist is on track to post results that blow its previous records out of the water this year. However, the company's share price has still collapsed as investors have become more risk-averse and abandoned growth stocks.
I think that investors should take advantage of the disconnect between Airbnb's soaring business and sagging stock performance. This is an innovative company with huge long-term growth potential, and the passage of time will likely come to make shares look ridiculously cheap at current levels.
2. Upstart Holdings
Upstart Holdings (UPST -0.44%) is changing the world of lending and borrowing. While credit ratings from FICO have traditionally been an end-all-be-all factor in assessing creditworthiness, the disruptive fintech company is using artificial intelligence (AI) to assess a wider range of information. Through the use of its AI-powered software, Upstart has been able to identify a much larger pool of reliable borrowers and is recording significantly lower default rates.
Upstart has been building a network of bank partners and investors and connecting lenders and credit customers, and this has helped the business grow at a rapid clip.
UPST Revenue (TTM) data by YCharts
However, the company has been running into headwinds lately, and its stock is now down roughly 82% year to date and 93% from the high that it reached last year. In addition to rising interest rates and the market generally going sour on growth stocks, there have been other catalysts that have prompted a dramatic reappraisal for Upstart's valuation.
With its last full-year sales guidance, management targeted revenue of roughly $1.25 billion, representing growth of roughly 47% annually. That still suggested decent near-term momentum, but it was a notable step down from the previous target for revenue of roughly $1.4 billion and annual sales growth of approximately 65%. Now, it looks like the business will fall short of even its diminished full-year performance target.
Upstart's recently published preliminary second-quarter results call for revenue of just $228 million, suggesting growth of 17% year over year. That performance is a far cry from previous guidance for sales between $295 million and $305 million, and management is seeing marketplace funding constrained due to macroeconomic conditions. It's not surprising that the stock has taken another tumble following the release.
While there are still risk factors facing the business, Upstart's dramatic drawdown also sets up big rebound potential, and some of the concerns regarding its long-term outlook may be overblown. If you're seeking potentially explosive returns and willing to weather turbulence in the near term, this comeback story looks worth betting on.
