High inflation and rising interest rates have made bears of many investors and sent the stock market into a downward slide. The tech-heavy Nasdaq Composite is currently 26% off its high, and the broad-based S&P 500 is down 17%. But several billionaire hedge fund managers have used the downturn as a buying opportunity.
For instance, Steve Cohen started a position in Zoom Video Communications (ZM 0.82%) in the second quarter, while Ken Griffin added to his position in Zoom. Meanwhile, David Shaw and Jim Simons both increased their stake in Docebo (DCBO -0.63%). For context, Zoom and Docebo currently trade 67% and 86% off their highs, respectively.
Is it time to buy these beaten-down growth stocks?
Zoom Video Communications: A leader in videoconferencing
Zoom operates a cloud communications platform that integrates video, voice, and chat functionality. The company is best known for Zoom Meetings, a software product that became synonymous with remote work during the pandemic. Zoom Meetings is currently tied with Microsoft Teams as the most popular videoconferencing application on the market, and Zoom is capitalizing on that advantage with a successful land-and-expand growth strategy.
For instance, Zoom Phone reached 4 million seats in August, up from 2 million seats in the same month last year. During the recent earnings call, management also noted positive momentum with two new products: Zoom Contact Center and Zoom IQ for Sales. Zoom Contact Center is the first omnichannel contact center optimized for video, and Zoom IQ for Sales uses artificial intelligence to analyze Zoom Meetings interactions and surface insights for sales agents.
Unfortunately, Zoom continued to battle headwinds in the second fiscal quarter of 2023 (ended July 31, 2022), including unfavorable foreign exchange rates, geopolitical conflict in Ukraine, and high inflation. As a result, revenue rose just 8% to $1.1 billion, and non-GAAP earnings dropped 23% to $1.05 per diluted share. Those disappointing results notwithstanding, the long-term investment thesis is still intact.
In the coming years, remote and hybrid work are set to become more common, as they allow businesses to cut travel expenses and hire the best talent from anywhere in the world. In fact, research company Gartner says just 25% of enterprise meetings will take place in person by 2024, down from 60% in 2021. And Ark Invest believes 832 million knowledge workers will engage in remote or hybrid work by 2026, up 70% from 2021. Those changing workplace dynamics should be a significant tailwind for Zoom.
On that note, management puts its addressable market at $91 billion by 2025, leaving plenty of room for growth. And with shares trading at 5.8 times sales -- the cheapest valuation since Zoom went public -- now is a good time to buy this growth stock.
Docebo: A leader in corporate learning
Docebo specializes in corporate learning and development. Who cares? Several studies have shown a correlation between ongoing learning opportunities and employee satisfaction, retention, and productivity. That matters because U.S. businesses alone incur about $1 trillion in turnover costs each year.
Docebo's platform helps customers manage, deliver, and measure the impact of learning content on business performance. It also leans on artificial intelligence to create training courses from corporate resources and personalize the learning experience for each employee. Better yet, Docebo allows businesses to inject training materials into the flow of work, thereby creating an atmosphere of continuous learning.
Despite tough competition, Docebo has started to separate itself from the pack. It was one of the first companies to infuse its learning software with artificial intelligence, and Fosway Group recently recognized Docebo as a leader in learning management systems (LMS) for the fifth consecutive year. Those accolades have helped it win customers like Amazon Web Services, Samsung, and Zoom Video Communications.
Financially, Docebo is growing at a steady clip. Revenue climbed 36% to $34.9 million in the second quarter, and the company generated positive cash from operations of $1.1 million, up from a loss of $0.6 million in the same period last year. More importantly, investors have good reason to believe the company can maintain that momentum. Between 2016 and 2021, Docebo grew twice as fast as the broader LMS industry, meaning it's gaining market share.
And I expect that outperformance to continue in the coming years as Docebo keeps innovating and more enterprises prioritize ongoing learning. On that note, management puts its addressable market at $30 billion by 2025, leaving a long runway for growth. And with shares trading at 8.5 times sales -- a bargain compared to the historical average of 19.2 times sales -- now is indeed a good time to buy this growth stock.