When 2022 comes to a close it could go down as the worst year for growth stocks that investors have seen in over a decade. The Nasdaq Composite index contains all kinds of growth stocks and it's been beaten down 33% this year.
It's been a lousy year for the growth stocks already in your portfolio but it's also an excellent time to be a net buyer of stocks. After all, the price you pay for a stock is a huge factor influencing the rate of return you receive.
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In the current bear market, these three stocks are getting crushed. A general economic slowdown caused by soaring interest rates will affect their performance somewhat. The market beatings they've received, though, have gone too far. Here's why buying their beaten-down shares could do wonders for your portfolio over the long run.
SoFi Technologies
SoFi Technologies (SOFI 0.28%) stock soared following the all-digital bank's stock market debut in 2020, but it has collapsed 79.9% from the peak it reached in 2021. SoFi runs a consumer bank and a technology platform for other fintech businesses. Both are growing by leaps and bounds.
NASDAQ: SOFI
Key Data Points
SoFi looks like a good stock to buy now because it's growing rapidly without running huge losses. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) soared from a $148 million loss in 2019 to an expected gain of between $115 million and $120 million this year.
At recent prices, you can buy SoFi for 40.7 times the midpoint of management's adjusted EBITDA estimate for 2022. That's a steep multiple, but the company's growing fast enough to warrant a much higher valuation. At the end of September, SoFi members were using 7.2 million products, which was 69% more than they were using a year earlier.
Spotify
You've probably already heard that Spotify Technology (SPOT 2.18%) runs the world's most popular audio streaming service. What you may not realize is that the company's non-music endeavors are making it far more profitable than any music streaming business could hope to become.
NYSE: SPOT
Key Data Points
Shares of Spotify have fallen 80.5% from their peak last year. Now you can buy the stock for just 1.14 times total revenue generated over the past 12 months. At such a knocked-down price, you'll come out miles ahead over the long run if the company simply achieves profitability.
Smart investments Spotify made this year in the podcasting and audiobook niches are pinching profitability now, but it's just a matter of time before margins expand again. Management expects a gross margin between 40% and 50% for its podcasting business. Since Spotify is still the only audio streaming service with integrated podcasts and audiobooks, staying on top of the competition in these niches should be a breeze.
Zoom Video Communications
Shares of Zoom Video Communications (ZM 5.70%) soared when COVID-19 forced businesses of all stripes to find work-from-home solutions. Ever since lockdowns ended, though, the stock has been in free fall.
NASDAQ: ZM
Key Data Points
After falling 86% from its peak in 2021, shares of Zoom look like an unbeatable bargain. The stock's trading at just 21.1 times management's adjusted earnings estimate for the current fiscal year that ends on Jan. 31, 2023.
The average stock in Nasdaq-100 index trades at a slightly lower multiple of 20.9 at the moment. This is surprising because Zoom's growth story is far more exciting than average.
In its fiscal second quarter, the number of enterprise customers soared 18% year over year and they're ramping up spending. The average enterprise customer spent 20% more over the past 12 months than they spent a year earlier. With important enterprise customers lining up to increase spending on its services, Zoom's bottom line, and its stock price, could soar in the years ahead.
