Growth stocks have taken a beating in 2022, making it easy to find great buying opportunities today. If a stock still has a robust business with healthy growth catalysts in this challenging economy, it can not only bounce back quickly, but also keep outperforming the market after the macroeconomic issues are resolved. Let's look at three of these vigorous growth stocks that are screaming buys at the end of the year.
Amazon is historically cheap right now
E-commerce and cloud computing giant Amazon (AMZN -2.56%) comes with decades of experience and one of the largest market footprints on the planet. However, that hasn't stopped the company from evolving like a hungry start-up.
Just this week, for example, the company introduced a flurry of new features to its Amazon Web Services cloud computing platform. The span from Thanksgiving to Cyber Monday was Amazon's best-selling shopping weekend ever. The Prime Video service will start making movies for silver-screen release next year, with a budget to match veterans like Paramount Pictures or Lionsgate.
I find Amazon's innovative spirit downright inspiring, even as many investors are dumping the stock. Share prices are down 45% in 52 weeks, including a 35% plunge since Aug. 15. Amazon's stock is sensitive to swings in the broader economy, which makes sense given the company's massive operations across a wide variety of services. So when the market as a whole turned sour due to the growth-limiting moves the government made to fight raging inflation, Amazon's stock also slipped. Then, Amazon's sales guidance for the holiday quarter came in below expectations due to currency exchange headwinds, sending the stock down again.
Investors have seen this movie before, where market makers underestimate Amazon's ability to deliver muscular business growth in the long run. Right now, Amazon's trailing sales and earnings have roughly tripled in five years. The stock, on the other hand, has barely beaten the market since December 2017:
It's as if the last five years never happened -- except that Amazon's business grew three times as robust. Make no mistake: This is a rare opportunity to pick up valuable Amazon shares at a bargain-bin price.
Merely hitting Wall Street's targets gave investors deep discounts on Salesforce
Business software veteran Salesforce (CRM -0.57%) is another tech titan with proven long-term growth. It's also another deeply discounted growth stock.
Salesforce's share price has dropped 42% over the last year. The stock is back to prices not seen since the brief but steep coronavirus crash in the spring of 2020, and in the winter of 2018 before that.
Just like Amazon, Salesforce sports a skyrocketing revenue chart. The stock took a sharp price cut from this week's third-quarter report. The results met or exceeded Wall Street's expectations. That includes Salesforce's revenue guidance for the next period, which was in line with the analyst consensus at the time -- but it was seen as a disappointment because Salesforce typically sets projections significantly above the Street view.
That's where Salesforce is today. The stock is on sale simply because the company may not beat analyst projections quite as easily as usual in the next quarter. The stock's valuation ratios haven't been this affordable since the Lehman crash in 2008.
Atlassian carries heavy analyst expectations on its shoulders
Stop me if you've heard this one before, but project management and team collaboration specialist Atlassian (TEAM -1.06%) is also on sale due to macroeconomic concerns. This stock trades 61% lower on a year-over-year basis, including a 40% drop in the last three months.
Atlassian's shares aren't exactly cheap by traditional metrics, but most companies aren't growing their sales and earnings by a compound average rate (CAGR) of 35% and 31%, respectively.
You still need to be comfortable with double-digit sales-to-earnings ratios and triple-digit valuation metrics measured against bottom-line profits before picking up Atlassian shares. This growth-oriented style isn't every investor's cup of tea. If that's you, I'd suggest taking a second look at Amazon and Salesforce instead.
All three of these stocks are no-brainer buys right now, but from different angles. It's safe to assume that better times lie ahead for the economy at large, and that the upswing will kick-start the stalled top and bottom lines for Amazon, Atlassian, and Salesforce.
I can't guarantee that it will happen in early 2023, or later next year, but market timing is more like gambling than investing anyway. I just showed you three fantastic companies whose stocks happen to be available at reasonable prices. If that pairing of long-term value and short-term discounts is good enough for master investor Warren Buffett, it's probably good for average investors as well.
