Investors shouldn't shut the book on 2022 yet; a couple of weeks are still left. Many beaten-down growth stocks are beginning to look attractive, and a calendar flip to 2023 could boost these stocks. While the calendar-year change doesn't signify anything different, it does change how some money managers act, and if they think growth stocks will be in style during 2023, then these stocks will be snapped up early in 2023.
Two stocks that I think are fantastic buys in 2022 and beyond are Snowflake (SNOW 2.74%) and Adyen (ADYEN 1.91%). Both of these are growing rapidly, and there's not a whole lot that will stop their growth trajectory. So let's find out why these two make excellent buys now.
Snowflake
Cloud computing is the future of business. The ability to store massive amounts of information and use off-site processing power is a game-changer in how companies handle data. However, doing this without a software package to assist can be perilous. That's where Snowflake's data cloud solution comes in.
Snowflake's software aids in storing structured, semi-structured, and unstructured data to be utilized when needed. Then, data scientists can use that information to determine patterns or harness the data flows in various applications to utilize real-time data.
Customers love this platform, and their expanded spending shows it. In Q3, Snowflake's net revenue retention rate was 165%, meaning customers spent $165 for every $100 they spent last year. This helped product revenue reach $523 million, up 67% year over year (YOY). There are also some big spenders with Snowflake, as customers who spend more than $1 million annually with the company rose 94% from a year ago to 287.
Snowflake's growth is quite impressive, but it's doing it in an unprofitable manner. The company lost $201 million in its Q3 of fiscal 2023 (ending Oct. 31). That's a considerable gap Snowflake must bridge to become profitable, representing a significant risk.
While the stock used to trade at more than 150 times sales (that's absurdly high), it now trades at a more palatable 23 times sales, although this is still very expensive.
Snowflake has two marks against it, but its rapid growth rate and $248 billion market opportunity have overcome them for me. It appears that could be Snowflake's turnaround year, and investors shouldn't wait to purchase the stock.
Adyen
Although you've probably never heard of this company, you've likely utilized its product. Adyen, headquartered in the Netherlands, is a payment processor that excels globally. When you purchase something online, you may use a credit card, but many steps go into charging your card before you see the complete checkout screen. Adyen's solution replaces the processing, risk management, and gateway segments of the old processing method, making its solution cheaper and more efficient than utilizing multiple providers.
Adyen has some big brands under its umbrella, with Microsoft, Etsy, and Uber all utilizing its technology. Because it is a Dutch company, its financial reporting rules are different, so investors only get a peek inside the company twice a year, and the company reports in euros.
Still, it doesn't take a lot of analysis to understand how well Adyen is doing. in the first half of 2022, Adyen's processed volume rose 60% from a year ago to 345.8 billion euros. From its processing volume, it had 608.5 million euros of revenue, up 37% from last year.
Adyen is also a great value, trading at a reasonable price-to-free-cash-flow level.
ADYEY Price to Free Cash Flow data by YCharts
Twenty times free cash flow (FCF) equates to a 5% FCF yield, which is an excellent bargain for a company growing as fast as Adyen is.
Investors should consider scooping up shares of Adyen before the U.S. public catches wind of this foreign company, because if it keeps up its growth, it will be on everyone's radar in no time.
