It's been a rough year or so for tech stocks.
Rising interest rates, the threat of a recession, and fading demand for tech products and services after a boom during the pandemic has pushed the Nasdaq into a bear market that's now lasted nearly a year and a half.
Despite its recent rally, the Nasdaq is still down 25% from its peak in November 2022. However, not every stock is struggling. Keep reading to see two hot growth stocks that are rallying and have more room to run.
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1. Perion Network
Perion Network (PERI 0.59%) is a small-cap adtech stock that has been an under-the-radar winner since the pandemic started. In fact, Perion was the only adtech stock to post gains in 2022, and the company is delivering strong results in 2023 as well, up 63% year to date.
The company has reported strong growth on the top and bottom lines thanks to its intelligent hub, which connects ad buyers and sellers to optimize brand ad campaigns and publisher ad inventory.
That business, as well as premium ad features like a "connected cart" with a QR code that viewers can scan, or picture-in-picture ads that don't disrupt live televisions like sports, have also helped the company stand out in the ad tech market.
However, there's another reason why the stock is soaring this year and could have more gains in store. The company is a strategic partner of Microsoft's Bing, meaning it could be a major beneficiary from ChatGPT and the new Bing, powered by the generative artificial intelligence technology, though it has not yet been released to the general public.
Given the size of the company, Perion could be a bigger beneficiary if Bing gains market share from the move than Microsoft itself.
Meanwhile, Perion still looks well priced even after the recent gains. Based on its adjusted earnings per share of $2.47 in 2022, the stock trades at a price-to-earnings ratio of just 17.
After posting a strong performance in 2022, the company sees solid growth in 2023 even in a difficult environment, forecasting 14% growth in both revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Considering the macro environment, there's a good chance that its growth will reaccelerate once the economy improves.
2. MercadoLibre
Latin American e-commerce star MercadoLibre (MELI 1.65%) also just touched a 52-week high, the latest sign that it's outperformed its e-commerce peers.
At a time when e-commerce leaders like Amazon, Shopify, and Etsy have all seen growth decelerate, MercadoLibre has remained strong, showing that the company has bucked the broader trend in the industry.
The company benefited from both resilient demand in Latin America and solid market share gains. In the fourth quarter, revenue rose 57% on a currency-neutral basis to $3 billion, and the company's margins continued to expand as businesses like its marketplace, ads, and credits continue to scale up, underscoring the profit potential of the business as it continues to penetrate Latin America.
Operating margin in the quarter reached 11.6%, and it posted earnings per share of $3.25, up from a loss of $0.92 in the quarter a year ago and better than analyst estimates of $2.40.
Better yet, the company says it expects to continue expanding its profit margin thanks to growth in areas like fintech, its marketplace, and advertising, and it has opportunities to gain more market share following the collapse of rival Americanas in Brazil.
MercadoLibre shares might look expensive, but continued profit margin expansion and high revenue growth could rapidly shrink that valuation. In fact, analysts expect earnings per share to grow by more than 150% over the next two years.
If MercadoLibre can deliver on those expectations, the stock should have even more upside potential ahead.
