The stock market has been on a wild ride in April. Following President Donald Trump's tariff announcement on April 2, the S&P 500 had one of its worst two-day performances in 80 years. Uncertainty over future trade policies and other countries' responses to them has rocked the market, leading many to sell riskier investments like growth stocks.
While many stocks have bounced back following the announcement that the U.S. will pause most of its tariffs, they're still well off their highs. Three growth stocks in particular look incredibly attractive after the sell-off. Even with the remaining macroeconomic uncertainty, these growth stocks are too cheap to ignore.
1. Alphabet
Alphabet (GOOG +0.85%) (GOOGL +0.83%) is best known for its Google search engine, YouTube, and various other internet properties with more than 1 billion monthly users. The stock has been hit hard in the stock market sell-off, but there are several reasons why long-term investors should remain optimistic about the tech giant's prospects.
First, its core business, Google Search, is extremely resilient. Many observers feared artificial intelligence (AI) chatbots like OpenAI's ChatGPT would displace online searches, but Alphabet's successfully staving them off with features like AI Overviews. Management says its AI-generated answers monetize at similar rates to traditional search results while increasing engagement and user satisfaction. Google has also used AI to develop features like circle-to-search and Google Lens, which have increased valuable product searches.
Google's ad business generally holds up well amid economic slowdowns. Advertisers will pull back on less targeted advertisements before cutting spend on Google's ads where consumers have high purchase intent. That should enable Google's core business to outperform regardless of how tariffs impact the economy.
NASDAQ: GOOG
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Meanwhile, the company's cloud computing business, Google Cloud, continues to see strong demand for AI services. That's unlikely to change, as businesses are looking to invest in AI to improve productivity and lower overhead in the long run. Management noted demand exceeded supply in the fourth quarter, and it still grew 30% year over year. Additionally, there's a lot of room to improve its operating margin as it scales, which was just 17.5% last quarter. Larger competitors have operating margins double that level.
As of this writing, Alphabet stock traded for just 17.5 times analysts' consensus estimate for 2025 earnings. That's a price investors should be more than willing to pay for a company as resilient as Alphabet with several growth drivers pushing earnings higher.
2. DraftKings
DraftKings (DKNG +2.27%) is one of the two largest online sports betting and iGaming companies in the United States. Declining consumer sentiment and growing recession fears pushed the stock price lower recently, as consumers tend to bet less and play fewer fantasy sports when they have less discretionary income.
But those concerns could be overblown. DraftKings is showing strong economies of scale after years of steady growth. Last year, it added 3.5 million new customers, increasing its customer base 42% to 10.1 million. And it paid less to acquire each of those customers than ever before. That speaks to DraftKings' brand advantage. Even in the face of high-profile sportsbook launches like ESPN Bet, DraftKings was able to add a record number of new customers at a low cost.
NASDAQ: DKNG
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DraftKings has a second important advantage. Its scale gives it valuable propriety data. Having access to good data can help DraftKings set accurate money lines and point spreads. On top of that, it enables it to target promotions, identify sharp bettors (to mitigate losses), and create popular new products like same-game parlays and player props.
Data is a big area of investment for DraftKings, too. It's made several acquisitions in the space. If recession fears grow and other sports data companies decrease in value, it may be an opportunity for DraftKings to acquire more companies and build on its data advantage.
Management sees strong operating leverage going forward with modest operating expense increases this year. Its full-year outlook calls for revenue growth of about 34%. That should produce significant earnings growth for the year. Analysts currently expect earnings per share to increase more than fivefold this year and another 72% in 2026. But with the stock trading for just 27.5 times analysts' earnings expectations for the year as of this writing, it looks like a bargain.
3. PayPal
PayPal (PYPL +1.01%) is a pioneer of online digital wallets. As one of the earliest businesses in the space, it has a massive head start building a network of merchants and consumers. As of the end of 2024, it counted 434 million active accounts. It's a natural beneficiary of growing e-commerce sales.
NASDAQ: PYPL
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That said, it's a position that's incredibly susceptible to an economic slowdown. If that happens, online retail could drop faster than many other industries due to its discretionary nature. That's especially true for smaller online retailers, who are the biggest beneficiaries of PayPal's services.
On top of that, PayPal is undergoing a transition led by new CEO Alex Chriss. It's focused on culling unprofitable merchants from its customer base, while only adding new profitable merchants to the platform. The result is seen in its 2% growth in unbranded card processing in the fourth quarter. Management expects similar results in the first quarter.
A focus on "profitable growth," as management calls it, should pay off in the long run with higher gross margins and lower operating expenses as the company narrows its focus. But it will require patience from investors. In the meantime, PayPal continues to generate significant free cash flow, which it uses to repurchase shares at a regular cadence. As a result, it's able to support strong earnings-per-share growth.
The stock recently traded for a trailing P/E ratio of 15, close to its all-time low since it became an independent publicly traded company again in 2015. Its forward P/E of about 12 is extremely cheap, even if you consider the risks of a macroeconomic slowdown impacting the company's operating results. It's too cheap to ignore.
