- Twilio (TWLO): Building a communications platform with a wide mode.
- DigitalOcean (DOCN): Offers an Infrastructure as a Service (IaaS) platform for software developers and has robust growth.
- Shopify (SHOP): Building the future of e-commerce and recently announced a 10-for-1 stock split.
It’s been a tough stretch for growth stocks. So tough, in fact, that it’s hard to write an article about growth stocks to buy this month. This group limped into 2022 and then the hammer came down. Investors dumped these stocks as fast as they could, with many free-falling from already wounded levels.
That’s left growth investors hoping for some kind of sustainable bounce and more specifically, a bottom.
We’ve since had a solid rally from the mid-March low. However, many of these stocks have come back under pressure. While they haven’t quite retested the 2022 lows, they’re not far from doing so. If we get a sustained decline this month, I would consider stepping in and buying some of these wounded stocks.
There will be a time when these stocks stop grinding out new lows. So far, it’s not clear that that time has come. However, there can be value in the three stocks if investors can hold steady in them. Investors who don’t like timing the market can opt for a dollar cost average (DCA) approach instead.
Let’s look at three high-quality growth stocks to buy this month — especially on a deeper decline.
Growth Stocks to Buy: Twilio
Twilio (NYSE:TWLO) has become a volatile stock, and its lack of profit hasn’t helped its cause. In fact, one could blame the bottom-line results as a serious culprit to the volatility. I have noticed this trend in many quarters: The company reports a blowout revenue result and beats on earnings expectations. However, management’s earnings outlook for the next quarter disappoints and the stock sells off.
In previous bull markets, the stock would sell off for a few days or weeks and then explode higher. In essence, it was a perfect buy-the-dip setup. Now that we’re in a bear market though, only the first part — the selloff — is playing out.
Shares are 71% off the all-time high of $457.30. At the low, shares were down 73%. Will it take out the lows? I have no idea, but if it does, it will only increase the value for future shareholders.
This company is forecast to grow revenue between 30% and 35% in each of the next three years. Next year, Twilio is forecast to flip to profitability.
With top customers including Stripe, Airbnb (NASDAQ:ABNB) Salesforce (NYSE:CRM) and others, I expect Twilio to hit new highs. Communication with customers is key for any business, giving Twilio an exceptional moat.
Growth Stocks to Buy: DigitalOcean
DigitalOcean (NYSE:DOCN) is a relatively new but exciting growth stock. The company made its debut just over a year ago in March 2021, but didn’t explode to new highs right away. Instead, it bided its time but drifted higher as many of its peers were engulfed in bear markets. Then in November, the stock surged to all-time highs.
Many investors have never heard of DigitalOcean, and that’s not too surprising. The company has this to say for its business model:
“Businesses grow faster when developers can build on the simple, affordable cloud they love. DigitalOcean has the cloud computing services you need, with predictable pricing, robust documentation, and scalability to support your growth at any stage.”
Unlike Twilio, DigitalOcean is already profitable. It was profitable in 2021, earnings 34 cents a share. It will look to double those results in 2022, followed by expectations for 64% growth in 2023. Like Twilio, DigitalOcean is forecast to grow revenue between 29% and 32% in each of the next three years.
Growth Stocks to Buy: Shopify
Last but certainly not least is Shopify (NYSE:SHOP). This stock is down a whopping 67% from the highs and at the recent low, it was down 71%. If it were to decline to its 2020 Covid-19 low, Shopify stock would fall about 47% from current levels. If it were to return to its 52-week high, it would roughly triple from current levels.
For many investors, that may be a risk/reward worth contemplating.
I really like this stock for the long term, as it continues to alter the e-commerce landscape. Shopify is building out an impressive platform for online sellers, covering everything from website building to shipping solutions.
Investors have been critical of the stock in the past due the valuation. Admittedly, it has always traded at a premium, and it always will. Shopify will not trade with a market-multiple for years — if ever.
Analysts expect 31% revenue growth this year, 33% growth in 2023 and 37% growth in 2024. In 2025, estimates shoot even higher. In other words, accelerating growth is on the horizon if Shopify can deliver.
This is one I want to own, tuck away and come back several years down the road.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.