7 Growth Stocks That Have Become Deep Value Plays

  • These growth stocks have witnessed a meaningful correction in 2022 and trade at attractive levels.
  • XPeng (XPEV): Strong vehicle deliveries growth with new models and international expansion.
  • Tilray (TLRY): Has a road map for $4 billion in revenue by 2024.
  • Lithium Americas (LAC): A strong asset base, which will translate into sustained EBITDA growth once commercialized.
  • Blink Charging (BLNK): Robust revenue growth is likely to sustain with aggressive international expansion.
  • UiPath (PATH): Is seeing strong growth in its customer base and annual recurring revenue with an addressable market of $60 billion.
  • Coinbase (COIN): As assets on its platform increase, transaction revenue is likely to trend higher.
  • Kinross Gold (KGC): Sale of assets provides robust financial flexibility for production growth from core assets.
growth stocks to buy: tree growing on coin of stacking with green bokeh background

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Growth stocks have been going through challenging times in 2022. The S&P 500 Pure Growth Index has declined by 19.3% during this period.

There are several reasons for this correction. First, inflation has been a concern, and rate hikes will imply liquidity tightening. This has reduced the appetite for risk-on trade on a relative basis.

Also, the Russian invasion of Ukraine is likely to impact global growth. There are already supply chain issues, and high-flying growth stocks have shed some valuation premium.

It seems likely that challenging times for equities will sustain in the near-term. However, every correction provides an entry opportunity into growth stocks that can be long-term value creators. There were dozens of stocks that delivered multifold returns after the pandemic-driven crash.

It’s also important to note that even with four or five rate hikes, real interest rates will remain negative. This will imply funds are flowing into equities and other risky asset classes.

I therefore believe investors can consider exposure to oversold growth stocks. Once market sentiments turn bullish, returns from these picks can be robust.

XPEV XPeng $23.25
TLRY Tilray $4.96
LAC Lithium Americas $26.23
BLNK Blink Charging $18.29
PATH UiPath $17.82
COIN Coinbase $116.60
KGC Kinross Gold $4.95

XPeng (XPEV)

Image of Xpeng's (XPEV) G3 electric SUV outside a mall in China

Source: Johnnie Rik / Shutterstock.com

With Covid-19-triggered supply chain issues, Chinese electric vehicle (EV) stocks have witnessed a sharp correction. XPeng (NYSE:XPEV) stock has declined by almost 50% in the last six-months. I see this as a good opportunity to accumulate for the long-term.

For year-to-date 2022, XPeng reported vehicle deliveries of 43,563. On a year-over-year (YOY) basis, deliveries have surged by 136%. In April 2022, deliveries declined by 42% on a monthly basis. However, this drop due to supply chain issues is temporary and discounted in the stock.

It’s worth noting XPeng commenced mass-delivery of its P5 sedan in October 2021. Furthermore, in the third quarter of 2022, the company plans to start deliveries of G9. The launch of new vehicles will support growth along with expansion in European markets.

From a financial perspective, XPeng reported $6.8 billion in cash and equivalents as of Q4 2021. On top of that, the company recently secured 7.5 billion renminbi in credit facility from the Agricultural Bank of China. The company has ample financial flexibility to pursue aggressive growth and invest in product development.

Overall, XPEV stock trades at attractive valuations. Once industry sentiments improve, the stock can quickly double.

Tilray (TLRY)

Mobile phone with webpage of Canadian cannabis company Tilray (TLRY) Inc. on screen in front of business logo. Focus on top-left of phone display. Unmodified photo.

Source: T. Schneider / Shutterstock.com

Gradually, more states in the U.S. are legalizing recreational cannabis. Furthermore, federal-level legalization of marijuana remains a possibility. However, Tilray (NASDAQ:TLRY) has remained depressed and trades below $5.

I see current levels as a good buying opportunity. TLRY stock is one of the top names to consider among growth stocks in the cannabis segment.

It’s worth noting that for the first nine months of 2022, Tilray reported revenue of $475 million. This would imply an annualized revenue potential of $633 million.

In August 2021, the company CEO guided for revenue of $4 billion by 2024. With organic and inorganic growth, this seems likely. In particular, if regulatory headwinds wane in the coming quarters.

Therefore, Tilray is positioned for healthy growth and the company has already been reporting positive adjusted EBITDA. With operating leverage, key margins should improve further in the next few years.

TLRY stock therefore seems very attractive after a downside of 69% in the last 12 months. Once industry sentiments change, there can be a case for multifold returns.

Lithium Americas (LAC)

smartphone with logo of Canadian company Lithium Americas Corp on screen

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From its 52-week high of $41.56, Lithium Americas (NYSE:LAC) stock has corrected by nearly 40% to current levels around $25. These are attractive prices for accumulation considering the company’s long-term growth potential.

As an overview, the company has 100% ownership in the largest known lithium resources in the United States. With a mine life of 46 years, it expects to deliver an average annual EBITDA of $520 million. Clearly, the asset is a gamechanger with a post-tax internal rate of return (IRR) of 29.3%.

Lithium Americas also has 44.8% ownership in the Caucharí-Olaroz project in Argentina. It is expected to deliver an average annual EBITDA of $308 million. Production in the asset is likely to commence in the second half of 2022. This is a key upside catalyst for LAC stock.

From a financial perspective, the company has cash and equivalents of $500 million. There is ample flexibility to finance the construction phase of the Thacker Pass project. With lithium prices in an uptrend, the company is positioned to deliver healthy cash flows once assets are in the production phase. Therefore, financing growth through debt or equity should not be a concern.

Blink Charging (BLNK)

a blink charging station

Source: David Tonelson/Shutterstock.com

Globally, investments in EV charging infrastructure have been ramping up. In February 2022, President Joe Biden’s administration rolled out a plan to allocate $5 billion to states for EV charging station development.

Even in Europe, there is significant investment due. Estimates suggest the region needs 65 million EV chargers by 2035. With industry tailwinds that are likely to last beyond the decade, related companies are among the best growth stocks to consider. Blink Charging (NASDAQ:BLNK) is one of the most appealing names to consider in this category — especially after a 48% correction in the last 12 months.

For 2021, Blink reported revenue of $20.9 million. On a YOY basis, revenue surged by 236%. With aggressive investments and acquisitions, healthy growth is likely to sustain.

It’s worth noting the company derived 36% of its revenue from outside the U.S. However, that’s likely to change as Blink makes inroads in Europe. Recently, the company acquired EB Charging, which provides EV charging infrastructure in the U.K. With a presence in 23 countries, Blink Charging is positioned for healthy top-line growth.

It’s also worth noting that as charging infrastructure expands, the company’s service revenue will swell. This will help boost its EBITDA margin.

Overall, it seems the correction is over for BLNK stock. With major investments due in EV charging, the company is well-positioned to benefit.

UiPath (PATH)

A magnifying glass zooms in on the website homepage of UiPath (PATH).

Source: dennizn / Shutterstock.com

UiPath (NYSE:PATH) is another name among growth stocks that is trading at attractive valuations. PATH stock has trended lower by almost 69% in the last six months.

Recently, UiPath appointed Robert Enslin as its co-CEO. The company also reaffirmed its guidance for 2022. It expects revenue of nearly $1.1 billion and annual recurring revenue (ARR) of approximately $1.2 billion.

Estimates from Forrester indicate the global automation market is likely to be worth $60 billion in the next few years. This positions UiPath for sustained growth in ARR and EBITDA margin expansion.

The company’s automation cloud has also been delivering encouraging numbers. This business segment was launched about two years ago and already has an ARR of $140 million.

Overall, UiPath has witnessed strong customer growth on a YOY basis. The company’s non-GAAP operating margin also turned positive in 2022. With a big addressable market, it is positioned for sustained growth. PATH stock therefore is at an appealing entry point after a deep correction.

Coinbase Global (COIN)

COIN stock Coinbase logo on screen with Bitcoin coins

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With Bitcoin (BTC-USD) struggling below $40,000 and lower trading activity, Coinbase (NASDAQ:COIN) has been in correction mode. After a drop of 66% in the last six months, the stock looks like a potential buy at a forward price-to-earnings (P/E) ratio of about 30x.

For 2021, Coinbase reported revenue of $7.4 billion and an adjusted EBITDA $4.1 billion. Even with multi-fold growth in both metrics, the stock has remained depressed. A key reason is expectations of meaningfully slower growth in 2022. That seems likely, but COIN stock sellers seem to have overreacted.

It’s worth noting that in 2021, Coinbase increased its number of institutional customers by 50%. With rising adoption from this group, the company is positioned to benefit. It also generated $500 million in subscription and services revenue for 2021. This includes sales from staking and custody, and is another potential source of sustained growth.

Another important point to note is that 68% of transactional revenue for Q4 2021 was from assets other than Bitcoin and Ethereum (ETH-USD). With more assets being listed on the platform, the revenue stream is diversified.

Overall, COIN stock is likely to make a strong comeback once there is a fresh breakout for Bitcoin. The stock looks undervalued considering the long-term growth outlook.

Kinross Gold (KGC)

Cellphone with business logo of Canadian mining company Kinross Gold Corp. on screen in front of webpage.

Source: T. Schneider / Shutterstock.com

With inflation at a 40-year high, it makes sense to hold gold mining stocks in your portfolio. Kinross Gold (NYSE:KGC) is a relatively smaller name in the industry that still looks solid. At a forward P/E ratio of 11.7x, KGC stock has the potential to double in the next few quarters.

Last month, Kinross sold Russian assets for a consideration of $680 million. The company also announced the sale of its Chirano mine in Ghana for $225 million. These sales have boosted its financial flexibility to pursue aggressive production growth from core assets.

For 2021, Kinross reported gold production of 2.07 million ounces. For 2022 and the coming year, it expects to produce 2.65 million ounces and 2.8 million ounces of gold, respectively.

With higher production visibility and gold trading around $1,900 per ounce, revenue and cash flow upside are likely to be robust. And while there is a case for multiple rate hikes in 2022, real interest rates will still remain negative. This will ensure gold remains around $2,000 per ounce, making KGC stock a worthwhile bet.

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On the date of publication, Faisal Humayun did not hold (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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

Article printed from InvestorPlace Media, https://investorplace.com/2022/05/7-growth-stocks-that-have-become-deep-value-plays/.

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