- These attractive growth stocks to buy have corrected by at least 70% in the last six months, but are fundamentally strong and poised for a comeback.
- Marathon Digital (MARA): Depressed due to a decline in Bitcoin. However, with the deployment of miners, the growth outlook is robust.
- Coinbase (COIN): Healthy addition of institutional clients. The long-term outlook remains positive with wider cryptocurrency adoption.
- Roblox (RBLX): The best metaverse play. Healthy growth with visibility for higher free cash flows in the coming years.
- Lucid Motors (LCID): Weak guidance for 2022 discounted in stock, but long-term outlook is positive with international expansion and new models.
- Etsy (ETSY): Growth in active buyers and sellers remains encouraging. GMS per active buyers continues to trend higher.
- DraftKings (DKNG): Cash burn is a concern. However, the addressable market is big and robust growth is likely to sustain.
- Sea Limited (SE): Stock rally after Q1 2022 results indicates a potential reversal in sentiment. Healthy e-commerce revenue growth to sustain.
Most of the high-flying growth stocks have been battered in the recent market correction. In fact, the S&P 500 Pure Growth Index has declined 24% year-to-date (YTD).
This does not come as a surprise, with several stocks plunging from overvalued levels. Also, the markets have been discounting the economic slowdown and liquidity tightening factors. And overall, there is a possibility of a recession in 2023.
Furthermore, it’s worth noting that growth stocks are high-beta stocks. Therefore, the reaction on the downside has been extreme. Even with all the concerns, though, I would look at some growth stocks to buy after a big correction.
While a handful of growth stocks have been relatively resilient, some stocks have declined by as much as 70% in the last few months. However, these are not purely speculative stocks. These are stocks of companies with a robust business model. Therefore, the correction provides an attractive entry opportunity into some quality growth stocks.
With all of that in mind, I would prefer to gradually invest in these growth stocks than take a one-time plunge. And once macro-economic headwinds wane, these stocks can deliver robust returns.
So, let’s take a look at factors that make these seven growth stocks worth considering.
Growth Stocks to Buy: Marathon Digital (MARA)
The plunge in Bitcoin (BTC-USD) has been more than 50% from all-time highs. Therefore, it’s not surprising that Bitcoin miners have witnessed a deep correction.
Marathon Digital (NASDAQ:MARA) has declined by 80% in the last six months. However, current levels seem attractive for long-term exposure.
As of April 2022, Marathon reported a mining capacity of 3.9EH/s. That said, the company plans to increase mining capacity to 13.3EH/s by mid-2022, and to 23.3EH/s by the first quarter of 2023.
Of course, Marathon has been slow in deploying capacity. However, even if the capacity addition takes longer than expected, Marathon is positioned for healthy growth through 2023.
Assuming that Bitcoin is back to $40,000 to $45,000 levels, Marathon is positioned to deliver revenue in excess of $1 billion. Clearly, the stock seems undervalued considering the impending growth. With a healthy balance sheet, I also don’t see any financing concerns.
Thus, MARA stock is among the attractive growth stocks to buy, as it can potentially double from current levels.
Coinbase (NASDAQ:COIN) stock is another name among cryptocurrency stocks that have plunged in the last six months. In fact, during this period, the stock has declined by 81%.
Moreover, last year was strong for Coinbase in terms of revenue and EBITDA growth. However, with the decline in trading and speculative activity, the outlook seems pessimistic for 2022. Even with this factor discounted, COIN stock seems attractively valued.
For Q1 2022, Coinbase reported a 58% decline in retail trading volume on a year-over-year (YOY) basis. For the same period, though, institutional trading activity increased by 37%. So, the wider adoption of cryptocurrency among retail and institutional investors over the long term is a key growth catalyst.
Coinbase also reported subscription and services fee of $151.9 million for Q1 2022, good for a boost of nearly 170%. More specifically, blockchain rewards was the largest contributor to revenue in this segment.
Therefore, there are positives even as headline numbers have disappointed. And so, I believe that COIN stock can easily double from current levels in the next 12-24 months.
Growth Stocks to Buy: Roblox (RBLX)
Roblox (NYSE:RBLX) had a sharp correction from November 2021 highs of $141.60 to current levels of $32.55. That said, it finally seems that the correction is over with the stock looking undervalued.
Overall, the metaverse is the key reason to be bullish on Roblox. In 2022, the metaverse market size is estimated at $100.3 billion. By 2029, though, the market size is expected to increase to $1.5 billion. This presents a big opportunity for Roblox, which is among the top metaverse plays.
For Q1 2022, Roblox reported revenue growth of 39% to $537.1 million. Also for the same period, the company reported healthy growth in daily active users.
Another important point to note is that Roblox reported free cash flow (FCF) of $105 million for the quarter. This is vital because the company already has an annualized FCF potential of $400 million.
With sustained revenue growth, the company is positioned to deliver strong cash flows. Also, with cash and equivalents of $3.1 billion, there is ample flexibility to invest in product development.
Overall, the company’s growth metrics remain encouraging and the stock plunge has clearly been an overreaction. Thus, RBLX stock is worth holding for the next few years.
Lucid Motors (LCID)
The correction was primarily due to Lucid providing weaker-than-expected guidance for 2022. Additionally, supply chain concerns have also contributed to the weak sector sentiment.
However, at current levels of $17.36, LCID stock seems poised for a reversal. In April 2022, Lucid announced a deal for the purchase of up to 100,000 vehicles by the Government of Saudi Arabia. With that in mind, international expansion is a key catalyst for long-term growth.
Moreover, as of Q1 2022, Lucid reported total customer reservation of 30,000 vehicles. In turn, this implies potential sales of $2.9 billion. And as the backlog swells, the stock is likely to trend higher.
Another important factor to note is that Lucid also has $5.4 billion in cash and equivalents. This provides ample financial buffer for investments in the next 12-18 months.
Growth Stocks to Buy: Etsy (ETSY)
Among e-commerce growth stocks to buy, Etsy (NASDAQ:ETSY) is attractive after a correction of 70% the past six months. At a forward price-earnings ratio (P/E) of 27.7, the downside seems capped. However, the upside potential is meaningful considering the long-term business outlook.
For Q1 2022, the company’s revenue growth was just 5.2% to $579 million. Moreover, muted top-line growth is discounted in the price.
However, Etsy has reported sustained growth in active buyers and sellers. At the same time, the percentage of non-U.S. gross merchandise sales have been increasing. It’s likely that growth will accelerate with a global addressable market.
Another positive is the trend in the gross merchandise sale (GMS) per active buyer. In Q1 2020, the GMS per buyer was $104. Two years later, it swelled to $137 in Q1 2022. So, as the purchase value for active buyer trends higher, it’s likely to have a positive impact on the company’s EBITDA and cash flow potential.
Overall, with all of this in mind, ETSY stock is attractive with the company having the potential to deliver strong cash flows over the next few years.
Even with relatively strong numbers, DraftKings (NASDAQ:DKNG) stock has been in a correction mode. Recently, Jefferies analyst David Katz opined that the stock trades at attractive valuations. The analyst has a price target of $60 for the stock, which would imply multi-fold returns from current levels.
For Q1 2022, DraftKings reported revenue growth of 34% to $417 million. However, EBITDA losses widened for the same period to $290 million. EBITDA losses remain a concern. DraftKings has however guided for a relatively lower loss for 2022 as compared to the previous guidance.
In terms of positives, there is a big addressable market as more states in the U.S. legalize sports betting and online sports gambling. This is likely to ensure that top-line growth remains robust. Also, the company’s average revenue per monthly unique payer has been trending higher.
Once marketing and selling expenses stagnate or decline on a relative basis, EBITDA margin will improve. So, overall, DKNG stock clearly seems to have over-reacted to cash burn concerns. Thus, a strong rally from oversold levels seems likely.
Growth Stocks to Buy: Sea Limited (SE)
Sea (NYSE:SE) has been among the worst-performing growth stocks in the last few quarters. However, at current levels of $74.20, the stock seems poised for a reversal rally.
For Q1 2022, Sea reported revenue of $2.9 billion — an increase of 64% YOY. While the cash burn has sustained, it’s likely that losses will narrow in the coming quarters. In fact, the company has already taken steps to cut costs for the e-commerce division.
Moreover, the digital entertainment segment has witnessed a decline in active and paying users. However, this factor is discounted in the stock. For example, after these results, SE stock was trading higher by 10%. This might be an indication of a potential reversal in sentiment.
It’s also worth noting that as of Q1 2022, the company reported cash and equivalents of $8.8 billion. Therefore, there is ample financial flexibility to invest in growth even with the cash burn. So, for all these reasons, investors should keep an eye on Sea Limited as one of the top growth stocks to buy.
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.