5 Growth Stocks to Buy After a 50% Correction

  • These growth stocks to buy trade at attractive valuations after a correction of more than 50%.
  • Nio (NIO): Positive industry tailwinds and government policy to support growth. New models and international expansion are positive catalysts.
  • Pinterest (PINS): Ample scope for growth in emerging market average revenue per user. Focus on making Pinterest a proxy e-commerce platform.
  • DraftKings (DKNG): A big addressable market as more states legalize online sports betting and iGaming. Steady upside in ARPU.
  • ChargePoint (CHPT): Positioned for stellar growth with presence in North America and Europe. EBITDA margin improvement likely as subscription service revenue swells.
  • Roblox (RBLX): Among the best metaverse plays. Free cash flows likely to increase in the coming years. Robust financial flexibility to invest in innovation.
growth stocks to buy - 5 Growth Stocks to Buy After a 50% Correction

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Legendary investor Warren Buffett opines that “money is made in investing by owning good companies for long periods of time.” It’s also common across all great investors that buying activity increases when there is blood on the streets. With several stocks being severely punished in the first two quarters of 2022, I would selectively look at growth stocks to buy.

Of course, the macro-economic headwinds are still not over. Inflation has been stubborn and there are fears of a recession in 2023. However, it’s important to note that markets tend to work discounts in before full effects take hold.

Therefore, it makes sense to gradually accumulate quality stocks — in particular, stocks that have witnessed a significant correction, but have a positive long-term outlook.

Let’s talk about four growth stocks to buy after a 50% correction.

NIO NIO Inc. $18.93
PINS Pinterest, Inc. $17.38
DKNG DraftKings Inc. $10.60
CHPT ChargePoint Holdings, Inc. $12.44
RBLX Roblox Corporation $24.31

Growth Stocks to Buy: Nio (NIO)

NIO ES6 electric SUV semi-autonomous car on display near Chinese automobile manufacturer NIO software development office in Silicon Valley
Source: Michael Vi / Shutterstock.com

In May 2022, Nio (NYSE:NIO) stock touched lows of $11.70. Within a matter of one-month, the stock surged by 74% to $20.40. Nio stock has witnessed renewed correction due to broad market sentiments. Fears of another lockdown in China have also impacted the stock. I believe it’s a good time for renewed exposure to the stock.

It’s worth noting that China has recently lowered taxes on low-emission vehicles. The country is also considering extension of electric vehicle (EV) subsidies. Once near-term tailwinds are navigated, Nio stock is likely to surge higher.

Specific to the company, there are two positive catalysts. First, Nio has an attractive new product line-up for China and international markets. New models will ensure that deliveries growth remains robust. Further, Nio also has strong financial flexibility with cash and equivalents of $8.4 billion as of March 2022.

I believe that vehicle margin is likely to be impacted in the near-term due to inflation. However, with operating leverage, the company is positioned for healthy cash flows in the next few years.

Pinterest (PINS)

Pinterest logo. PINS stock.
Source: Ink Drop / shutterstock

Pinterest (NASDAQ:PINS) stock is another name that has declined by 50% in the last six-months. I believe that the correction is overdone. At a forward price-to-earnings-ratio of 20.8, the stock is worth adding to the portfolio.

I am bullish on Pinterest for two major reasons. First, the company is focused on making shopping seamless on the platform. I see Pinterest as a proxy e-commerce platform with global presence. Last quarter, the company launched “Your Shop.” The Pinterest application programming interface (API) intends to make shipping experience more personalized.

Further, Pinterest has significant impending growth from emerging markets. For U.S. and Canada, the company reported average revenue per user of $4.98 for Q1 2022. For the same period, the ARPU for the rest of the world (excluding Europe) was eight cents. However, the ARPU increased by 164% on a year-on-year basis. There seems to be ample scope for growth in emerging markets where Pinterest has the highest number of active users.

Overall, Pinterest has a healthy cash flow visibility for the long-term. A deep correction provides a good entry opportunity.

Growth Stocks to Buy: DraftKings (DKNG)

A man opens the DraftKings (DKNG) app from his iPhone. DraftKings is an American daily fantasy sports contest and sports betting operator. DKNG Stock Forecast
Source: Tada Images / Shutterstock.com

DraftKings (NASDAQ:DKNG) is another name among growth stocks to buy that has plunged by 50% in the last six-months. While there are concerns related to cash burn, I believe that DKNG stock is oversold in the near-term.

For Q1 2022, DraftKings reported revenue growth of 34% to $417.2 million. For the same period, the company’s adjusted EBITDA loss widened to $289.5 million.

However, even with the cash burn, there are positives that make DKNG a buy at current levels. DraftKings has continued to report healthy growth in average monthly unique payers. Once marketing and selling expenses stabilize, steady growth in ARPU is likely to translate into EBITDA margin improvement.

Another point to note is that the iGaming and Sports Betting industry is still at an early growth stage. The company believes that the total addressable market in North America is in the range of $67 to $80 billion. Therefore, there is ample scope for growth as more states legalize iGaming and sports betting.

DraftKings has already increased the long-term EBITDA outlook to $2.1 billion. Multi-fold returns is a possibility in the next few years.

ChargePoint Holdings (CHPT)

EV stocks: A close-up shot of a ChargePoint (CHPT) charging station.
Source: YuniqueB / Shutterstock.com

ChargePoint (NYSE:CHPT)  stock is down by about 37% in the last six-months. However, on a 12-month basis, the stock is lower by almost 58%. I believe that CHPT stock is the top name among growth stocks to buy from the EV charging industry.

As an overview, ChargePoint is a leader in charging infrastructure in North America. The company has also expanded presence in Europe through acquisition. Currently, ChargePoint has presence in 16 European cities.

Therefore, the company is making inroads in two of the biggest regions for electric vehicle charging infrastructure growth. With positive policy tailwinds, there is scope for sustained growth in the coming years.

Another important point to note is that the company derives revenue from network charging stations and subscription services. As the company’s presence expands, subscription services will boost EBITDA margin and cash flow upside.

Overall, CHPT stock looks attractive after a deep correction. The company has a strong cash buffer to maintain aggressive growth and create long-term value.

Growth Stocks to Buy: Roblox (RBLX)

Roblox Stock IPO
Source: Miguel Lagoa / Shutterstock.com

Roblox (NASDAQ:RBLX) has witnessed a deep correction on post-pandemic growth concerns. However, there seems to be value in the stock at current levels of $24. I expect quick 20% to 30% returns.

Roblox has been considered among the top metaverse plays. The industry is set to grow at a robust pace through 2030. Even with a relative slowdown in growth, the long-term outlook remains positive.

For Q1 2022, Roblox reported revenue growth of 39% on a year-on-year basis to $537.1 million. For the same period, the company reported free cash flow of $104.6 million.

Another important point to note is that daily active users also increased by 28% on a year-on-year basis to 54.1 million. Clearly, growth has been lower than expected, but there are positive metrics. With sustained user growth, free cash flow will also accelerate.

In terms of DAU growth, Roblox reported 28% year-on-year growth. During the same period, growth in users above 13-years of age was 38%. With a wider addressable market, active user growth is likely to sustain.

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.


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