It is no secret that once high-flying growth stocks have fallen drastically in the ongoing correction. On an individual level, it is very easy to identify once-vaunted growth stocks that have since fallen dramatically.
And on a more comprehensive, holistic level, the numbers bear out the same conclusion: Growth has tanked. The S&P 500 Pure Growth Index, a useful yardstick for measuring the movement of the sector, is down more than 20% year-to-date.
On the one hand, there are plenty of opportunities afoot. There will come a time when beaten down growth plays return to fashion at large. That will benefit the best growth plays — hopefully those listed above the most.
But a caveat emptor warning is still necessary. Growth stocks have a reasonable chance of remaining stunted as recession fears loom and as the Fed continues to raise interest rates. That said, these seven stocks look like solid plays for the long term.
|GOOG, GOOGL||Alphabet Inc.||$2,286.20, 2,284.61|
|FB||Meta Platforms, Inc.||$191.02|
|FVRR||Fiverr International Ltd.||$41.81|
|LCID||Lucid Group, Inc.||$18.61|
Growth Stocks to Buy: Etsy (ETSY)
Etsy (NASDAQ:ETSY) operates a unique marketplace. The handmade products its sellers produce separate it from every other platform selling retail, mass-produced goods.
That’s the brand’s unique selling proposition (USP) to be certain.
And while that lends to its inherent attractiveness, overall market conditions aren’t currently in its favor. The company is growing in fits, which has sent investors and their capital fleeing into more stable investments.
The problem is that Etsy’s net income dropped by 40.1% in Q1, sinking to $86.1 million.
The company looked fundamentally stable otherwise and it should be noted that it is still profitable. However, the sharp decline simply bodes poorly for Etsy in a rising interest rate environment.
So, why then should investors consider ETSY stock? The answer is that despite issues, Etsy is rapidly moving toward a better future. Gross Merchandise Sales (GMS) have more than doubled between Q1 ‘20 and Q1 ‘22, rising from $1.2 billion to $2.8 billion. The company is still growing rapidly and is profitable in spite of the fluctuations.
That’s more than can be said for many other growth stocks and will go a long way once the macroeconomic picture stabilizes.
Alphabet (GOOG, GOOGL)
On the one hand, Alphabet (NASDAQ:GOOG, GOOGL) is Alphabet. Even in the worst of times — i.e., current times — it tends to hold its value well. On the other hand, it is still down more than 20% since the new year.
But growth investors are going to be hard-pressed to find a better growth stock in terms of the likelihood to return to former highs. GOOG stock is about as sure a thing as there is.
Investors may be hesitant to pay for its growth currently, but fret not, because it will continue to grow and capital will return.
Google’s revenues reached $68.011 billion in the first quarter. That’s a 23% increase over the same period a year earlier. That said, net income declined and ad revenue from YouTube disappointed.
I’ve written several times that YouTube shorts will likely make up the shortfall – TikTok took market share – moving forward. So I’m not worried that the recent problems are a sign of a greater, lingering issue.
And Google will soon undertake a 20-for-1 stock split just like the one Amazon (NASDAQ:AMZN) shareholders recently approved. It should be a no-brainer vote that should increase share prices.
Growth Stocks to Buy: Block (SQ)
A recent article in Barron’s highlighted the notion that Block (NASDAQ:SQ) is branding itself as more than a payment company, and Wall Street is on board with the firm’s self-characterization.
Block began as Square and initially focused on in-person credit-card payments for small merchants. Since then it has added P2P payments, which allow payments without account details and buy-now pay later functionality as well. Further, Block has also pivoted toward crypto and blockchain, reflected in the name change.
The company is a very interesting one even when ignoring branding efforts and associated pivots. It invests heavily into Bitcoin (BTC-USD), which cost it recently. Bitcoin decreases alone caused revenues to sink 22% overall in the most recent quarter. But when those losses are stripped out, revenues increased by 44%.
And Wall Street is on board with Block overall. Analysts give it an average target stock price of $147.09, implying significant upside at current prices.
My hope is that Block adjusts some of its risk factors in consideration of the macroeconomic environment and focuses on payments primarily. That could turbocharge its rebound.
Meta Platforms (FB)
It looks like Meta Platforms (NASDAQ:FB) stock is nearing a bottom. I say that because it has quickly rebounded after Snap (NYSE:SNAP) warned of slowing growth ahead on May 24. That news sent FB shares off a cliff as they dropped from $196 to below $180 instantaneously.
The good news is that Meta Platforms has shown its resilience, clawing back those losses in just 3 days. That’s a reasonable indication that Facebook ad revenue and Instagram, key value drivers, are again attractive to investment capital.
It’s tough to ignore the opportunity that FB stock presents currently. There’s nearly 50% upside present in its consensus stock price target of $294.13. Keep a keen eye on government regulation as it relates to Facebook’s ad tech. Any sign that the government will back off would be a strong entry point.
Growth Stocks to Buy: Fiserv (FISV)
Fiserv (NYSE:FISV) is a Wisconsin headquartered payments and fintech solutions firm. It’s on the safer side of growth and there’s plenty of reason for optimism in the company’s shares.
For one, revenues increased more than 10% per its most recent earnings report. That included an 11% increase in organic revenue growth.
Further, Fiserv reaffirmed earlier guidance. That reaffirmation should reassure investors of the firm’s prowess in this particularly volatile time.
Based on analysts’ expectations FISV stock looks to have roughly 25% upside. Investors should take note that the firm has produced earnings beats in each of the past four quarters. Combine that with the fact that management reaffirmed earlier guidance and Fiserv looks like a dependable growth stock moving forward.
Investors should be interested in Fiverr International (NYSE:FVRR) first and foremost based on a fundamental basis.
The freelancer platform had a very strong quarter from several perspectives. Growth investors seek top-line growth and Fiverr delivered on that front, hitting $86.7 million in sales this quarter. That marked a 27% increase YoY as well as the first time that the company reached adjusted EBITDA profitability in Q1 ever.
Although the company again posted a net loss, that net loss improved during the period. Rising revenues and narrowing net losses are precisely what reasonable growth investors ought to seek.
One reason to assume that Fiverr’s growth could exceed expectations is that more workers could pursue side hustles to combat inflation and rising costs. The gig economy is heating up, and FVRR stock is one way to invest in its growth.
Growth Stocks to Buy: Lucid Motors (LCID)
Making the suggestion that investors consider buying Lucid Motors (NASDAQ:LCID) stock is controversial. It carries significant short interest that sits above 24% currently after all.
That suggests that market sentiment is very negative on its prospects and that LCID is expected to move downward.
But a few things also suggest that the worst may be over for Lucid. Holders of Lucid shares since the beginning of the year have seen their investment lose more than 50% of its value. However, prices are acting as if a bottom may have been reached.
If that is the case, one reason could be that the company hasn’t had to revise production goals downward since they were moved to between 12,000 and 14,000. That could be perceived as a strong positive given that supply chain disruptions haven’t exactly smoothed themselves out yet.
So the notion that Lucid is a Tesla (NASDAQ:TSLA) killer ought to come back into play soon enough.
On the date of publication, Alex Sirois 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.