Simply described, growth stocks are the shares of companies that are growing faster than the average company on the stock market. These are often the stocks of start-up companies that are expanding quickly and rapidly gaining market share. While growth stocks are often depressed when the market is down, for outsized gains, there are few alternatives to growth stocks. Given the decline of stock prices in recent months, many growth stocks are now available at deep discounts. However, when the bull market returns, these names will rebound sharply. Here are seven cheap growth stocks that are too attractive to ignore.
Alphabet (NASDAQ:GOOGL) is so much more than an online search engine today. The parent company of Google is diversified and offers a range of cutting-edge products that include smartphones and smart watches, as well as online home assistants. Many of its offerings utilize artificial intelligence.
The California-based company remains a leader when it comes to pushing the technology envelope. And GOOGL stock has now reached its most affordable level since the company went public in 2004.
A 20-for-1 stock split executed in July brought the price of GOOGL stock down to around $135 from more than $1,800 previously. However, the share price has been dragged lower amid this year’s tech wreck and after the company signaled that online advertising is slowing.
The result is that investors can now buy GOOGL stock for $99 a share. Over the long term, the company’s return on investment is likely to be massive. Since its initial public offering 18 years ago, Alphabet’s stock has returned more than 3,500% to the investors who held onto its shares for all those years.
Another leading technology company and growth stock that has been pushed lower this year is cloud computing giant Salesforce (NYSE:CRM). In 2022, CRM stock has fallen 39% to $155.82 per share.
The San Francisco-based company’s stock has been hurt by investors fleeing to the safety of more cyclical blue-chip names and by weak forward guidance that indicates its growth is starting to slow. However, there are reasons for investors to remain optimistic about Salesforce’s long-term outlook.
In August, Salesforce issued quarterly results that beat Wall Street’s forecasts, highlighted by earnings per share of $1.19, which handily beat analysts’ average EPS estimate of $1.02. Additionally, the company announced that it was undertaking its first-ever share buyback program with plans to repurchase $10 billion of its own stock.
While its forward guidance was weaker than had been expected, Salesforce’s management said that it plans to lift the prices that it charges for the Slack team communications app that it acquired last year.
With the drama surrounding Twitter (NYSE:TWTR) seemingly put to bed, Elon Musk can now, hopefully, turn his focus back to Tesla (NASDAQ:TSLA), the world’s leading manufacturer of electric vehicles.
While it can no longer be considered a start-up, Tesla remains in aggressive growth mode. In the last year alone, the company has opened massive new manufacturing plants in Austin, Texas and Berlin, Germany, and expanded its existing plant in Shanghai, China. The company also continues to push into new frontiers ranging from solar panels to humanoid robots.
It’s all part of Musk’s vision for our collective future, and it is the reason why Tesla remains one of the best cheap growth stocks to own.
Like many tech stocks, TSLA shares split on a 3-for-1 basis in August this year. It was the second split in as many years for the stock and brought the price down to under $250 a share.
However, aside from the split, the shares of Tesla have declined 32% in 2022, providing an attractive entry point for investors at their current level of $240. Its price-earnings ratio is still on the high side at 87.
But keep in mind that its P/E ratio was sitting above 200 at the outset of the pandemic.
Spotify Technology (SPOT)
Swedish company Spotify Technology (NYSE:SPOT) is the undisputed king of audio streaming. It is a fast-growing company that is dominant in most of the markets in which it operates.
However, the company’s lack of profitability has hurt its share price, pushing it down 61% so far this year to $92.30.
However, while profits remain elusive for SPOT, the numbers show that it is heading in the right direction.
In the second quarter, Spotify reported that its monthly active users had jumped 19% year-over-year and 3% versus Q1 to 433 million. The company has a goal to reach 1 billion monthly active users by 2030.
As music streaming and podcasts grow in popularity, Spotify has continued to aggressively expand. Today the company and its service are available in every country around the world except for China.
As a result, Spotify now generates more than $10 billion a year in revenues, with the vast majority of that money coming from monthly subscriptions. The company is working to diversify and generate new revenue streams, most recently by entering the audio-book space. If all goes according to plan, Spotify should turn a profit by the end of this year and should start generating consistent profits in 2023.
It’s not without risk and many investors would be unable to handle its volatility, but for those who can be patient and stomach near-term losses, then financial technology (fintech) company Block (NYSE:SQ) could be a good growth stock to buy at current levels. Formerly known as Square, Block is the company behind the popular payment system that enables small-and-medium businesses to accept credit and debit card payments and use smartphones for point-of-sale transactions.
Square co-founder Jack Dorsey rebranded the company as Block to reflect its growing push into cryptocurrencies, a risky proposition that is largely responsible for SQ stock being down 61% this year.
At its current price of $62.50 a share, SQ stock looks very cheap. At the depths of the pandemic, when so many merchants were turning to Block’s technology to help facilitate online payments, the stock was trading near $300 a share.
The decline since last November has been largely due to Dorsey’s push into the volatile cryptocurrency market. The company currently holds more than 8,000 Bitcoin (BTC-USD) tokens worth more than $150 million. That has made many investors think twice about buying SQ stock. However, the company’s core payments business continues to grow and expand at a brisk pace.
With the Biden administration’s hard fought climate change legislation officially passed, the long-awaited buildout of electric vehicle infrastructure is expected to begin in earnest.
And this benefits California-based ChargePoint (NYSE:CHPT), the biggest manufacturer of electric vehicle charging stations in the world. The Biden administration has allocated $900 million to install electric vehicle charging stations in 34 states and Puerto Rico. The President has said publicly that he wants EV chargers to be “as easy to find as gas stations are now.”
This will be a boom for ChargePoint, which operates the largest network of independent EV charging stations in the world, spanning 14 countries. The American company is expected to further benefit as other countries around the world ramp up their investments in the infrastructure that is needed to achieve more widespread adoption of electric vehicles.
With most major automakers planning to switch their fleets to EVs by 2030, the demand for the charging stations made by ChargePoint will only grow in coming years. Currently, CHPT stock, which has tumbled 18% this year, can be bought for $15,70 a share.
While it is true that we’ve returned to the office, much of our work life has migrated online for good from video conferences to team-chat functions. The same can be said for the electronic management of contracts and signatures. Basically, people no longer need to be face-to-face to sign a contract and finalize a deal or agreement.
Companies such as DocuSign (NASDAQ:DOCU) have made it possible for contracts and signatures to be managed from anywhere in the world, easily and conveniently. Another casualty of the pandemic recovery, DOCU stock has fallen 80% in the past 12 months and now changes hands at $52.30 a share. But the selloff has been overdone based on DocuSign’s financials and future outlook.
To be sure, DocuSign has struggled coming out of the Covid-19 crisis. Most recently, the company announced that it was laying off more than 650 employees as part of a cost-cutting plan that will cost as much as $40 million.
DocuSign has also announced the appointment of Allan Thygesen, who previously was in charge of online advertisements at Google parent company Alphabet, to be its new CEO. While the current transition at DocuSign has been painful for shareholders, the end result should be a leaner and more nimble company that is poised for future gains.
The company estimates that its total addressable market is $50 billion, which should provide plenty of room for continued growth.
On the date of publication, Joel Baglole held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.