3 Beaten Stocks You Would Be Crazy To Sell

Shopify (SHOP) makes ecommerce platforms online businesses can use to sell products directly to consumers. Its product suite includes tools for processing payments, streamlining shipments, and marketing to existing and potential customers.

Shopify’s stock price soared during the height of the pandemic as more consumers turned to the internet to find the products and services they wanted. Online shopping’s popularity had been growing for years. The pandemic kicked the growth into high gear and created enormous growth for companies like Shopify.

Over the last year, Shopify’s stock price peaked at about $1,690 on November 19, 2021. Over the next few months, though, shares lost more than half of their value. Prices reached their lowest point on March 14, 2022, when shares traded for about $513.

Currently, shares trade for approximately the same price as at the beginning of the pandemic. Has the company really outlived so much of its relevance that it deserved to lose more than $1,000 per share?

The numbers suggest that Shopify has plenty of growth potential.

During the fourth quarter of 2021, Shopify brought in $1.38 billion in revenue. That’s 41% higher than the same quarter from 2020. Other signs of success include:

• 37% growth in adjusted gross profit.
• 23% growth in monthly recurring revenue.
• $1.2 billion in increased sales during the holiday shopping season.

When a company’s performance improves while its stock falls, you might see a good opportunity to invest at a discounted price. That looks like the case for Shopify.

Sea Limited

Sea Limited (SE) doesn’t have the widespread name recognition that Shopify enjoys in North America, but it owns the largest e-commerce platform in Southeast Asia. 

Like Shopify, Sea Limited’s stock price got a huge boost over the past few years. In mid-March of 2020, most stocks plummeted but Sea Limited’s share price grew from $28 on March 20, 2020 to about $358 on November 5, 2021. Since then, the stock has dropped below $100. 

Did Sea Limited deserve to lose two-thirds of its value?

Financial statements from Q4 show that the company has done remarkably well. Some of its wins include:

• Growing its Q4 2020 total gross profit from $0.5 billion to $1.3 billion in Q4 2021 (a 145.6% increase).
• More than doubling its revenue from $1.6 billion in Q4 2020 to $3.2 billion in Q4 2021.
• Increasing its quarterly active users by 7.1%.
• Improving its quarterly paying users by 5.6%

Investors might fear that the company cannot maintain this level of growth as the pandemic slows. That’s probably a short-sighted and incorrect assumption, though.

More than half of consumers say that they like shopping online because it’s convenient and they find cheaper prices. Assuming that remains true, companies like Sea Limited should have ample room to develop more products that make online shopping even more attractive.

Coinbase

Coinbase (COIN) has only traded as a public company since April of 2021, so there isn’t as much historical data to analyze. So far, the company has experienced one major swell while maintaining a general downward trend. 

Coinbase come out strong at $342 on April 16, 2021. By the end of May, though, it had shed more than $100 per share. Between October 1 and November 12, share prices climbed to $342. Since then the major trend has been downward.

The company operates a large cryptocurrency platform, so its revenue depends heavily on the price of bitcoin and ethereum. Regardless, it’s by far the largest crypto platform, providing a single dashboard where people can buy and sell hundreds of different coins, including Bitcoin, Ethereum, and Dogecoin. 

Coinbase reports that it has more than 89 million verified users and over $278 billion in assets on its platform.

Coinbase managed to meet or beat most of its goals for 2021. It predicted annual average retail MTUs between 8 and 8.5 million, and it reported 8.4 million.

The company’s outlook expected average transactions per user to land in the high $50s, and it reported $64. It even managed to keep its expenses slightly below expectations even during an aggressive advertising campaign.

Financials look terrific for Coinbase, with astronomical growth between 2020 and 2021. Net revenue went from $1.14 billion in 2020 to $7.35 billion in 2021. 

So, why isn’t Coinbase able to maintain its original stock price?

While Coinbase has done a fantastic job, cryptocurrencies are extremely volatile. And Coinbase charges a very high margin, which analysts expect will be compressed over time, leading to lower revenues.

Social unrest might also make cryptocurrencies, and therefore Coinbase, look like too much of a gamble for some investors. The company closed about 25,000 Russian wallets when Russia invaded Ukraine.

While Coinbase got some positive press for siding against Ukraine’s invaders, the move also forced investors to think about the safety of their money. Would future military actions result in closed accounts owned by people who don’t have control over international conflicts?

The price of electricity also dampens the excitement surrounding crypto. As energy prices rise, it becomes more expensive to mine coins, which requires enormous amounts of electricity to create. Unless crypto miners commit to renewable energy sources, it’s hard to precisely forecast price trends, and therefore Coinbase’s market cap.

The ability of Coinbase to generate revenues as the industry faces scrutiny shows that it has more resilience than similar companies. If you want to put your money in crypto, Coinbase is probably a safer option than an individual coin or a different trading platform.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.