Growth Stocks To Bet The Farm On: With the economy in such a perilous state right now, investors are turning toward low-risk assets to protect their capital during these uncertain times.
No doubt, there’s certainly some wisdom in adopting a “safety first” approach, especially when the macro-environment is so volatile and unpredictable.
And yet, there’s always something to be said for taking the contrarian route instead.
In fact, to paraphrase Warren Buffett: you should be buying when others sell, and selling when others buy.
Indeed, share prices have crashed recently, creating what could be the perfect opportunity to snap up some undervalued and overlooked bargains.
With that thought in mind, here are five growth companies that should deliver the goods when the stock market finally recovers.
Planet.com
Planet Labs operates the third largest fleet of Earth observation satellites in the world, providing imagery and geospatial analytics to its rapidly growing base of private and institutional customers. The firm’s data is 100% machine learning-ready, enabling users to gain enhanced perspectives into what’s really going on at ground level.
Indeed, the company now boasts a roster of more than 800 clients, generating a recurring average contract value of 90% across the board.
Helping to drive PL’s expansion is the firm’s superior technological offering. For instance, the company’s new Pelican initiative is being dubbed as “a category-defining satellite constellation,” delivering unprecedented revisits rates and precision images at 30-centimeter resolution.
For the First Quarter of FY 2023, PL’s revenue increased 26% annually to $40.1 million. The company also recorded a net dollar retention rate of 105%, and ended the period debt-free.
Furthermore, Planet was able to announce its selection by the National Reconnaissance Office to participate in the Electro-Optical Commercial Layer (EOCL) contract. The award gives the NRO 5-year access to PL’s image library, with the option of multi-year contract extensions running through until 2032.
Importantly, Planet Labs is also highly scalable: the business offers its services through a one-to-many data platform, which ensures the cost of bringing in more clients doesn’t become onerous as the firm expands.
Describing itself as “the Bloomberg Terminal” for Earth Data, Planet’s certainly shooting for the stars as far as its future aspirations are concerned. And if it maintains its current rate of growth, who’s to say it won’t hit that lofty target?
Sea Limited
Tech conglomerate Sea Limited is perhaps best known as the owner and creator of the wildly popular mobile phone game, Free Fire.
However, Garena, the digital entertainment wing of the Singapore-based business, is performing poorly, with its consumer base fast declining, and quarterly paying users falling 23% in the First Quarter of 2022.
Nevertheless, the company has two other segments that could promise big gains over the coming years.
First off, there’s Sea Limited’s e-commerce platform, Shopee, which saw revenue growth improve 64% year-on-year for the last reporting period.
Furthermore, its FinTech enterprise, SeaMoney, is prominent in the Southeast Asia market, being the most popular e-wallet in Indonesia, and showing well in other territories as well.
With its stock having lost nearly 65% in 2022, the firm seems well-placed to grow from here. Its gross profit was up 81% in Q1, suggesting it could soon turn its total net loss into a positive in a fairly short space of time.
Source: Unsplash
Block
Financial services firm Block has lost over 70% of its value in the past twelve months.
The business, formerly known as Square, was once a stock market darling, having exploded in price from the pandemic crash of early 2020 to its high in the latter half of 2021.
Unfortunately, the Jack Dorsey-led company ended up falling back to earth with a bang recently. The operation’s tight association with Bitcoin served as a tailwind for the enterprise when the crypto boom was at its peak – but since then, with BTC suffering large losses over the last few months, SQ has suffered along with it.
In fact, Bitcoin revenues were down $1.73 billion in the First Quarter of 2022, a loss of over 50% year-on-year.
That said, Block is shaping up to be an industry leader in the emerging FinTech space. The market for financial technology services is expected to grow at a CAGR of 19.8%, reaching a potential value of $332 billion in 2028.
Indeed, SQ’s Cash App ecosystem could be the winner-takes-all flagship product for a one-stop mobile FinTech solution. It has 45 million monthly active users, and has been the #1 finance app in the Apple App Store for the last five years.
MercadoLibre
Latin America’s leading e-commerce marketplace hasn’t had such a great year so far.
Rising interest rates negatively impacted MercadoLibre’s efforts to develop its lending and FinTech businesses, while other headwinds – such as high inflation and the increasingly fractious political situation in Brazil – have also caused problems for the Buenos Aires-based company too.
However, things could be about to get better for MELI in the near term. E-commerce penetration remains low in Latin America at present, but that’s expected to rise substantially over the next few years, growing from 8% today to around 16% in 2025.
Moreover, despite the current fiscal conditions pressing down on MercadoLibra just now, the revenue streams it derives from its various verticals shore up confidence in the brand. The company grew its Total Payment Volume in the First Quarter by over 81% to $25.3 billion, with its credit portfolio spiking a massive 319% year-on-year to $2.40 billion.
What should be particularly exciting for investors is the fact that MELI’s profit metrics are improving too. Its net income reverted from a loss of 2.5% in Q1 2021 to a gain of 2.9% in 2022, while the company’s gross profit margin also grew, from 42.9% last year, to 47.7% for the same quarter this time round.
Snowflake
According to analysts at investment firm Baird, Montana-based data warehousing company Snowflake is an industry leader in the emerging field of “next-generation data.”
That’s quite an endorsement. Indeed, with a stated price target of $200 implying a 33% upside to the firm’s current valuation, these Wall Street insiders aren’t coy about putting their money where their mouth is.
For those already aware of Snowflake, this shouldn’t come as a surprise. The company is a rapidly expanding software-as-a-service business that’s already logging astonishing growth metrics so early in its development, with a net revenue retention rate of 174% for the First Quarter of fiscal 2023, and a product revenue that’s accelerating at 106% year-on-year.
It can’t be understated just how important SNOW’s services are to businesses traversing the so-called “cloud migration” process.
In fact, Snowflake can count 506 of the Forbes Global 2000 companies as customers, with the likes of Dropbox, CapitalOne, and Goldman Sachs using its native applications or cybersecurity capabilities in some way.
And as the data transformation process continues apace, Snowflake will be there to capitalize on this burgeoning industry.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>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.