Market Correction: 5 Screaming Buys

As the stock market slips into correction territory, risk-tolerant investors will have the opportunity to buy high-growth stocks at steep discounts.

 

The correction has been especially hard on tech companies, some of which have the potential to generate large returns over the next several years. Here are five of the top stocks to buy during the correction to see outsized gains when the market rebounds.

 

Formerly known as Square, Block (NYSE:SQ) is a major force in the world of digital payments. Like most other tech stocks, though, Block has had a rocky start to 2022, losing nearly 37 percent of its value so far this year.

 

As suggested by the company’s new name, Block is refocusing on blockchain technology and the cryptocurrency market in order to remain at the cutting edge of digital payment processing. The value these niches hold could help to support higher prices for Block in the coming years.

Block is also moving into the increasingly lucrative buy-now-pay-later financing business. Following an acquisition of BNPL provider Afterpay, Block has used this model to generate new revenues from younger buyers taking advantage of financing options. So far, Block has managed this business line quite well: 98 percent of installment loans held by the company are repaid on time.

 

Block showed very strong performance in Q4 2021. Revenue increased by 29 percent from the previous year, and gross payment volume rose by 45 percent. The stock even posted a substantial earnings beat, outperforming the consensus estimate by 42 percent.

 

Analyst price targets continue to favor Block. The median 12-month target price of $179 would give Block a 75 percent upside over its current trading price of $101.86. Tellingly, the low estimate of $120 would provide an upside of nearly 18 percent.

 

With strong growth, focus on an emerging technology, stable new business streams and ample upside potential, Block is a clear buy option for investors looking for tech bargains. While the performance of the stock has been lackluster so far this year, Block’s Q4 earnings report clearly shows that the company is still on the right track.

 

Online signature service provider DocuSign (NASDAQ:DOCU) is one of the more underrated stocks on the market at the moment.

 

Since reaching a record high of more than $300 per share last year, the stock has lost nearly 75 percent of its value.

 

Despite its share price woes, the company itself continues to turn in excellent growth results. Revenue growth in the high double digits held throughout 2021 but did soften in the Q1 of this year.

DocuSign is also investing in artificial intelligence technology that will allow parties to easily negotiate and create contracts. The company’s Agreement Cloud system should help to bring in new customers and revenues over the coming years.

 

Overall, DocuSign is a company that still has ample potential for future growth. This year’s selloff notwithstanding, DocuSign could be a good long-term bet on both AI technology and online business.

 

The stock’s median 12-month price target of $95 would give it an upside of 26.7 percent. While slowing growth is a concern, DocuSign appears to be a good long-term buy while the price remains low.

 

eCommerce platform Shopify (NYSE:SHOP) is another attractive technology company that may have fallen into oversold territory.

 

The stock is down more than 60 percent YTD, despite the fact that the company has grown enormously throughout the COVID-19 pandemic.

 

While slowing growth as the pandemic ends is a potential concern, it’s also an understandable phenomenon that likely shouldn’t have thrown the stock off course by more than half.

In 2020 and 2021, Shopify saw revenue growth of 86 and 57 percent, respectively. It also massively expanded its user base as traditional businesses were forced to make the move to the digital world for the first time.

 

Even though growth in 2022 and beyond likely won’t be as blistering, Shopify is in an excellent position to take advantage of new online shopping habits developed by consumers during the pandemic years.

 

Currently trading at $543.11, Shopify has a median price target of $900. There’s a very good chance that the stock will miss that mark this year. However, the long-term prospects for Shopify remain quite bright.

 

Even with a miss in the coming 12 months, there’s more than enough room for investors to realize large returns when the stock begins to recover.

 

Satellite imaging company Planet (NYSE:PL) is one of the latest additions to the American stock market, having gone public in December 2021. This stock hasn’t fared quite as badly in 2022 as other tech companies, but it has lost more than 23 percent of its value YTD.

Planet has created a massive database of satellite images that gives it a considerable moat against its competitors. Together with a planned future in machine learning analytics, this dataset could make Planet extremely valuable. It should be noted that Planet is still a very young company and its stock is a speculative buy. With that said, the company’s potential is enormous and its annual revenues are running north of $100M+.

 

Analysts are also quite bullish on Planet stock. The stock currently trades at $4.71 and has a median target price of $13. Even the lowest of 8 current target prices places the stock at $10 over the next 12 months.

 

Given this bullish short-term outlook and the company’s long-term potential, Planet is a stock that could reward early investors with generous gains. The company likely won’t reach its full potential until it begins adding analytics capabilities to its massive collection of satellite image data.

 

Planet carries the risks typically associated with young startup stocks, but it also has a compelling outlook and a moat that would be quite difficult for other companies to overcome.

 

A standard of the payment processing industry, PayPal (NASDAQ:PYPL) has seen a split among analysts recently. While some analysts have downgraded the stock, others maintain that the company still has strong investment potential.

 

Slowing growth as the COVID-19 pandemic ends and weaker spending projections in Europe due to geopolitical conflict have both played into the more bearish view on PayPal.

Despite some challenges, there’s still a lot to like about PayPal. While weaker than the year before, PayPal increased its year-on-year revenues by 13 percent in Q4. User growth was also decent at 9.8 million new users. Like revenue, user growth was lower than the same quarter in the previous year.

 

Turning to analyst forecasts, PayPal retains a decent amount of expected upside. The median target price for the stock is $187.50, up 94 percent from its current price of $96.61.

 

In light of recent results, it’s unlikely that PayPal would hit that price this year. However, even the lowest price target for PayPal puts the stock up nearly 11 percent at $107.

 

At these prices, even weak performance would likely allow PayPal to generate good returns over the next 12 months. Over the longer term, investors who buy the stock at its current price are likely to do quite well. While slow growth could hinder the stock, there’s still potential in this benchmark payment processor.

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