In many ways, 2022 has been a year like no other — and not in a good way. Supply chain issues from COVID-19, high inflation, soaring interest rates and the worst on Wall Street since the Great Recession have wreaked havoc on investors’ portfolios.
All three major market indexes fell last year, however NASDAQ Composite It has the dubious distinction of being the hardest hit, staying firmly entrenched in bear market territory, and still down 33% from its peak in late 2021. Unfortunately, many High growth stocks It has fared worse with some suffering from the worst performance in the market Start.
For investors who like to see the glass half full, there it is he good news. History shows that previous market declines were the best time to buy quality companies at a discount. Moreover, all the previous ones Alcohol market paved the way for bull market to follow.
With that as a backdrop, let’s take a look at three big-growth stocks that lost more than 60% of their value in 2022, paving the way for a stunning recovery.
1. PayPal: 62% less
In this day and age, shoppers don’t think twice about buying goods and services online, however PayPal (PYPL -0.38%) It was the predecessor to digital payments. However, this did not help isolate the godfather financial technology from the effects of an uncertain economy.
PayPal’s third quarter results help illustrate the challenges the company faces. Revenue grew 11% year-over-year, while earnings per share (EPS) rose 26%. Total Payments Volume (TPV) increased 14% in constant currency as the company added 2.9 million active accounts, up just 4%. This is in stark contrast to the 24% and 13% active account growth the company reported in 2020 and 2021, respectively.
But PayPal’s engagement was up, providing 50.1 transactions per active account on a 12-month basis, up 13%. The number of active accounts now stands at 432 million, which is impressive by any standard.
Finally, its cost-cutting campaign is bearing fruit, and it is expected to add $900 million to net profit in 2022.
PayPal pivoted to respond to macroeconomic headwinds, which have caused low-income consumers to pull back from spending. Instead of stubbornly sticking to its previous strategy of increasing active accounts at any cost, the company is focusing on key priorities like increasing engagement and increasing average revenue per user (ARPU), making existing users more profitable. This should help PayPal recover nicely when the economy rebounds.
It also helps to step back and take a broader view. As a leading provider of digital payments and financial technology services, PayPal is well positioned to take advantage of a largely cracked but rapidly growing market. While estimates vary, digital payments worldwide were projected to reach $9.5 trillion in 2022 and should rise to nearly $15 trillion by 2027, according to Statista. For context, PayPal generated $1.34 trillion in TPV in the past four quarters, giving the company a long path to future growth.
2. Platforms: Down 64%
There’s a phenomenon well-documented in the annals of marketing: When economic uncertainty pops up, companies do their best to rein in spending—starting with the advertising line on the income statement. the reason? Advertising spend is a component that is easy to call in or intensify in response to changing circumstances. That’s what Meta platforms (Meta 0.20%) facing now.
In fact, for the first time in the company’s history, Facebook’s parent company reported a sequential year-over-year decline in revenue. However, it’s not like the results fell off a cliff.
Q2 revenue was down 1%, Q3 revenue was down 4% — but even that doesn’t tell the whole story. Without the strong dollar and its impact on foreign exchange rates, revenues in the second and third quarters would have increased by 3% and 2%, respectively. Modest, yes, but it increases nonetheless.
And it’s possible that there is still more pain in store for Meta Platforms investors – that is, until the economy hits a new high.
However, it has been visited by more than 2.93 billion people Social media An empire every day and 3.71 billion logins per month, Meta Platforms has a strong scope network effect And an audience marketers can’t ignore. That’s why the company remains the second largest digital advertiser in the world by revenue, second only to the alphabetThe Google.
This means that when advertising budgets come back – which they undoubtedly will – Meta Platforms will bounce back with it, taking investors along.
3- Tesla: 65% decrease
Like many highly rated disruptive companies, electric vehicle maker Tesla (TSLA -0.94%) Occurred in the shadow of falling stock prices caused by the bear market. But over the past two months, Tesla stock has plummeted else 50%. Two factors — driven by investor sentiment — play a big role in the latest move, which could reverse course just as quickly.
First, there is the matter of CEO Elon Musk’s takeover of Twitter. The deal has now and then grabbed a lot of headlines. With Musk at the helm of Twitter, investors are justifiably concerned that the shadowy leader may be distracted and therefore not as effective at guiding Tesla as he might be otherwise.
However, various reports indicate that Twitter and Musk are “actively looking” for a new CEO, adding credence to Musk’s assertion that his time running Twitter will be temporary.
Equally worrisome for investors were Tesla’s fourth-quarter delivery numbers, which were disappointing, though understandable, given the overall state of the economy. The company said it delivered 405,278 vehicles, which fell short of Wall Street’s forecast of 427,000 vehicles delivered. However, even in a challenging economic climate, Tesla deliveries are still up 40% in 2022, which is an impressive feat for a luxury automaker.
An important factor affecting results was the multiple pandemic-related shutdowns of the Shanghai production facility. The last manufacturing halt came in late December as the company faced a COVID outbreak among employees and suppliers, which could affect its year-end delivery results.
However, both issues are short-term in nature. This suggests that when a Twitter CEO is found and Tesla’s deliveries improve, the stock is set to regain lost ground.
A few things to consider
In the five years leading up to November 2021, these companies were truly exceptional growth stocks. Tesla gained more than 3,000%, while Meta Platforms and PayPal gained 155% and 457%, respectively. Despite declines of more than 60% last year, each one remains the undisputed leader in its industry, paving the way for a remarkable recovery once the economy improves.
Finally, even after massive declines, so are these stocks still Selling at a slight premium. Tesla, PayPal and Meta Platform all trade at about 2.6 times forward sales estimates, when typical Price-to-sales ratio Between 1 and 2. However, given their industry-leading position and potential for future growth, they each deserve an excellent rating.
No doubt investors who buy these stocks now will be happy when they look back three to five years from now.