Forget Interest Rates: I’m Still Buying These 2 High Growth Tech Stocks
Over the past few months, rising interest rates have caused many investors to reduce their exposure to higher-growth tech stocks. Early in the year, I also sold some of my weaker growth stocks, including Break, pinterest, Palantizeand Bumblebee – to raise more money.
I spent some of that money on more conservative things blue chip tech stocks, but I also recovered more shares from other beaten growth stocks. Here are two high growth stocks to which I have further increased my exposure, even though rising interest rates have created a hostile market for the entire cohort.
1. PayPal Credits
PayPal Holdings’ (NASDAQ: PYPL) the stock has lost more than 40% of its value in the past six months as investors worry about slowing revenue growth and declining margins. Its supposed interest in acquiring Pinterest, which quickly faded, also seemed like a desperate attempt to expand its user base and jump on the “social commerce” bandwagon rather than a strategy. well designed.
But if we cut through all that noise, PayPal is still a rock-solid company. It expects its revenue and adjusted profit to grow by about 18% and 19%, respectively, this year. Its growth has slowed since 2020, but this slowdown was mainly caused by tough pandemic competitions, which boosted online spending and digital payments instead of fundamental problems.
PayPal has also repeatedly reiterated its long-term goals of more than doubling its annual revenue – from $21.5 billion in 2020 to more than $50 billion in 2025 – and growing its profits at a growth rate. annual compound (CAGR) of 22%. during these five years. It expects its number of active accounts to grow from 416 million in its last quarter to 750 million in 2025.
PayPal expects this growth to be led by Venmo, its peer-to-peer payments app, which serves more than 80 million users, and its new “super app,” which bundles digital payments, accounts savings, cryptocurrency purchases, buy now, pay later (BNPL) and other financial services.
PayPal still faces several near-term headwinds, including competition and slowing online spending in a post-lockdown market. However, I think it’s still a great long-term buy at 33 times forward earnings and seven times next year’s sales.
2. Limited Sea
Sea Limitedit is (NYSE:SE) The stock price has also fallen nearly 40% in the past six months as investors fret over slowing growth, a lack of profits and the tech giant’s ambitious expansion plans. South East Asia.
Sea’s Shopee is the first e-commerce marketplace in Southeast Asia and Taiwan, but has expanded into Latin America, Europe and India with aggressive loss strategies. Sea’s gaming unit, Garena, releases the hit game Free firebut the four-year-old game could gradually lose its luster in the crowded mobile gaming market.
The bears believe that Shopee’s international expansion will fail and that free fire, which leverages its profits to partially offset Shopee’s losses, will fade before Shopee’s loss-making strategies lock in enough buyers.
These concerns are valid, but the sea still grows like a weed. Its earnings have soared 101% in 2020, and analysts expect growth of 118% in 2021 and 50% in 2022. Those are jaw-dropping growth rates for a stock that trades below seven times next year’s sales.
Investors should not underestimate the resilience of Sea: Shopee replaced Ali Baba‘s Lazada as the top e-commerce marketplace in Southeast Asia in 2019. It surpassed MercadoLibre as the most downloaded e-commerce application in Latin America last year. According to App Annie, Garena Free fireits first self-developed game, was the world’s most downloaded mobile game in 2019 and 2020. It remains one of the top games in Southeast Asia and Latin America.
Sea isn’t profitable, but it’s also sitting on plenty of cash after raising $6.3 billion through convertible debt and an equity offering last September. I think Sea still has plenty of room for growth over the next few decades, so its recent pullback looks like an attractive buying opportunity.
Should you buy PayPal and Sea today?
PayPal and Sea both overheated a bit last year, but both stocks now look attractively valued after their latest pullbacks. Investors shouldn’t go all-in on either stock at this time – since rising interest rates remain a pressing issue – but they can gradually build up stocks (as I am doing) before the Market doesn’t realize he’s thrown the babies out with the bathwater again.
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Leo Sun owns MercadoLibre, PayPal Holdings and Sea Limited. The Motley Fool owns and endorses MercadoLibre, Palantir Technologies Inc., PayPal Holdings, Pinterest and Sea Limited. The Motley Fool recommends Bumble Inc. and recommends the following options: $75 long calls in January 2022 on PayPal Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.