2 hot stocks to buy right now
The recent decline in growth stocks has caused more fizz than sizzle in the portfolios of many investors. Many former high-flying stocks have lost more than half their value since November.
The declines have presented opportunities for those looking to put some cash to work, as they can now buy fast-growing companies at a massive discount. Falling stock prices such as Sea Limited (NYSE: SE) and Assets received (NASDAQ: UPST) offer such opportunities.
1. Sea Limited
When investors see the successes of e-commerce behemoths such as Amazon Where Ali Baba, they might miss what’s happening in e-commerce in other parts of the world. Sea Limited operates its Shopee platform which dominates Southeast Asia and expands to countries like Brazil and France. It is working hard to become a major e-commerce presence in several parts of the world.
Despite all the focus on retail, Sea Limited is a conglomerate that also operates a game publisher, Garena, which is its most profitable segment. It thrives, in large part, on the success of its freemium battle royale game called Free fire.
Its fintech segment, SeaMoney, caters to customers in developing countries. SeaMoney can serve customers without a bank account, a segment overlooked by fintech giants such as To block.
The company has also achieved triple-digit growth rates despite inflation. Sea reported $6.7 billion in revenue in the first nine months of 2021, up 140% from the same period in 2020. E-commerce revenue for the first nine months jumped 175% year over year, while digital entertainment revenue grew 120% higher over the same period.
The company raised its guidance for the full year 2021 in the e-commerce segment. It projects GAAP revenue of between $5 billion and $5.2 billion, a midterm growth rate of 135%. That didn’t include a forecast for digital entertainment, and analysts expect revenue growth to slow to 48% in fiscal 2022.
Despite stock price growth of more than 1,000% over three years, the price has fallen nearly 60% since hitting a high in October.
Its price-to-sales (P/S) ratio fell to 9, from around 30 a year ago and comparable to its counterpart MercadoLibre, which is selling at a similar multiple. Such a valuation could make Sea Limited an attractive buy despite somewhat slower revenue increases.
Upstart has built its growth on the disruption of the lending industry. Instead of relying on FICO scores, a metric that leaves millions of Americans without access to credit, Upstart relies on artificial intelligence to make many of its lending decisions.
It began offering fixed rate unsecured personal loans (offered in partnership with various banks) and has since branched out into supporting car dealerships by offering car loan customers. The company plans to enter the mortgage business in the near future.
By the end of the third quarter of 2021, Upstart had worked with banking partners to issue more than 1.5 million loans. Nearly 363,000 of these loans took place in the third quarter alone. Car credit has grown rapidly. Most of its auto loans had been in one state in Q3 2020. By Q3 2021, however, that activity had grown to more than 4,000 auto loans in 47 states.
Rising interest rates and a general sell-off in technology weighed on the stock. Despite some recovery in recent days, Upstart stock is selling at more than 70% off its 52-week high.
Yet its $544 million revenue for the first nine months of 2021 was 271% higher than the first three quarters of 2020. It has already turned profitable as it reported a net profit of $76.5 million in the first three quarters of 2021. It grossed around $5 million in the same period of 2020.
Upstart announces its fourth quarter and full year 2021 results on February 15. The company previously forecast revenue between $255 million and $265 million for the quarter, a 200% increase at the midpoint, if that forecast holds true. While that means some slowdown, 200% still equates to skyrocketing growth.
Upstart’s P/S ratio of 16 makes its stock significantly more expensive than slower-growing traditional banks. However, this multiple fell from a level of over 60 last fall.
Given this discount and continued rapid revenue growth, one could argue that consumer credit stock has become significantly oversold.
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