Nasdaq Bear Market: Time to Buy These 2 Monster Growth Stocks
Despite last week’s rebound, the Nasdaq Compound is still in bearish territory. The tech-heavy index is 28% off its November high, dragged lower by uncertainty about the strength of the economy. But as Wall Street frets over the weeks and months ahead, you can capitalize on the current downturn by focusing on a longer time horizon.
With this in mind, disruptive companies like To block (SQ -2.21%) and Cloudy (REPORT -5.00%) are shaping the future of the financial services and cloud computing industries, respectively. And with both stocks trading at 75% (or more) of their all-time highs, it’s time to buy.
Here’s what you need to know.
Block is disrupting the retail and financial services sectors. Through its Square ecosystem, the company offers an integrated suite of hardware, software, and services that simplify business management across physical and digital locations. This sets Block apart from traditional merchant acquirers like banks, as they often bundle products from different vendors. This makes implementation more complicated, especially for small businesses that lack strong technical support.
However, the flexibility and cohesive nature of Square’s commerce platform also attracts middle-market merchants (those earning more than $500,000 per year) to the ecosystem. In fact, mid-market merchants accounted for 35% of gross payment volume in Q1 2022, compared to 26% in Q1 2020. great profitability for Block.
On the other side of the business, the Cash app allows users to deposit, spend, send, and invest money and file taxes from a single platform. Additionally, by integrating the Afterpay Shop Directory into the digital wallet, Block aims to make Cash App a commerce discovery tool, potentially unlocking synergies with its Square ecosystem.
From a financial perspective, Block is growing at a good pace. In the past year, gross profit soared 50% to $4.8 billion and the fintech company generated $965 million in free cash flow, from a loss of $344 million the previous year. More importantly, shareholders have reason to believe that the momentum will continue in the years to come.
Currently, Block values its total addressable market (TAM) in the United States at $190 billion in gross profit, meaning the company has captured less than 3% of its TAM. But that number doesn’t even take into account its growing presence in Europe or other international markets, meaning its true TAM is even greater.
With that in mind, stocks are trading at 2.2 times sales, near their cheapest valuation in the past two years. That’s why it’s time to add this growth stock to your portfolio.
2. Cloud Flare
Cloudflare is disrupting the cloud computing industry. Its portfolio includes network, application and zero-trust security services, which collectively accelerate and protect enterprise IT infrastructure while eliminating the cost and complexity of on-premises solutions. Cloudflare also offers tools for app and website development.
The cloud industry is dominated by large vendors like Amazon, but Cloudflare managed to stand out. Its global network interconnects with 10,500 other networks – including ISPs, large enterprises and other cloud providers – and it is within 50 milliseconds of 95% of internet users worldwide. world. This means that its platform is very fast. In fact, internal studies have shown that Cloudflare consistently outperforms other edge clouds such as Rapidlyas well as public clouds like Amazon and Alphabetit’s Google.
Additionally, Cloudflare is infrastructure agnostic. Its platform integrates with private data centers, public clouds, and multi-cloud environments, enabling enterprises to accelerate performance and enforce consistent security policies across their entire network infrastructure. This sets Cloudflare apart from traditional providers, who tend to prioritize their own infrastructure and services.
Cloudflare saw its customer base jump 29% to 154,000 in the past year, and the average customer spent 27% more. As a result, revenue soared 53% to $730 billion, although the company only generated $6 million in cash from operations. This paltry cash flow may worry some investors, but management intends to run the business at breakeven for the foreseeable future. Cloudflare has captured less than 1% of its $115 billion addressable market, so it makes sense to invest aggressively to capture market share.
On that note, the company recently announced D1 Database, a new addition to its developer platform that will allow customers to build applications on Cloudflare’s network without provisioning third-party database services. . To that end, management expects D1 to “quickly become one of the largest databases in the world.” This kind of innovation should give investors confidence that Cloudflare is making the right decision by aggressively investing in growth.
Currently, the shares are trading at 22.4 times sales, near their cheapest valuation in the past two years. That’s why it’s time to buy this monster growth stock.