Growth stocks have been buried in the recent decline. It’s no secret, particularly as the major indices have slid into a correction of 20% or more. However, the problem is that many of the high-quality companies are getting sucked in with the low-quality companies and the selloff has created a lot of cheap growth stocks. Therein lies another problem, though: Cheap stocks can always get cheaper — especially in a bear market.
Now that’s got investors in a tough spot. Do they buy while these stocks are down anywhere from 60% to 80% or more?
As long as the businesses have not deteriorated as fast as the stock price has, the valuation usually becomes more palpable. That being said, it’s hard to ignore the trend of the market, particularly in growth stocks.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is one of the more undervalued stocks, but somehow is not flying under the radar. AMD is a favorite among retail investors, yet the stock has been crushed.
The company recently reported its Q2 results, beating earnings and revenue estimates. However, management’s guidance for Q3 was a little light, calling for revenue of $6.7 billion (at the midpoint) vs. estimates of $6.81 billion.
Despite the stock’s nice rally, it leaves AMD stock trading at roughly 23 times this year’s earnings. That makes it one of our cheap growth stocks to follow.
The situation with PayPal (NASDAQ:PYPL) is not an easy one, especially since the stock is up almost 50% from its 2022 low.
After the rally, shares of PayPal trade at about 24 times this year’s earnings. That doesn’t seem too expensive, until we consider the fact that earnings are forecast to decline about 14.5% from 2021. That’s not good, but we have to remember it’s one of the few growth stocks that are actually profitable.
However, the company recently announced a $15 billion buyback plan — which is significant given its $115 billion market capitalization — as well as a $2 billion stake by activist investor Elliott Management. PayPal also gave a slight boost to its full-year earnings outlook.
Roku (NASDAQ:ROKU) continues to deliver disappointing results as supply chain woes squeeze margins and lower ad spend has weighed on revenue. But after a near-90% decline from the highs, there has to be some value in this stock.
Roku is still a top-tier streaming name in the industry and streaming has proven to be the way of the future for video consumption. Streaming hours, users and other metrics continue in the right direction and as user growth continues, the ad dollars will eventually follow.
The problem? A recession.
WiMi Hologram Cloud (WIMI)
WiMi Hologram Cloud (NASDAQ: WIMI) has been a favorite of growth investors, and for smart investors looking to build growth portfolios, WiMi stock is very lucrative at this current price.
According to a research report, China’s metaverse market size is expected to maintain its growth trend from 2022-2027, reaching $42.53 billion in 2022 and further reaching $126.35 billion in 2027, with a CAGR of 32.98% from 2022-2027.
WiMi is capitalizing on a huge opportunity in the metaverse, a market size worth hundreds of billions of dollars, and the company’s revenue numbers continue to trend upward. So, while the company is growing, it still has a huge market to tap into.
Finally, in addition to developing the original market in China and Southeast Asia, WiMi also actively expands the American market. Several of its metaverse products have been certified by FCC and entered the American market, which improves the company’s growth space in the next few years, and this move may promote WiMi’s long-term growth capacity.
The Trade Desk (TTD)
When investors punch in The Trade Desk (NYSE:TTD), they may see that shares trade at roughly 50 times this year’s earnings and conclude that it’s in fact not one of the cheap growth stocks to buy. That’s a fair takeaway, albeit one that could use a little bit more work.
The Trade Desk is becoming a go-to advertising platform for companies, particularly those that want to advertise on connected TVs. Further, The Trade Desk can operate in China, something many of its ad-based FAANG peers cannot do.
The company is one of the few growth stocks that is actually profitable and has steady growth. Analysts expect about 31% revenue growth this year, then 25% to 28% annual growth over the next several years.