Many growth-dependent stocks have seen significant pullbacks in a recent bout of market volatility. Tech stocks have been volatile across 2021’s trading, and concerns about rising Treasury bond yields and valuation levels have caused some investors to move out of riskier plays in the sector. But long-term investors may be able to take advantage of recent market turbulence and use it as an opportunity to build positions in strong businesses with market-crushing potential.
With that in mind, a panel of Motley Fool contributors has weighed in with some of their favorite discounted growth picks. Read on to see why they think PayPal (NASDAQ:PYPL), Fiverr International (NYSE:FVRR), and Twitter (NYSE:TWTR) are great buys right now.
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A slight slowdown in growth doesn’t justify the PayPal stock sell-off
Daniel Foelber (PayPal): Crypto, real estate, and stock markets all have one thing in common: When the best names in the business go on sale, it’s usually a great time to buy.
In hindsight, the housing crash of 2008, the crypto crash of 2018, and the stock market crash of 2020 were all incredible times to jump in. While today’s Nasdaq sell-off isn’t as severe, it could be a dip worth taking advantage of.
The headline story is that the stock market is hovering around an all-time high. But behind the scenes, many industry leaders are substantially down from their highs. When it comes to fan-favorite financial stocks, consider that PayPal, Square, Visa, Upstart, and Lemonade are all down 13% or more over the last month while the S&P 500 is up 3%.
The big reason PayPal stock is down 40% from its all-time high is slowing growth. PayPal’s revenue growth rate has slowed, and that’s chased a lot of growth investors out of the stock. However, what hasn’t slowed, and in fact has improved a lot, is the company’s ability to generate cash. PayPal stands out as the best of them. Its core business is performing well. Its smaller businesses like Venmo have a lot of growth potential — as evidenced by Venmo’s partnership with Amazon.
Over the last few years, PayPal has transformed itself into the ultimate cash cow. Over the last four quarters, it has generated over $24 billion in revenue and $5 billion in free cash flow (FCF) that it can use to reinvest in its business.
So while Wall Street is fixated on slightly lower than expected growth numbers, long-term investors can take advantage of the overreaction to PayPal’s earnings. The investment thesis is simple. PayPal benefits from a growing economy that relies less and less on cash. If that’s a trend you believe in, then going with an industry titan when there’s blood in the streets could be a winning move.
Get a piece of the gig economy at a discount
Keith Noonan (Fiverr International): When it comes to growth stocks, picking the trends you focus on can play a huge role in shaping your performance. The rise of the gig…