2 Sizzling Hot Stocks You Can Buy Right Now
The recent decline in growth stocks has left many investors’ portfolios seething rather than sizzling. Many former high-flying stocks have lost more than half their value since November.
The declines have opened up opportunities for those willing to put money to work as they can now buy some fast-growing companies at a massive discount. The lower prices of stocks such sea limited (NYSE:SE) and Ordinary Holdings (NASDAQ:UPST) offer such opportunities.
When investors see the successes of e-commerce giants such as Amazon or Alibaba, they might miss out on what’s happening in e-commerce in other parts of the world. Sea Limited operates its Shopee platform, dominating Southeast Asia and expanding into countries like Brazil and France. It is working hard to become a significant e-commerce presence in multiple regions around the world.
For all its retail focus, Sea Limited is a conglomerate that also operates a gaming publisher, Garena, which is its most profitable segment. It thrives in large part on the success of its freemium battle royale game name free fire.
The fintech segment SeaMoney is aimed at customers in developing countries. SeaMoney can serve unbanked customers, a segment pioneered by fintech giants such as block.
Despite inflation, the company has achieved triple-digit growth rates. Sea reported revenue of $6.7 billion in the first nine months of 2021, up 140% from the same period in 2020. E-commerce revenue increased 175% year over year in the first nine months, while digital entertainment revenue grew 120%. higher in the same period.
The company raised full-year 2021 guidance in the e-commerce segment. It forecasts GAAP revenue of between $5 billion and $5.2 billion, a 135% growth rate at the midpoint. That didn’t include any guidance for digital entertainment, and analysts expect revenue growth to slow to 48% in fiscal 2022.
Despite three years of stock price growth of more than 1,000%, the price has fallen nearly 60% since its October peak.
The price-to-sales (P/E) ratio has fallen to 9 from about 30 a year ago and is in line with its peer MercadoLibre, which sells at a similar multiple. Such a valuation could make Sea Limited an attractive buy despite somewhat slower sales growth.
Upstart built its growth on disrupting the lending industry. Rather than relying on FICO scores, a measure that keeps millions of Americans inaccessible to credit, Upstart relies on artificial intelligence to make many of its lending decisions.
It started out offering unsecured personal loans at fixed rates (offered in partnership with various banks) and has since specialized in supporting car dealerships by providing car loans to customers. The company plans to enter the mortgage lending business in the near future.
By the end of Q3 2021, Upstart had worked with banking partners to originate more than 1.5 million loans. Almost 363,000 of these loans were made in the third quarter alone. Auto lending has expanded rapidly. Most of its auto loans were processed in one state in the third quarter of 2020. However, by the third quarter of 2021, that business had grown to over 4,000 auto loans in 47 states.
Rising interest rates and a general tech sell-off have weighed on the stock. Despite some recovery over the past few days, Upstart stock is selling at a more than 70% discount to its 52-week high.
Still, its revenue for the first nine months of 2021 was $544 million, up 271% from the first three quarters of 2020. It has already turned profitable, posting net income for the first three quarters of 2021 of 76.5 million US dollars. In the same period of 2020, it earned about $5 million.
Upstart reports fourth-quarter and full-year 2021 earnings on Feb. 15. The company previously forecast revenue of between $255 million and $265 million for the quarter, representing a 200% increase at the midpoint if that forecast holds. While that means some slowdown, 200% still means sizzling growth.
Upstart’s price-to-earnings ratio of 16 makes its stock significantly more expensive than slower-growing traditional banks. However, this multiple has fallen from above 60 levels last fall.
Given this discount and continued rapid revenue growth, one could argue that the consumer finance stock is significantly oversold.
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