With a massive influx of retail investors flooding the stock market, this year has been a wild ride for investors. As the bull market continues, growth stocks to buy are still largely outshining their value counterparts due to improved corporate earnings, low interest rates and global economic growth.
The Dow Jones Industrial Average, the S&P 500 and the tech-heavy Nasdaq have all seen new highs in recent days. As a result, it is sometimes difficult for investors to identify low-priced stocks with growth potential.
The market cliché of buying low and selling high remains the key to making money in the stock market. Many stocks with sky-high valuations that have recently taken a beating still have robust long-term prospects, presenting an opportunity to buy them at a discount.
Investors should nevertheless be selective, focusing on stocks with solid fundamentals that justify a rebound after a market sell-off. They should also avoid over-committing to typical high-growth investment themes and do their own research before taking a position.
With that in mind, let’s take a closer look at these seven beaten-down growth stocks to buy in August:
- Alteryx (NYSE:AYX)
- Global X MSCI China Consumer Disc ETF (NYSEARCA:CHIQ)
- Netflix (NASDAQ:NFLX)
- Penn National Gaming (NASDAQ:PENN)
- Pinterest (NYSE:PINS)
- Qualcomm (NASDAQ:QCOM)
- Snowflake Inc. (NYSE:SNOW)
Growth Stocks to Buy: Alteryx (AYX)
52-week range: $66.66 to $154.83
Irvine, California-based Alteryx provides self-service data analytics software. Its software platform enables organizations to improve outcomes and the productivity of business analysts.
Alteryx announced Q2 2021 results in early August. Revenue increased 25% year-over-year (YOY) to $120.1 million. Non-GAAP net loss came in at $5.2 million and the company saw diluted earnings per share (EPS) of 8 cents. Last year, the company reported non-GAAP net income of $1.7 million, or 2 cents diluted EPS. Cash and equivalents ended the quarter at $286 million.
CEO Mark Anderson said, “Alteryx continues to make meaningful progress on our transformation journey as evidenced by our ARR growth of 27% this quarter.”
As data becomes increasingly commoditized, the ability to identify, sort and utilize raw data has become crucial for organizations. Alteryx benefits from a rapidly growing market that offers opportunities to expand into artificial intelligence. With its automated data analytics platform, the company is poised to benefit from positive trends that fuel enterprise digitization and increase the importance of data citizens.
In early June, Alteryx announced a strategic alliance with KPMG. As part of the deal, the company will integrate its platform with the latter company’s technology and expertise. Alteryx also forged a partnership with McLaren Racing in late June.
AYX stock hovers around $70 to $75. It’s down almost 36% year-to-date (YTD), trading more than 48% below its February high. The significant pullback could be a buying opportunity for long-term investors. Bullish analysts have a median price target of $100. The current price-to-sales (P/S) ratio stands at 9.06.
Global X MSCI China Consumer Discretionary ETF (CHIQ)
52-week range: $24.82 to $43.90
Expense ratio: 0.65% per year
Our next selection is an exchange-traded fund (ETF) that focuses on China, the most populous country worldwide. Due to increased regulatory oversight, many Chinese stocks have come under pressure recently.
For instance, the Shanghai Composite index is flat so far in the year and down about 5% from the multi-year highs seen in February. Therefore, a contrarian bet on Chinese shares could appeal to a number of investors.
The Global X MSCI China Consumer Disc ETF invests in large and mid-capitalization consumer discretionary firms. Despite the recent regulatory developments, China’s middle class is growing. Therefore, many firms are expected to benefit from increased spending.
CHIQ, which has 83 stocks, began trading in November 2009. In terms of sectors, the fund is 23.23% motor vehicles, 22.93% internet retail, 10.98% internet software and services and 10.86% apparel and footwear. The top 10 companies make up about 55% of its net assets.
Leading holdings include tech giant Alibaba (NYSE:BABA), e-commerce heavyweight JD.com (NASDAQ:JD) and car manufacturer Nio (NYSE:NIO).
Over the past 12 months, CHIQ has returned about 22%. However, it is down 16% so far this year. Buy-and-hold investors bullish on Chinese consumer markets should consider researching the fund further.
Growth Stocks to Buy: Netflix (NFLX)
52-week range: $458.60 to $593.29
Los Gatos, California-based Netflix boasts paid streaming memberships in more than 190 countries. It offers television series, feature films and documentaries to its members.
Netflix announced Q2 2021 results in mid-July. Revenue soared 19% YOY to $7.3 billion. Net income came in at $1.35 billion or $2.97 diluted EPS, up from $720 million or $1.59 diluted EPS in the prior-year quarter. Cash and equivalents ended the quarter at $7.8 billion.
After impressive growth in 2020, investors can’t agree on whether Netflix can maintain its position as a market leader in the streaming space. The company lost more than 400,000 customers in the U.S. and Canada during the second quarter. While competition continues to flood into the streaming space, Netflix sees future growth potential in overseas markets.
Many analysts predict most of its future expansion will come from Asian countries (other than China, where the service isn’t available.) For example, Japan may become a significant revenue generator for Netflix this year.
The company is currently working on developing geographically-targeted content for areas where it wants to offer services at competitive prices. Therefore, NFLX stock still has plenty of room for growth on a global scale.
An outperformer over the past decade, NFLX shares are up only 8% in the past 12 months. They currently trade at $510, down 5% YTD. Forward price-to-earnings (P/E) and current P/S ratios are 48.47 and 7.64, respectively. A further decline toward $500 or less would make the shares more attractive.
Penn National Gaming (PENN)
52-week range: $50.87 to $142.00
Wyomissing, Pennsylvania-based Penn National is a leading operator of gaming and racing properties and video game terminals in the U.S. It offers retail and online sports betting, online casinos and bingo.
Penn National released Q2 2021 results in early August. Revenue stood at $1.55 billion, increasing nearly 600% from $223 million in 2019. Net income came at $198.7 million compared to a net loss of $214.4 million in the prior-year quarter. Diluted EPS stood at $1.17. Cash and equivalents ended the quarter at $2.27 billion.
CEO Jay Snowden remarked, “Penn National delivered a strong second quarter that exceeded our pre-announced results from June 24, 2021.”
Recently, Penn National announced that it is acquiring Score Media and Gaming (NASDAQ:SCR), the third most popular sports app in North America, for $2 billion. As part of the deal, Score’s integrated media and betting platform will be combined with the vast audience and popular content of Barstool Sports. The move will create North America’s leading digital sports content, gaming and technology company.
This acquisition can potentially become a significant growth engine that fuels revenue and engagement with the company’s land-based casinos. The online sportsbook currently has more than 400,000 registered players compared to DraftKings’ (NASDAQ:DKNG) 1.5 million monthly unique players.
Total revenue is moving back to pre-pandemic levels in response to eased Covid-19 restrictions. Penn National does not have exposure to a business convention market like Las Vegas, where casinos are an important part of commercial life. As a result, analysts do not forecast long-term damage from declining business travel.
PENN stock hit a record high of $142 in mid-March. It currently hovers around $72, down 16% so far this year. Forward P/E and current P/S ratios stand at 24.61 and 1.95, respectively. At current levels, investors should consider adding Penn National to their list of growth stocks to buy.
Growth Stocks to Buy: Pinterest (PINS)
52-week range: $32.49 to $89.90
San Francisco, California-based Pinterest enables users to gather and save ideas for everything from travel destinations to furniture or recipes. The company primarily generates revenue by selling digital ads and is currently rolling out in-platform e-commerce features.
Pinterest announced Q2 results in late July. Quarterly revenue grew 125% YOY to $613 million. Non-GAAP net income stood at $170 million compared to a net loss of $38 million in the prior-year quarter. Diluted net income per share stood at 10 cents compared to a diluted loss per share of 17 cents a year ago. Cash and equivalents ended the quarter at $1 billion.
CEO and co-founder Ben Silbermann stated, “Our second-quarter results reflect both the strength of our business and the recent shift in consumer behavior we’ve seen as people spend less time at home.”
PINS stock plunged 20% after reporting Q2 results. Despite posting a solid profit, investors were disappointed in Pinterest’s falling monthly active users (MAUs). The shares are currently around $56, down 14% YTD and 37% from the peak seen in mid-February.
Despite slowed user growth, Pinterest’s underlying long-term prospects remain strong. The company is making significant progress toward increasing the monetization of its platform. For buy-and-hold investors, the pullback may be an opportunity to buy PINS stock at a considerable discount. Forward P/E and current P/S ratios stand at 53.53 and 14.02, respectively.
52-week range: $108.30 to $167.94
Dividend yield: 1.86%
San Diego, California-based Qualcomm develops and licenses wireless technology and designs chips for smartphones. The company’s critical patents revolve around technologies that are standards in wireless communications and comprise the backbone of 3G and 4G networks.
Qualcomm released Q3 results at the end of July. Revenue increased 65% YOY to $8.06 billion. Non-GAAP net income soared 124% YOY to $2.2 billion, or $1.92 diluted EPS. As of June 27, cash and equivalents stood at $7.4 billion.
On the results, CEO Cristiano Amon said, “Our solutions are fueling the connected intelligent edge that is enabling the cloud economy, and we are seeing unprecedented demand for our technologies as the pace of digital transformation accelerates.”
Smartphone chip sales constitute Qualcomm’s largest segment. Widespread adoption of new 5G-ready devices contributed to the significant rise in Q3 revenue. While Qualcomm benefits from new smartphone models with 5G technology, Apple’s (NASDAQ:AAPL) decision to design its own chips in-house has increased the competition in the industry.
Qualcomm is also expanding into new markets like laptops, automobiles and network infrastructure. But it faces stiff competition from Nvidia (NASDAQ:NVDA) and Skyworks Solutions (NASDAQ:SWKS).
The company predicts at least a 4% increase in revenue and a minimum 12% increase in adjusted EPS in its fiscal 2021 fourth quarter. While QCOM stock is down nearly 4% so far in 2021, it may soon head back toward the all-time highs reached in January. It currently trades around $147 per share. Forward P/E and current P/S ratios stand at 167.79 and 5.01, respectively.
Growth Stocks to Buy: Snowflake (SNOW)
52-week range: $184.71 to $429
San Mateo, California-based Snowflake is a data warehousing and sharing company that went public in 2020. Its platform enables customers to consolidate data into a single source to drive business insights and build data-driven applications.
Snowflake released Q1 2022 results in late May. Revenue was $228.9 million, an increase of 110% YOY. Net loss was $203 million, and diluted EPS was a 70 cents net loss. In Q1 2021, the company saw a net loss of $94 million, or a diluted EPS loss of $1.72. Free cash flow stood at $12.9 million. Cash and equivalents at the end of the period stood at $661 million.
CEO Frank Slootman noted, “Snowflake reported strong Q1 results with triple-digit growth in product revenue, reflecting strength in customer consumption. Remaining performance obligations showed a robust increase year-on-year, indicating strength in sales across the board.”
Customers across various industries have adopted Snowflake’s data cloud platform. The company boasts over 4,500 existing clients, including more than a third of 2020’s Fortune 500 list. With more than 100 customers generating $1 million or more in annual sales and a high net revenue retention rate, Snowflake creates substantial value for its customers.
As more enterprises adopt digital solutions and put data at the heart of their operations, Snowflake is well-positioned to capitalize on increasing usage of data platforms in the coming years. SNOW stock currently trades for about $284 and is flat YTD. It trades nearly 34% lower than its record high in mid-December. The current P/S ratio stands at 73.23. A further decline toward the $250 level would improve the margin of safety for investors.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
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