3 Growth Stocks That Have Been Beaten Down But May Revive in the Second Half of 2022
Major Points
- Despite this year's strong sales increase, certain stocks have taken a beating.
- As investors start to buy again, the difference between their prices and growth rates can collapse quite quickly.
For these equities, which are expected to surge, the remainder of this year may be a completely different story.
The stock markets have experienced their worst year-to-date first half since 1970. Growth stocks have suffered the most from this bear market, with some of their share prices plummeting by 50% or even more.
It is not unusual to see growth stocks decline quickly when the markets become choppy, given their huge premiums, particularly when there are concerns about an economic slowdown. However, not everyone deserved to be punished so severely, and the market may soon realize how inexpensive some growth stocks are right now. These three growth stocks, which have been significantly undervalued, could rise in the second half of 2022.
Among the most cost-effective growth stocks to buy
The auto sector has had a turbulent year. The Russian invasion of Ukraine has messed up supply chains, pushed up the prices of raw materials, made it harder to get semiconductor chips, and threatens to take even more money out of the pockets of automakers.Given that it lost about 46% of its value in the first half of the year, it is not unexpected that Ford's (F-2.31%) stock has had a difficult time finding a bottom this year. Ford's sales of traditional vehicles are doing well despite the downturn in the industry, while sales of its electric vehicles have been going through the roof lately.
In the upcoming months, Ford's stock should increase thanks to three factors. The first is the strong demand for conventional vehicles, especially Ford SUVs and F-Series pickup trucks. The F-Series was the only pickup truck brand in the United States to see sales increase in May, rising 6.9 percent year on year.
The second is the restart of sales of the Mustang Mach-E. Due to a potential overheating issue, Ford recalled and stopped selling the all-electric SUV in mid-June, which decreased the value of its stock. Ford, nevertheless, might resolve the problems within the upcoming few weeks, and after that, Mach-E sales ought to soar once more. Mustang Mach-E sales increased by 166 percent in May compared to the same month last year, setting new monthly records.
Ford's F-150 Lightning pickup trucks in Alaska during testing.
Ford's all-electric F-150 Lightning pickup trucks come in third and are the most significant. Ford only began shipping the pickup truck in May, so it shouldn't begin boosting its top line until the second half of 2022. Ford has more than 200,000 F-150 Lightning reservations and is increasing production to keep up with demand.
Ford's stock price has been impacted by recessionary worries, but the corporation is now unable to satisfy all of the demand. I don't see any reason why Ford's stock should continue to trade at a pitiful price-to-sales (P/S) ratio of 0.33 for very long. That's a wonderful "issue."
This market leader will experience synergies from its transactions.
It goes without saying that during this year's bear market, tech stocks have taken the biggest beating. Salesforce (CRM, 1.56 percent) stock has been a little more resilient, losing roughly one-third of its value in the first half of 2022, while several high-growth companies have hit new lows. Salesforce is a strong company with a lot of room for growth, which should help the stock get better.The CRM software from Salesforce enables companies to give their sales teams more freedom to concentrate on increasing customer retention and revenue. This sector has the potential to grow quickly because more and more businesses are trying to automate customer management and make more money.
For nine years, Salesforce has had an unbeatable lead in the market. Salesforce will hold a 23.9 percent share of the global CRM market in 2021.The combined market share of the following four sizable rivals was lower.
Salesforce is an acquiring firm, and while a string of mergers have put pressure on its margins, the company hopes that big-ticket acquisitions like Slack will help it unlock more value and gradually increase margins. For the fiscal year that ends on January 31, 2023, Salesforce anticipates earning around $31.8 billion in sales, up from $26.5 billion in the previous fiscal year. It will be a record year for the business, and Salesforce expects to generate $50 billion in revenue by 2026.
With its potential for revenue growth, this software-as-a-service stock could be one of the first to come back.
There is no risk left for this stock.
Shopify (SHOP 6.40 percent) stock has taken a beating this year. The termination of COVID-19 lockdowns has slowed the rise of online shopping, and investors are concerned that increased competition in a declining industry won't be good for Shopify.
Even though Shopify's growth is slowing down, it would be unrealistic to expect any internet firm to maintain the pandemic's hypergrowth. Normalization had to happen, and a big part of the slowdown is already reflected in the price of Shopify's stock.One factor that could cause Shopify's operating margin to fall short is its acquisition of Deliverr. Deliverr will enable Shopify to compete with Amazon by enabling its merchants to offer one-day and two-day delivery similar to Amazon Prime, so there will be some short-term pain for long-term gain. More sellers may be strongly encouraged to conduct business on Shopify as a result.
The first quarter revenue growth for Shopify wasn't quite as dismal as the markets were portraying it to be. The gross merchandise volume went up by 16%, which helped the revenue go up by 22% from the previous year.
According to Shopify, the second half of the year will see substantially better sales growth than the first. Of course, it's still possible that it won't have the same level of growth this year as it did in 2021, when its sales increased by 57 percent, but even a 20 percent increase in growth wouldn't justify the current cheap price at which Shopify stock is selling. In order to put that into perspective, it should be noted that although Shopify experienced record sales over the previous 12 months, the stock is currently selling at a P/S ratio of just 8, which is less than one-third of its five-year average.
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