Most reputable growth stocks end up doing their job by making sizable gains. That’s not to say, however, that any of these names are immune to the occasional setback. Indeed, their very growth-oriented nature usually means that they take big chunks when they stumble.
These stumbles, however, are excellent buying opportunities for investors who can keep their eyes on the big picture. To that end, if you have a few thousand dollars idle right now, here’s a look at two great growth picks to consider while they’re down. Both companies face compelling long-term futures.
Shopify
It is quite possible that you used a Shopify ( STORE -9.59% ) service without even realizing it. Well-known brand groups including Kraft Heinz, Dressbarn and Staples are just a few of its major customers. Then there are the millions of other smaller stores that have enlisted the company’s help in establishing an e-commerce presence.
In total, Shopify facilitated $175 billion in online sales last year, up 47% from 2020 levels. Analysts predict revenue growth of 31% this year and 33% more next year, pushing the company deeper into the black. This growth, however, only scratches the surface of Shopify’s potential.
Image source: Getty Images.
The driving force behind this continuous expansion is as much Amazon as is Shopify. While Amazon.com is the undisputed king of e-commerce, it shows all the pitfalls of size. Its scale has become cumbersome, it offers a little too much direct competition with third-party sellers, and it’s increasingly difficult for sellers looking to operate a single store to do so in a retail environment that is home to around 2 million other active sellers.
Tired of the challenges inherent in the platform, more and more brands are looking to regain control of how they connect with consumers online by managing these transactions themselves.
The fact is, while millions of small and not-so-small businesses have embraced Shopify’s platform, many more haven’t made the switch yet — or even at all in the e-commerce fray. . While Shopify contributed $175 billion in online sales last year, Digital Commerce 360 reports that US consumers alone spent nearly $900 billion online in 2021, and that amount is less. 20% of the $4.5 trillion in retail sales they racked up during that 12-month stretch. eMarketer pegs the global annual e-commerce figure at around $5 trillion.
The thing is, there are still plenty of opportunities for Shopify to exploit from here. The stock’s 66% drop from the November high indicates that investors aren’t quite making the connection.
Crocodile
The other high growth name to pick up while downed is Crocodile ( CROX -0.15% ). Shares of this company are down 60% from the November high and are knocking on new 52-week lows hit in March.
Yes, it’s the same company behind the funky foam shoes that were all the rage in 2007 and seemingly died out in 2009. The shoes, it seems, fell into disuse as quickly as they grew little by little. nearly as quickly as fashion has developed.
The thing is, Crocs never really went away. The brand simply needed to regroup and assess how to create sustainable and scalable demand. He seems to have done just that. With the exception of the first two quarters of the COVID-19 pandemic in the United States, revenue has grown every quarter since 2017. Last year’s revenue of $2.3 billion actually beat a record despite all the supply chain hassles. world was then confronted.
The key to this lasting success is threefold. One of these folds is the new world’s appreciation for function over fashion. Crocs shoes have never been so conventional. But consumers don’t care. They are ultra-comfortable, so much so that people don’t mind wearing them wherever they go.
Another new pillar of Crocs’ surprisingly sustained success is the relatively new understanding that its shoes allow brands to make fashion statements with a bit of a mockery of the fashion industry itself. Companies ranging from Hidden Valley dressing to luxury fashion name Balenciaga have collaborated with Crocs to create and sell new products, as have pop stars Justin Bieber and Drew Barrymore, and rock band Kiss. Consumers loved the unlikely mixes.
Finally, Crocs’ third strategy for driving continued sales growth is to recognize that a group of its customers enjoy customizing their clogs with charms, patches, and other decorations. The company even promotes its Jibbitz brand of shoe charms on its e-commerce site for shoppers looking to add a little bling to their online shoe orders.
The three-pronged plan seems to be working. Despite the stock’s strong sell-off, analysts expect revenue growth of nearly 50% this year, followed by more than 18% growth next year.
The recent pullback has also dragged the stock down to a price that is only 7.3 times projected earnings per share of $9.95 this year. The market is unlikely to let this stock linger at such a low valuation any longer.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.
