An Ugly Start to 2022 for Growth Stocks
It’s been an ugly stretch for popular growth names on the market, although it’s probably one we should have seen coming. From 2020 to 2021, we saw one of the strongest bull markets in history. Well, we all know stocks don’t only go up, so we could have probably seen this period of consolidation coming. The problem with the mass growth stock sell-off is that some great companies are being dragged down into the mud. Here are two stocks that I am getting really close to buying for my own portfolio.
Sofi Technologies (NASDAQ:SOFI)
Perhaps no group of stocks have been hit harder than those that went public through a SPAC merger. SPACs were all the rage last year, and the markets set an all-time record for IPOs during a calendar year. SoFi is likely the best of the companies that venture capitalist Chamath Palihapitiya brought to the public markets and yet it is getting pummeled right now alongside the rest of the growth sector. SoFi is positioning itself well for future growth and has a couple of aces hidden up its sleeve.
Its acquisition of Galileo is underappreciated in my opinion. Galileo is a financial software platform that powers SoFi’s various fintech services. What’s more, Galileo is actually behind 95% of digital banking systems in North America and is used by financial companies around the world as well. The platform should be the key to SoFi’s continued development as a full-fledged financial services provider, especially once it is approved for its national bank charter. Obtaining that charter will help SoFi’s bottom line as lending money would be cheaper because SoFi wouldn’t have to rely on third-party companies. As well, it would be able to provide account holders with higher interest rates and lend money at lower interest rates.
The stock is now down about 18% since it went public and is trading at basically its lowest multiples ever. SoFi might not get the same attention as PayPal (NASDAQ:PYPL) or Block (NYSE:SQ), but I think within ten years it will be mentioned in the same sentence as these other two massive fintech companies.
C3.AI (NYSE:AI)
C3.AI made a huge splash when it first started trading on the public markets but has since lost 75% of its stock price over the last year. This type of fall screams a fundamental issue with the business that was not revealed during the IPO. But much of C3.AI’s decline has been what I believe to be a result of rising too high too fast on Wall Street. Most investors don’t know how to value artificial intelligence yet, especially at a large-scale enterprise level where this company operates.
Last quarter alone it signed new contracts with companies like Royal Dutch Shell, Baker Hughes, Liberty Mutual, and even the Department of Defense. C3.AI grew its customer base by 63% bringing its total to 104 altogether. It is a stark reminder that major companies in all industries are implementing artificial intelligence and machine learning into their businesses.
So what’s the deal with C3.AI? It’s far from profitable, and its meteoric rise came at the right time as AI was the flavor of the week back in December of 2020. Then COVID-19 hit, and over the past half a year or so, growth stocks have been battered down. It’s usually hard to find stocks that are trading at a 75% discount and are adding customers and growing their business. At these price levels, C3.AI could have a lot of upside over the next few years.
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