Hundreds of stocks are selling at prices well below what those companies are worth. With many great stocks on sale, it’s tough to cut through the noise and current market chaos — which stocks do you buy?
Here are 3 top contenders:
1. Planet Labs
Planet Labs (NASDAQ:PL) is an Earth data and analytics company with the largest Earth-imaging satellite fleet.
The company’s proprietary data creates revenue through a high-growth subscription model, servicing over 700 customers across several verticals. For example, this data is used among government agencies to increase global security and respond to threats; in forestry, it’s used to monitor sustainability initiatives; and in agriculture, data is used to help increase crop yields.
Planet made over $100 million in revenue in FY2021. In July 2021, the company merged with dMY Technology Group, Inc. IV, a $345 million special purpose acquisition company, to become a publicly-traded company. The cash infusion was designed to accelerate growth by expanding into new markets and investing in software and machine-learning-enabled data solutions.
Investors have had mixed emotions about Planet Labs this year. After the company missed its earnings and guidance in June, the stock began to plummet. Although Planet Labs isn’t growing quite as quickly as some would have hoped, its growth rate is rapid and meeting the forecasts set out when operating as a SPAC – by contrast most SPACs have fallen way short of their projections.
For long-term investors, the company’s $1 billion+ market cap could be a real steal, and a good sign because opportunities to scale throughout the next decade are high. The consensus analyst estimate is over 100% higher than where the share price sits currently.
2. Sea Limited
Sea Limited (NASDAQ:SE) is a tech conglomerate operating under three core segments — eCommerce, digital entertainment, and digital financial services. Like most high-growth tech stocks, SE Limited has taken a significant beating this year, down over 65% year to date. Although many SE holders began panic selling, long-term investors are holding their shares and using the selloff to buy more.
SE reported strong Q1 2022 earnings, including $2.9 billion total GAAP revenue (up 64.4% from Q1 2021) and $1.2 billion total gross profit (up 81.3% from Q1 2021).
Analysts predict the company could more than double its revenue over the next five years as SE expands into new markets and launches new businesses. As of this writing, shares are down from the stock’s 52-week high of $372.70. Compared to its revenue growth forecasts, SE looks definitively cheap with a market cap of $42.61 billion.
With that said, some investors are concerned about the stickiness of users in its lucrative gaming segment and the impact of high operating costs. However, if Sea Limited can address these issues, the company will likely be a solid long-term investment. Analysts have pegged fair value at $144.23, suggesting 60% upside from current levels.
Formally known as Restoration Hardware, RH (NASDAQ:RH) is an upscale American home-furnishings company and growing lifestyle brand.
Based on the company’s financial health and growth prospects, analysts believe RH has the potential to outperform the market. RH reported strong Q1 results, including record revenue of $957 million, up 11% from 2021, with $2.24 billion cash on the company’s balance sheet.
Currently, the market is valuing RH as if it’s a struggling retailer amidst an economic downturn. However, the company’s history shows otherwise – RH has more than tripled its revenue over the past decade. It may be undervalued when you combine this past growth with the company’s transition toward becoming a lifestyle brand.
RH’s operating margins are high, cash flow is significant, and the company’s revenue is growing. In ten years, shares should be significantly higher, which is why long-term investors are taking advantage of short-term headwinds. As of this writing, shares are trading up slightly from the stock’s 52-week low of $207.37, well below its 52-week high of $744.56.
Should You Buy Shares of PL, SE, and RH?
All three of these growth stocks are unique and differ from one another. So, investing in all three wouldn’t be a bad strategy if your goal is to diversify. That said, invest in the companies that fit your investing strategy — and those you know. As Warren Buffet said, “Never invest in a business you can’t understand.”
Bottom line — If you’re willing to take an educated bet on PL, SE, and RH, all three present a buying opportunity. Although nothing is certain, you should be rewarded if you plan to buy and hold these stocks for the next ten years.