Do you have $5,000? These 3 growth stocks are trading near their 52-week lows
The market rallied this summer, but not all growth stocks are playing along. Several companies have lagged behind, not participating in the market’s long-awaited rebound after months of pain.
Matching group (MTCH 4.39%), freshpet (FRPT -0.79%)and Twilio (TWLO 7.40%) are all trading within 10% of their 52-week lows. Let’s take a closer look at why they are in the market niche and assess their chances of getting out of it again. If you have $5,000 to invest, this looks like attractive opportunities to “buy the dip”.
When viable COVID-19 vaccines became available early last year, it should have been a dinner bell — or maybe even a mating call — for Match Group. The online dating industry leader is the company behind Tinder and dozens of other dating apps, but it couldn’t strike a chord with investors. The stock fell 13% last year, and in 2022 stocks have lost more than half their value.
The stock hit a new two-year low last week after posting disappointing financial results. Revenue rose 12% for Match Group’s second quarter, just short of Wall Street targets. The fact is that sales would have increased by 19% – and exceeded market expectations – had it not been for the strengthening of the dollar against international currencies. Match Group surprised the market with a small loss, but is expected to bounce back this quarter.
Match Group isn’t feeling romantic right now. Tinder is looking for a new CEO, and the flagship app’s revenue per paid user has fallen slightly. However, a 10% increase in revenue per paid user across the rest of its other apps pushes the metric for Match Group as a whole up 3% over the past year. The number of paying users for all Match Group properties soared 10% to 16.4 million premium lovebirds. The forecast calls for a flat second half in terms of revenue growth, but for the current quarter at least, this outlook has an impact of 8% on the currency conversions included in the forecast. Match Group shares are down 57% since the start of last year, and like someone who just broke up after a long relationship, shares should rebound.
Freshpet came within 4% of hitting a new low on Tuesday after posting mixed financial results. The provider of premium refrigerated pet foods – presented in stand-alone displays in a growing number of grocery stores, mass retailers and pet supply chains – saw a 34% increase in its net sales in the second quarter. Early results were nearly in line with market expectations, but the stock suffered a 15% hit after posting a much larger than expected deficit for the period.
An inflationary surge in food prices and a ramp-up in marketing spending squeezed margins. Freshpet’s net loss nearly tripled from a year earlier. The good news is that many headwinds seem to be temporary. Inflationary pressures are already beginning to ease. It also plans to open a new facility next month that will bring its total production capacity north of $1 billion, justifying the higher marketing costs.
Like online dating stocks which have surprisingly languished of late, pet food stocks have also performed poorly. We welcomed pets at the start of the pandemic. Aren’t we going to spoil these new puppies and kittens for years? If Freshpet manages to align its costs, it should recover from the recent setback.
Let’s finish with Twilio. The leader in in-app communication solutions continues to grow at a rapid pace. Revenue rose 41% in last week’s quarterly update, ahead of expectations. Net results were also better than analysts were aiming for.
Twilio got tripped up with his advice. The midpoint of its current-quarter outlook calls for 31% year-over-year revenue growth. Most companies would be happy to see gains north of 30%, but this is a significant deceleration. Twilio’s platform is holding up very well, but many of its customers — especially in crypto, social media, and on-demand consumer businesses — are experiencing slowdowns this summer. With Twilio still the dominant player in its promising niche, it’s hard to bet against the fallen market darling. It looks more like a buying opportunity than throwing in the towel.
Match Group, Freshpet and Twilio may be out of favor at the moment, but they are still growth stocks with promising long-term prospects. They all closed within 10% of their recent lows on Tuesday, but that also means there’s plenty of upside potential if the headwinds turn back into tailwinds.
Rick Munarriz holds positions in Twilio. The Motley Fool fills positions and recommends Freshpet, Match Group and Twilio. The Motley Fool has a disclosure policy.