Many “hypergrowth” tech stocks hit all-time highs last year, driven by bullish market optimism in a post-pandemic recovery, stimulus checks, the growth of free trading platforms like Robinhood Markets, and discussions on Reddit’s WallStreetBets (WSB) subreddit. Bullish fund managers like Cathie Wood have also fanned those flames with high-profile buys.
But in recent months, many of those frothy stocks have been crushed by inflation, fears of rising rates and Russia’s invasion of Ukraine have sparked a rotation into more conservative investments. Woods Ark Innovation ETF — arguably the flagship fund for hypergrowth stocks — is down almost 40% this year.
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However, this selloff has also created promising buying opportunities for investors who can handle short-term volatility. Here are four hypergrowth stocks I would buy in this tough market: Airbnb (NASDAQ: ABNB), Datadog (NASDAQ:DDOG), Cloudy (NYSE:NET)and Adyen (OTC:ADYE.Y). Let’s find out a bit more about these four hypergrowth tech stocks to buy in 2022.
1.Airbnb
Airbnb’s revenue fell 30% in 2020 as the COVID-19 pandemic brought global travel to a halt. But in 2021, his income soared 77% as those lockdowns were eased. In 2022, analysts expect its revenue to grow 32% and break its losing streak with a full-year profit.
Airbnb’s business model is naturally inflation-proof, for two reasons: tighter budgets will push travelers toward cheaper accommodations, while a need for additional income will encourage hosts to rent out their properties.
Airbnb’s stock isn’t cheap at 12 times this year’s sales, but its continued disruption of traditional hotels, growing brand recognition and resilience to macroeconomic headwinds all justify that slight premium.
2. Data dog
Datadog’s cloud-based platform monitors an organization’s databases, servers, and applications in real time, then aggregates all that data into unified dashboards for IT professionals. This simplified approach greatly facilitates the detection and diagnosis of technical problems.
Datadog’s revenue jumped 66% in 2020 and then 70% in 2021, as its total number of customers with more than $1 million in annual recurring revenue more than doubled. It has also maintained its net dollar retention rate above 130% for 18 consecutive quarters. Its gross margins are maintained and its net losses are reduced.
Analysts expect Datadog’s revenue to rise 49% to $1.5 billion this year, and shares are trading at around 30 times that estimate. That’s a premium valuation, but should be easily supported by Datadog’s stellar growth rates.
3. Cloud Flare
As the Russian-Ukrainian conflict escalates, fears of cyberattacks and internet disruptions are growing. Cloudflare’s platform addresses these fears with a Content Delivery Network (CDN), which accelerates the delivery of digital media to apps and websites, and cybersecurity tools that protect websites against attacks by distributed denial of service (DDoS).
Cloudflare was already growing like a weed before the conflict. Its revenue is up 50% in 2020 and 52% in 2021, and analysts expect its revenue to rise 42% to $931 million this year as it makes a very small profit. Cloudflare shares are trading at more than 40 times that estimate, but the company could still have plenty of room for growth as companies aggressively secure their websites and speed up the delivery of their digital content to visitors.
4. Adyen
Adyen, which is based in Amsterdam, develops backend software that helps merchants accept over 250 payment methods, including credit cards, debit cards, mobile wallets and payment apps. It’s not a consumer-oriented company like PayPal Credits Where To blockand it does not touch cryptocurrency, stock trading, or linked debit cards.
Instead, Adyen simply provides code that can be integrated into existing payment systems. Many large retailers, including former PayPal partner eBaywere drawn to this flexible model.
Adyen’s revenue grew 28% in 2020 even as many retailers closed during the pandemic, and grew 46% in 2021 as those headwinds subsided. Analysts expect its revenue and profit to rise 38% and 39% respectively this year. The stock certainly isn’t cheap at 76 times forward earnings and 36 times sales this year – but investors shouldn’t overlook its low-key approach in an industry filled with buzzy platforms.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice 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.
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