Last week, it proved a tricky one for growth stocks. Many of the market’s fastest growing technology darlings were demolished, especially in the second half of the week. The pullback was probably primarily a function of some gains after many of these stocks went up since the bottom of the coronavirus market crash in March.
Sure, many of these supplies were due to a correction. After all, stocks may not trend sharply upwards forever. Eventually they become overrated. A withdrawal in these shares was therefore largely earned. But the decline may also have led to some stocks shifting.
Three major growth stocks looking for good buying opportunities after selling last week is cloud data company MongoDB (NASDAQ: MDB), monitoring and analyzer platform provider Datadog (NASDAQ: DDOG), and companies for telehealth and virtual care Teladoc Health (NYSE: TDOC) en Livongo Health (NASDAQ: LVGO).
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MongoDB: Down 18%
Following this week’s sale, MongoDB’s shares have now fallen 18% for quite some time, giving today’s investors a much better starting point than many other investors paid for the stock this summer.
MongoDB is able to grow its business rapidly – even through the pandemic. The company’s revenue for the quarter ending April 30, 2020 (MongoDB’s first quarter of fiscal 2021), grew 46% year over year. This was mainly an acceleration of growth of 44% in the previous quarter. The company even raised the low end of its fiscal 2021 fiscal full year revenue by $ 10 million, resulting in 2021 fiscal revenue between $ 520 million and $ 530 million.
“Although the impact of COVID-19 will be longer than we originally expected at the beginning of this fiscal year, we see clear signs that the current environment is reinforcing the long-term trends towards digital transformation and cloud migration,” said MongoDB CEO Dev Ittycheria in ‘ the fiscal release of the first quarter of the company. “MongoDB is a clear beneficiary of these trends and we will continue to invest to fully capitalize on this market opportunity.”
Datadog: Down 23%
Shares of Datadog have been down 23% since hitting a $ 98.99 high earlier this month. Nevertheless, Datadog’s underlying business is booming. While growth in the second quarter in Q1 fell from a growth of 87%, the year was still a strong 68%.
The company’s customers with contracts with annual returns of $ 100,000 or more at the end of Datadog’s second quarter were up 71% year-over-year, at 1,015.
Looking ahead, the company posted a full-year outlook for $ 566 million to $ 572 million in revenue. Analysts expect 2020 revenue of $ 564 million.
Livongo Health and Teladoc: Down 19% and 23% respectively
Finally, there are Livongo Health and Teladoc – two companies whose shares fell sharply last week after announcing their plans to merge and merge – a move that would make them the undisputed leader in telehealth and virtual care to make.
The two companies estimate the combination will drive $ 100 million in synergy revenue until the end of the second year after the merger. In addition, they predict $ 500 million in synergies of revenue on a run-by-basis basis by 2025. Considering that the two companies today generate just $ 923 million in annual revenue, this is quite a projection.
Investors buying these tech companies for telehealth are taking an interest in an incredible growth story. Livongo Health, a company that specializes in virtual healthcare solutions for people with chronic conditions, saw revenue in the second quarter increase by 125% year-over-year to $ 91.9 million. Telehealth platform provider Teladoc saw its revenue drop 85% in the second quarter of the year.
Of course, there is always a risk that the merger will not close. But even as individual entities, both Livongo Health and Teladoc Health have an excellent competitive position – and their shares are 19% and 23% below high, respectively.
Expect more volatility going forward
Although these stocks look attractive today, that does not mean that the prices they saw on Friday will be the lowest they are trading from now on. Growth stocks can be very volatile as investors today try to re-evaluate the current value of stock based on wild forecasts for future growth. Small changes in the sentiment for these trajectories of these companies can trigger significant fluctuations in their prices.
Looking back over five years and more, however, these fast-growing tech companies are likely to continue to win market share and improve their offering to their customers, making them critical technologies of the future and ultimately rewarding investors. More importantly, their scalable business models are likely to generate substantial profits over the long term. But investors will have to be patient because these companies are still investing heavily in the huge growth opportunities for them.
