Tech Sell-Off: 2 Unstoppable Stocks Down Over 50% To Buy Right Now


the S&P500 is currently down 4% from its peak, but the S&P 500 Information Technology Index — which tracks S&P 500 technology stocks — is down 9%. In other words, the technology sector has underperformed the broader market over the past few months. But if you expand the time horizon, that narrative changes.

Broadly speaking, tech stocks have actually beaten the S&P 500 over the past one, three, five, and 10 years. In fact, the S&P 500 Information Technology Index has risen 470% over the past decade, while the S&P 500 has risen only 227%. This data argues in favor of allocating at least part of your portfolio to the technology sector.

In this spirit, the actions of Etsy ( ETSY 2.23% ) and DigitalOcean Holdings (DOCN 2.97% ) are currently trading more than 50% below their all-time highs, but both stocks could be smart additions to your portfolio. Here’s why.

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Etsy operates the fourth most popular e-commerce marketplace in the United States by monthly visits. And its focus on unique and creative products has been key to its success. The Etsy brand has become synonymous with handmade, vintage, and customizable inventory, setting it apart from other marketplaces like Amazon and big-box retailers like walmart.

To further this advantage, Etsy provides value-added services that make commerce easier for its sellers, including digital advertising tools and discounted shipping labels. On the other side of the equation, Etsy has worked hard to improve the buyer experience with AI-powered search results and personalized recommendations, and by providing better post-purchase support. Collectively, these initiatives have largely borne fruit.

Since 2019, Etsy has doubled the number of buyers and sellers on its marketplace, and it has tripled the number of repeat buyers (i.e. consumers who have spent more than $200 and made purchases at least six days in the last 12 months). In turn, revenue skyrocketed 35% to $2.3 billion in 2021, and earnings rose 30% to $3.41 per diluted share.

Currently, Etsy estimates its primary market opportunity at $466 billion, a figure that includes online spending in its seven primary geographies. But that figure jumps to $2 trillion if you include transactions that currently take place offline, and it gets even bigger if you take into account Etsy’s recent acquisitions of fashion resale platform Depop and the marketplace. Brazilian Elo7, which (like Etsy) specializes in handmade. and unique goods.

In short, Etsy already has a big market opportunity, but it should grow even bigger as online shopping continues to take market share from traditional retail. More importantly, the company has carved out a defensible niche by focusing on unique and creative products. And with stocks trading at nine times sales — a bit cheaper than the three-year average of 12.1 times sales — this tech stock looks like a bargain.

2. Digital Ocean

Tech giants like Amazon and Microsoft have become synonymous with cloud computing, and there’s a good reason for that. These companies offer an incredible range of cloud services, from basic infrastructure solutions to cutting-edge tools for machine learning and quantum computing. Unfortunately, these products are usually designed for large enterprises, which means they are often too complex for individual developers or small businesses. That’s why DigitalOcean is on a mission to democratize cloud computing.

Its platform, while not a match for Amazon or Microsoft, offers a growing number of infrastructure and platform services, including networking and storage, developer tools, and databases. fully managed. Most importantly, all of these products are designed with simplicity in mind, which means small businesses can deliver cloud services in minutes, without any specialized training. The company also provides 24/7 customer and technical support, along with thousands of developer tutorials and an array of community-generated educational content. In short, DigitalOcean makes building and scaling cloud applications easy, even for customers who don’t have a strong IT department.

Unsurprisingly, these differentiating qualities have fueled solid growth. Last year, DigitalOcean saw its number of customers increase by 6% to 609,000, and the average customer spent 16% more. In turn, this compound momentum drove revenue up 35% to $429 million, and the company generated positive free cash flow of $24 million, compared to a loss of $57 million in 2020.

For the future, I think DigitalOcean could maintain (or even accelerate) its growth. Management pegs its addressable market at $72 billion in 2022, but estimates that figure will grow to $145 billion by 2025 as more small businesses adopt cloud services. This puts DigitalOcean (and its disruptive business model) in front of a huge opportunity. And with stocks trading at 13.5 times the sell – a bit cheaper than the historical average of 14.9 times the sell – now seems like a good time to start a position in this beaten tech stock.

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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