I’m a big fan of shopping lists. They keep me focused amid a kaleidoscope of too-good-to-pass-up offers at the supermarket.
“Do I really need this?” When I’m checking out a 64-ounce container of ketchup, I’ll ask if it’s marked down 75%. If it’s not on my list, chances are I’ll pass – no matter how good a deal it is. However, if I see “ketchup” on my list, it’s time to go—safe in the knowledge that I’m not impulse buying.
So it is with the stock market. For investors who plan ahead, stock market downturns are the time to pull out their stock shopping lists and take advantage of lower prices. With that in mind, let’s take a closer look at three stocks worth considering now.
Image Source: Getty Images.
1. Spotify
There is no doubt in my mind that a correction in the wholesale market will drive the stock price up. Spotify (SPOT -1.64%) LOW. After all, it’s an unprofitable tech disruptor that has at times struggled with cost discipline.
Still, it’s also a name I’d want on my shopping list if the market gets out of bed, and here’s why:
- Spotify is cash-flow-positive.
- It has $3.4 billion in cash on its balance sheet.
- Its management holds about 40% of its outstanding shares.
In other words, this company isn’t going anywhere, no matter how fearful the broader economy or stock market may be. For one thing, Spotify remains in the growth phase of its business life cycle as it nears the key milestone of 500 million monthly active users (MAU). Still, it remains focused on acquiring paid and ad-supported users and determining the right mix of subscriber versus ad-driven revenue.
Granted, the company will eventually need to bear fruit and show that it can be profitable. However, that is a challenge for another day. Right now, the market is happy to reward Spotify for increasing MAUs and revenue. And with total revenue up 18% year over year, its stock is up 62% year to date.
Smart investors will keep an eye on Spotify as a name to consider taking the plunge if the overall market declines.
2. Duolingo
I was skeptical when I first came across Duolingo (DUOL -0.82%). After all, in a world where almost everyone carries a pocket translator in the form of their smartphone, who needs a language learning app?
At any rate, I didn’t think it would make for a great business model. But, here again, my first impression was wrong.
Duolingo is fun and easy to use. In fact, I’m in the middle of a 60-day learning streak as I prepare for my summer trip to Italy. What’s more, Duolingo is an app that instantly appeals to people of all backgrounds. Whether you want to learn a few basic phrases to use on holiday or get completely immersed in preparing for a move abroad, Duolingo has you covered.
Financially, the company is cashing in. Revenue rose to $104 million in its latest quarter (three months ending December 31, 2022). That’s up 42% from a year ago. Monthly active users grew to 16.3 million — a 62% year-over-year increase. Paid subscriptions grew even more, rising 67%.
And while overall profitability is still a ways off, the company’s net loss narrowed to $13.9 million from $59.6 million. Still, the market is seeing this diamond in the rough; Shares are up 77% year to date. And if the overall market slips, it’s a name investors should consider adding.
3. Tesla
Just like some groceries are always on my list, there are stocks I’m always ready to buy — if they get cheap enough, same with Tesla (TSLA -2.17%).
Not owning a company is great. Revenue to grow from $26 billion in 2020 to $81 billion in 2022. In the same period, production increased by 500,000 vehicles to 1.31 million. In addition, the company’s latest factories in Texas and Germany will further boost the production figures.
TSLA Revenue (TTM) data by YCharts.
Incidentally, these increased production levels may allow Tesla to cut prices further. Thus making its vehicles more affordable to a wider range of consumers as the company moves towards its long-term goal of producing and selling 20 million vehicles annually.
Eventually, Tesla will transition from a growth company into a lucrative cash cow, and I want to follow it throughout the journey. Like a highly discounted grocery essential, this is a name I want to stock up on whenever I get the chance.
Jake Lerch has positions in Duolingo, Spotify Technology and Tesla and has the following options: Long April 2023 Tesla $145 Put and Short April 2023 Tesla $155 Put. The Motley Fool has a position in and recommends Spotify Technology and Tesla. The Motley Fool has a disclosure policy.
Source: www.fool.com
