Has the market let you down? Consider Investing in These 3 Stocks – The Motley Fool | Region & Cash

Amid the massive slump in tech stocks, investor sentiment is likely to have hit its lowest level since the financial crisis. That Nasdaq Composite is down more than 25%, and many prominent growth tech stocks are down more than 75% during this downturn.

However, such bear markets can actually To use longer term investors as they can now buy stocks at lower prices. This includes tech stocks such as Adobe (ADB -1.71%), Zoom video communication (ZM -3.88%)and alphabet (GOOGL -5.63%) (WELL -5.81%)which now offer more compelling opportunities and potentially bigger wins.

I regret not having bought Adobe a decade ago. I don’t make the same mistake twice.

Jake Lerch (Adobe): Everyone loves a deal. Whether it’s just a few dollars or thousands of dollars, we all love the feeling that we’re saving money. This applies in particular to financial investments. I’m always on the lookout for stocks on offer. Some companies I will keep an eye on for months or even years, waiting for the right time to pull the trigger.

Last month I finally got my chance at Adobe. It’s one of those companies that I wish I had bought ten years ago. If I had invested $10,000 in 2012, I would be $118,000 richer today. Unfortunatelyall I can do now is live and learn — and buy some Adobe stock.

What I really love about Adobe is that it’s at the center of the digital economy. Businesses large and small rely on the company’s tools for content creation, marketing, and sales.

Adobe operates in three segments:

  • Digital media
  • digital experience
  • publishing and advertising

Around the world, content creators, marketers, educators, and enthusiasts use Adobe’s diverse tools and platforms to produce the digital media we use every day.

Despite its importance to the overall digital economy, Adobe stock has had a tough time this year. It’s down 29% year-to-date and 42% below its all-time high. The latest blow came last month when Adobe reported better-than-expected results but lowered its full-year guidance due to — wait a minute — negative currency effects from the strong US dollar.

I’m not worried about the strong dollar when it comes to Adobe. The company’s fundamentals remain strong. Its operating margin is 36%; it has a return on equity of 35%. Additionally, free cash flow is at a record high of $6.9 billion.

With the company trading at a record-low price-to-earnings (P/E) ratio of 39.3, I’m hoping Adobe will give back some of its recent gains — so I can get an even better deal.

From pandemic darling to discarded, this stock is a steal

Justin Pope (Zoom Video Communications): COVID-19 turned the stock market into a rollercoaster ride, with stocks plummeting and soaring just months later. Zoom has been a poster child for pandemic stocks; Lockdowns forced people to communicate digitally, and Zoom’s growth and stock price skyrocketed.

You can see below that what went up came down again. Now that Zoom reports just 12% year-over-year revenue growth for the quarter ended April 30, 2022, is the goose cooked?

ZM data from YCharts

There’s plenty of evidence that Zoom still has a lot in the tank. First, don’t get too excited about Zoom’s slow revenue growth. Those are annual calculations, and the company grew 191% in the same quarter last year. It’s doubtful that a company will experience its growth spurt so strongly and follow it up with the same momentum a year later.

Zoom has nonetheless managed to grow beyond this stellar period rather than returning revenue. This could be a sign that Zoom’s success is down to actual market demand, which will fuel near-term long-term growth, while Zoom is a fad that will die once the pandemic is over.

And Zoom is highly profitable, unlike many growth stocks that have suffered 50% or more discounts in this bear market. The company accumulates free cash flow and net income, and strengthens a balance sheet with $5.7 billion in cash, a whopping 18% of its market cap, with zero debt.

ZM Free Cash Flow Chart

ZM Free Cash Flow data by YCharts

I wouldn’t be surprised if growth picked up again once Zoom surpassed those impressive comparable growth numbers, but it doesn’t need to be much. The stock now trades at a price-to-earnings (P/E) ratio of just 26, which seems pretty reasonable for a growth stock with years of potential growth and the option to increase share buybacks if desired.

When you add it all up, Zoom appears to be a fundamentally healthy company that’s trading at a great price today. Investors might look back on this bear market as an opportunity to snag stocks.

Google investment opportunity in this search company

Will Healy (Alphabet): Now that Google parent Alphabet has completed its long-awaited 1:20 stock split, it might be time to consider the search engine and advertising giant. While it doesn’t pay a dividend, Alphabet offers almost everything value-conscious investors want in a stock.

First, it’s his business. Its dominant search engine and popular YouTube platform paved the way to becoming an advertising giant and cash cow. It has used these resources to hone its skills in AI, machine learning, and numerous other applications affecting it across multiple sub-sectors of the technology industry.

However, if the latest earnings reports show any signs, Google Cloud looks set to become the next big cash cow. In the first quarter of 2022, Google Cloud reported revenue growth of 44% versus 23% for Alphabet as a whole.

Alphabet also has around $140 billion in liquidity, a factor that gives it optional options bolstered by one of the strongest balance sheets in the industry. Since it generated $15 billion in free cash flow in the first quarter alone, that cash hoard could continue to grow.

Admittedly, Alphabet isn’t immune to the bear market. Since November, the stock is down about 25%, a move roughly paralleling that of the company S&P500.

But given its revenue growth, it may be undervalued. Alphabet is selling at 21 times earnings, its lowest valuation since 2014. It also trades at a significantly lower multiple than cloud peers Amazon and Microsoftwhich sell for 59x and 27x the profit, respectively.

While some investors now feel bad about tech stocks, Alphabet has given them few reasons to doubt its preeminence in the tech industry or its future. At 21 times earnings, buying this stock is likely to increase investor returns — and investor sentiment, too — over time.

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