All about Investing

2 Beaten-Down Growth Stocks Sitting on Plenty of Cash

Related categories

These businesses are well positioned to handle global economic downturns.

This has been a topsy-turvy year for growth stocks and these former stock-market darlings. Both of the stocks on this list delivered big gains through most of 2021, only to collapse over the past several months. 

They might be heavily depressed at the moment, but the businesses behind these stocks are stronger than ever. As a result, both have over $2 billion in cash on their balance sheets and the means to produce more.

Image source: Getty Images.

Soaring oil prices and rising interest rates could have a significant effect on cash flows, but these factors alone are highly unlikely to unravel these companies' successful operations. Read on to see why these are two of the best growth stocks you can buy in these uncertain times.

1. Roku

Roku (ROKU -1.63%) was a big benefactor of pandemic-related lockdowns, but the stock's price spike didn't last. Shares of the TV-streaming pioneer have tumbled 75% from their high point last summer. Now you can scoop up the stock at prices not seen since July of 2020. 

A fourth-quarter earnings report marred by decelerating growth and top-line revenue that missed the company's own forecast pushed Roku stock down. Investors need to remember that lower sales of new Roku-enabled television sets caused by a shortage of the chips needed to manufacture those televisions is a temporary challenge.

Roku's future looks brighter than its stock price suggests. By hours streamed, Roku is the leading platform in North America, and the company knows how to monetize its growing user base. Cash from operations soared 54% last year to $228 million. That left the company with $2.1 billion in cash at the end of 2021.

Roku is willing to accept a loss on the hardware it sells because streaming targeted advertisements through Roku TVs and streaming sticks is a lucrative business. Average annual revenue per user rose 43% to an impressive $41.03 last year.

Roku has brilliantly monetized its platform in the U.S., but it's still playing land-and-expand to develop new international markets. With lots of room to grow, this is a great stock to buy now and hold for the long run.

2. Veeva Systems

Veeva Systems (VEEV -1.01%) is another growth stock you can buy at prices not seen since the first half of 2020. Shares of the life science industry's leading cloud service provider soared in 2020 and 2021. Unfortunately, a market wary of tech stocks pulled Veeva's price down by 43% since it peaked last July. 

Veeva Systems provides cloud-based software as a service (SaaS) designed specifically for the biopharmaceutical industry. Laboratory testing and clinical trials rack up a lot of data that drugmakers need to keep at their fingertips. Once a new drug earns FDA approval, Veeva Systems also offers customer relationship management services built for pharmaceutical sales. 

This stock recently tanked despite revenue that grew 26% during the fiscal year ended Jan. 31, 2022. The market was responding to fiscal first-quarter guidance that suggests a slowdown ahead. Veeva Systems expects around $495 million in top-line revenue during its fiscal Q1. That's only 2% more than the company recorded during the previous three-month period.

Early in the pandemic, we saw an unprecedented level of investment in the biopharmaceutical industry. Startup drug developers aren't getting bombarded with giant waves of cash anymore, and that's bound to show up in Veeva's results this year. 

Luckily for investors, Veeva still dominates the niche market it created. That's allowed the company to build up a big comfy cash cushion to weather any storm. Cash, cash equivalents, and short-term investments on Veeva's balance sheet totaled $2.4 billion at the end of January.

Less biopharmaceutical industry investment means fiscal 2023 probably isn't going to be a banner year for Veeva Systems. Without significant competition on the horizon, though, investors can reasonably expect many years of bottom-line growth at a double-digit percentage.

Leave your comment