In the grand scheme of things, Wall Street is a powerful tool for accumulating wealth. Equities have outperformed bonds, real estate, and commodities like oil and gold in terms of annual returns over the past hundred years, making them the top choice for investment growth.
However, this does not imply that stocks consistently increase in value without fluctuations.
The initial three trading days in August were driven by the performance of growth stocks. The Nasdaq Composite Index losing approximately 1,400 points , experiencing a drop of 8% in value, which categorizes it as being in a correction phase. While significant decreases may be unsettling, they have typically served as a favorable moment for investors with a long-term perspective to seize opportunities.
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Although we cannot accurately forecast when downturns will start, how long they will continue, or where they will end, it is evident that the main stock market indices tend to increase in worth in the long term. Identifying mispricings in reputable companies during market declines can be a successful approach.
The two items that come next are historically inexpensive. growth stocks Investors can take advantage of an opportunity that cannot be overlooked any further.
It’s time to strike: Baidu.
The first A stock with remarkable growth potential at an incredibly low price. One of the investment options that investors can consider adding to their portfolios at the moment is the Chinese internet search giant. Baidu ( BIDU -2.56% ) .
Certainly, Chinese stocks face specific challenges due to regulations that may arise when interacting with the Chinese government. The impact of both regulatory supervision and the slow recovery of China’s economy post COVID lockdowns has had a negative effect on companies like Baidu and other well-known Chinese stocks.
Fortunately, there are several factors indicating that Baidu may be at its lowest point and is currently undervalued, making it a compelling opportunity.
Firstly, the internet search engine of the company has represented over half of the market share in local search For over ten years now, Baidu has established itself as the leading choice for online searches. It has been successful in attracting advertisers and setting high prices for ads. It is likely that this sector will continue to be a significant source of revenue for the company in the foreseeable future.
Even more interesting is observing how the company is using its money. For example, it is a prominent provider of cloud infrastructure services in China. The investment in enterprise cloud services is still in its early stages in China, and businesses are gradually increasing their spending in this area. As cloud-service profits are higher than advertising profits, we can expect Baidu’s operational cash flow to significantly increase in the future.
Baidu, the company responsible for Apollo Go, a prominent self-driving ride-sharing service globally, had recorded over 6 million rides as of April 19. This achievement highlights the significance of the company’s services. machine intelligence implementation of investments.
In addition, Baidu has accumulated a significant amount of cash reserves. The quarter that ended in March concluded with approximately $26 billion. Baidu has a strong financial position with a significant amount of cash, cash equivalents, and marketable securities, which exceeds its current market capitalization of $30 billion. In the event of a recession in the U.S., China, or globally, Baidu is better positioned than many other companies to withstand the economic downturn.
Under 8 times earnings forecast for the upcoming year Baidu’s stock is very cheap, especially considering its $13.7 billion net-cash position, making it an attractive investment opportunity at the moment.
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It’s time to take action: Fiverr International
Another high-growth stock that investors can confidently capitalize on is platform for purchasing services over the internet Fiverr Global ( FVRR -4.12% ) .
While AI is anticipated to drive growth in Baidu’s non-digital marketing sector in the future, concerns have arisen on Wall Street about the potential impact of AI on Fiverr’s online platform for freelance services. In simpler terms, there is a fear that AI could replace freelancers in certain roles, reducing the demand for online service platforms.
Fiverr has successfully welcomed AI and utilized it to increase its sales to some extent. It seems that worries about AI negatively impacting freelance work are mostly exaggerated.
Progressing beyond this obstacle, we encounter four. Specific catalysts that can boost Fiverr .
To begin with, the makeup of the workforce has undergone a permanent shift as a result of the pandemic. There is now a higher number of individuals working from home compared to before the pandemic, which aligns well with the services offered by Fiverr, a platform designed for freelancers.
Secondly, the The distinctiveness of the platform is leading to a consistent growth in the amount spent by each customer. While other online-service platforms typically permit freelancers to set hourly rates for their work, Fiverr freelancers showcase their services as individual tasks. This transparent pricing model appears to strongly appeal to buyers using the platform.
The The third aspect that sets Fiverr apart is its commission rate: Fiverr retains a portion of each transaction made on its platform, which includes fees. While many of its rivals typically have take rates in the mid-teens range, Fiverr achieved a take rate of 33% in the quarter ending in June.
The platform is now earning a higher cut from every transaction made, and at the same time, customers are spending more on each purchase. This combination is expected to result in a better operating margin in the long run.
Lastly, it has utilized non-organic methods to expand into different industries One way Fiverr is diversifying its revenue streams is by acquiring AutoDS, a company that offers comprehensive solutions for drop-shippers on a subscription basis. This move introduces a fresh approach to boosting sales while also enhancing Fiverr’s e-commerce platform.
Fiverr’s valuation is currently under 10 times the projected earnings for the next year, marking a significant low since its initial public offering in June 2019. Given the potential for consistent high earnings growth, this appears to be an ideal opportunity for investors seeking to take advantage of the situation.
