- Robinhood (HOOD) is set to launch cryptocurrency wallets and tax-advantaged retirement accounts.
- Snowflake (SNOW) has a sticky platform with a net revenue retention rate of 178%.
- Stitch Fix’s (SFIX) spending per customer increased 18% year-over-year to $549, implying strong customer engagement.
With soaring inflation and the start of the rate-hiking cycle by the Federal Reserve, investors started 2022 by dumping tech stocks. Russia’s invasion of Ukraine further added volatility to an already fragile stock market.
Investors noted that the selloff in tech stocks particularly hit growth names in cloud software, e-commerce, financial technology (fintech) and consumer devices. For instance, the Technology Select Sector SPDR Fund (NYSEARCA:XLK), which tracks the technology sector of the S&P 500 Index, is currently down 13% year-to-date (YTD).
However, despite the recent decline, tech stocks have returned over 600% over the past decade. Meanwhile, gains in consumer discretionary shares, the second-fastest growing sector, have been around 475%.
Now investors wonder if potential gains in tech stock have come to a halt, and whether they should prepare for drawdowns. But, a recent report by Wedbush Securities suggests that “what we are seeing now is only the beginning of a long-term explosion in tech earnings.”
Therefore, long-term investors could consider this year’s weakness as opportunity to buy into robust shares with high-growth potential. With that information, here are three tech stocks that could take off in the coming months.
Robinhood (NASDAQ:HOOD) is the pioneer of commission-free online stock trading. The brokerage generates transaction-based revenues from routing user orders to market makers.
Robinhood released Q4 FY21 results on Jan. 27. Revenue increased 14% year-over-year (YOY) to $363 million. Its net loss came in at $423 million, or 49 cents per diluted share, compared with a net income of $13 million in the prior-year quarter. Cash and equivalents ended the period at $6.3 billion.
Monthly active users reached 17.3 million at the end of 2021, up 48% YOY. Investors were excited to hear that Robinhood will launch new value-added initiatives in 2022. They include cryptocurrency wallets and tax-advantaged retirement accounts.
However, management expects Q1 revenues to decline by at least 35% YOY. Last year, the broker had benefited from stimulus checks and high trading activity during the pandemic.
HOOD stock is down more than 85% from its all-time high and 38% YTD. Shares look reasonably valued at 3.75 times trailing sales. Meanwhile, the 12-month median price forecast for Robinhood Markets stock stands at $15.
Snowflake (NYSE:SNOW) is a leader in the big data revolution. For instance, Snowflake Data Cloud helps clients consolidate data into a single source. Then, they can generate business insights, develop data-driven applications and share data.
The data platform reported Q4 2021 results on March 2. Product revenue surged 102% YOY to $359.6 million. Its net loss narrowed to $132 million, or 43 cents loss per diluted share, down from $199 million a year ago. Cash and equivalents ended the period at $1.1 billion.
In 2022, Snowflake grew its customer base by 44% YOY. Analysts were pleased to see that customers spent 78% more on average. This enabled it to generate $57 million in free cash flow, compared with a loss of $94 million in 2021. Management forecasts 65% to 67% revenue growth for 2022.
SNOW stock is down almost 37% YTD. Despite the dip, shares are still on the frothy side at 56 times trailing sales. Finally, the 12-month median price forecast for Snowflake stock is $325.
Stitch Fix (SFIX)
Stitch Fix (NASDAQ:SFIX) is an online personal styling service in the U.S. and U.K. The platform uses recommendation algorithms and data science to personalize clothing items based on consumers’ preferences and budget.
Stitch Fix announced Q2 FY22 results on March 8. Revenue increased 3% YOY to $516.7 million, a sharp deceleration from its performance before the pandemic. Its net loss widened to $30.9 million, or 28 cents per diluted share, compared to $21 million a year ago. Cash and equivalents ended the period at $194 million.
New-user gains slowed to just 4%, down from 11% in the previous quarter. However, spending per customer increased 18% YOY to a record $549. In other words, the platform saw strong engagement, and Stitch Fix benefited from shopper satisfaction. Yet, management anticipates revenue to fall 10% in the current quarter.
SFIX stock has declined 81% over the past year and 49% YTD. As a result, shares are trading at 0.52 times trailing sales. Finally, the 12-month median price forecast for Stitch Fix stock stands at $11.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.