10 of the Best Growth Stocks to Buy for 2022

Once growth bottoms out, these 10 companies should come roaring back.

It’s a harrowing time to be a growth stock investor. Even the mega-cap tech companies have started to tumble, while more speculative and unprofitable companies have absolutely imploded. To be fair, there were some indefensible valuations in certain growth stocks. In some cases, analysts extrapolated a short-term surge in demand far into the future, leading to impossibly high expectations. Now, however, things are rapidly moving in reverse. Bubbly valuations are coming back to earth, and opportunities are really starting to emerge. Nowadays, even the highest-quality software stocks are trading down sharply, and there absolutely stunning declines in some of the smaller and less established growth firms. Here are 10 of the best growth stocks to buy that still have the ability to deliver big returns for investors.

Salesforce.com Inc. (ticker: CRM)

Salesforce is one of the world’s largest software-as-a-service, or SaaS, companies. It was, somewhat surprisingly, added to the venerable Dow Jones Industrials stock index, kicking out Exxon Mobil Corp. (XOM) in 2020. It was a sign of the times to replace a large oil company with a leading software name. Salesforce’s status as a Dow component highlights its stability amid a fast-changing SaaS landscape. Salesforce wisely has built a platform in recent years, adding communications and e-commerce functions on top of its core marketing management business. By making bold moves such as buying Slack, Salesforce has developed a wide product offering, making it a core piece of infrastructure for many Fortune 500 companies. Salesforce shares have fallen by a third from their 52-week highs and are now near 10-year lows on price-to-revenue and price-to-free-cash-flow bases.

Adobe Systems Inc. (ADBE)

Adobe is another of the SaaS titans. The company notably shifted from a one-time license model to a recurring subscription-based model years ago. This initially caused a great deal of consternation among investors and analysts but has proven to be wildly successful. Adobe generated $7.3 billion in revenues in 2017; analysts now see it pulling in roughly $17.9 billion for 2022. That’s a tremendous growth rate for a company that is already as large as Adobe. In addition to Photoshop and Illustrator, the company has assembled a wide array of other pieces of key software. Some, like Acrobat, have served as a launching point for a broader cloud-based app ecosystem. With the SaaS industry in a downturn, Adobe is now in a position of strength to make further acquisitions and grow its overall market share.

Autodesk Inc. (ADSK)

Autodesk is in a related field to Adobe. It also makes software primarily for managing images and graphic design. However, the difference is that Autodesk is more focused on industrial applications, whereas Adobe is the leading brand for purposes such as media and advertising. Autodesk allows companies to plan out models of products, factories, building blueprints and so on. By doing things in software first, this saves a lot of trial and error and the potential waste of goods and materials. Autodesk is moving into other fast-growing fields such as 3D printing. ADSK stock has pulled back from $330 to about $215 per share since November, offering a solid discount for investors today.

Avalara Inc. (AVLR)

Unlike the above SaaS stocks that serve a wide market need, Avalara is more of a niche player. It’s focused on tax compliance for e-commerce. Fortunately for Avalara, there are only a couple of serious competitors in this field, giving it wide latitude. And sales tax compliance has taken on increasing importance in recent years. A Supreme Court decision in 2018 made it far easier for individual states to charge sales tax on all transactions regardless of whether an e-commerce retailer had any physical presence in that state. That, plus the pandemic-driven surge in e-commerce sales has made Avalara’s services more essential than ever. Avalara stock has lost nearly half its value since the peak, but its core business continues reporting strong results and there’s little doubt that sales tax compliance will be a far larger field in five years than it is today.

Netflix Inc. (NFLX)

Netflix remains the unparalleled leader in video streaming. Its catalog of content is second to none in terms of quantity, especially for international and foreign language content. This has given Netflix an incredible leg up in terms of expanding in places such as Europe and Latin America, whereas other American rivals are half a decade behind in terms of trying to broaden their non-English libraries. Netflix’s global sourcing allows it to find unexpected hits, such as the recent “Squid Game,” from all over the world. However, like many stay-at-home winners, Netflix has slumped as new memberships have slowed down: Many people who were going to sign up for Netflix already did so during the pandemic. Netflix stock has tanked in 2022 as investors factor in that slowdown. With shares down 35% year to date, this is a great entry point for longer-term investors.

Spotify Technology SA (SPOT)

Spotify is for music what Netflix is for movies and TV shows. And Spotify stock has taken a similar blow this year as investors factor in slower near-term subscriber growth. Spotify is also investing in platforms such as podcasting, advertising and virtual event hosting to lessen its reliance on the record labels. The crux of Spotify’s profitability problem has been that it pays out the majority of its revenues to the labels. As it diversifies its revenue streams, however, it should be able to keep more of the pie for itself. Spotify is arguably in an even better position than Netflix, since Spotify has little competition to worry about aside from Apple Inc. (AAPL). Over time, Spotify should be able to consolidate the music streaming market and improve its profit margins. Its current market cap of just $30 billion is rather undemanding for such a powerful brand.

C3.ai Inc. (AI)

C3 is a leading artificial intelligence software company led by famed entrepreneur Thomas Siebel, who built Siebel Systems in the 1990s and early 2000s and ultimately sold it to Oracle Corp. (ORCL). Siebel Systems was one of the first customer relationship management firms and was one of the few dot-com firms to generate strong shareholder returns when the bubble burst. After that, Siebel turned to AI for his latest venture. Investors got too excited about C3.ai in 2020 and bid the stock up to unreasonable levels. The stock is down more than 80% since then, however, and represents strong value here. Today, the company has $1 billion of net cash against a market capitalization of just $2.3 billion, giving investors a large margin of safety. Meanwhile, the growth story is back on track following a recent $500 million contract with the U.S. Department of Defense.

StoneCo Ltd. (STNE)

StoneCo is a Brazilian e-commerce company that has remarkably lost nearly 90% of its value since its prior peak, even as prominent investors such as Warren Buffett‘s Berkshire Hathaway Inc. (BRK.B) and Cathie Wood’s Ark Invest have backed the company. Regardless, a perfect storm of rising interest rates, falling credit quality and political uncertainty in Brazil has led to a wipeout in payments companies, including StoneCo and PagSeguro Digital Ltd. (PAGS). Ultimately, however, StoneCo continues to post strong organic growth in its client base and the number of transactions that it processes. Brazil’s economy should pick up in 2022. That’s because the country is a massive exporter of commodities such as iron ore, coffee and soybeans, whose prices are shooting up as of late. As Brazil recovers, fintech firms such as StoneCo should enjoy a swift revival, as well.

Lightspeed Commerce Inc. (LSPD)

Lightspeed Commerce operates a cloud-based point-of-sale system. It competes in the same general arena as rivals such as Shopify Inc. (SHOP) and Block Inc. (SQ). In addition to general retail and e-commerce, Lightspeed has services for more specific applications such as restaurants and hospitality. When the pandemic hit, Lightspeed appeared to be a big winner out of the gate. Shares rallied tenfold as businesses rushed to adopt digital checkout services. Since then, however, Lightspeed stock has lost three-quarters of its peak value as investors fear a slowdown in the e-commerce space. That will probably happen, but the stock price has likely overreacted to that concern. The company’s market cap has now fallen to about $4 billion. That’s not expensive at all for a firm with approximately $550 million of run-rate annual revenues and posted 165% year-over-year revenue growth last quarter.

Canada Goose Holdings Inc. (GOOS)

Not all growth companies have to be in the technology sector. Sometimes, fast-growing firms can appear in slower-moving industries such as apparel. Luxury winter clothing maker Canada Goose has been one such rapid-growing firm. Though the firm was founded in 1957, it has come into its own over the past five years. In 2016, it generated $220 million of revenue. This soared to $719 million for fiscal year 2021. While Canada Goose continues to grow, its profit margins got hit in 2021 and the stock has slumped 40% year over year. The omicron variant along with general supply chain and inflation issues caused the company’s recent holiday season to fall well short of expectations. But analysts still see double-digit revenue growth going forward. As profit margins recover, analysts see earnings per share jumping to $1.24 in 2023, which would put the stock at less than 22 times forward earnings.

10 of the best growth stocks to buy for 2022:

— Salesforce.com Inc. (CRM)

— Adobe Systems Inc. (ADBE)

— Autodesk Inc. (ADSK)

— Avalara Inc. (AVLR)

— Netflix Inc. (NFLX)

— Spotify Technology SA (SPOT)

— C3.ai Inc. (AI)

— StoneCo Ltd. (STNE)

— Lightspeed Commerce Inc. (LSPD)

— Canada Goose Holdings Inc. (GOOS)

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