The recent bear market has left many investors scared and reluctant to invest. Many one-time high-flyers in technology, both inside and outside the Nasdaq Composite, now trade at a fraction of their highs. The Composite itself is down about 31% year to date.
However, that bear market means that $1,000 buys a lot more stock than it did a year ago. To that end, the market has priced amazon (NASDAQ:AMZN) and Trade Desk (NASDAQ:TTD) well within the range of such investors.
Amazon stock is trading at a substantial discount
Until recently, Amazon shareholders with only $1,000 to invest would have had to settle for a partial share. But now that Amazon just split its stock 20-for-1, small-scale investors have an easier time buying whole shares of this e-commerce and cloud giant.
Even with an extensive online retail footprint, consumers have bought less online, which has hurt Amazon stock. Investors have sold off as its North America and International divisions reported negative operating income.
Still, Amazon Web Services, which pioneered the cloud computing industry, continues to fire on all cylinders. It made up only 16% of Amazon’s revenue in the first quarter of 2022, but that revenue grew by 36% year over year.
This far exceeded the 7% revenue growth for the company over the same period in Q1. That revenue, which amounted to over $116 billion, still led to an overall net loss of $3.8 billion, down from an $8.1 billion profit in the year-ago quarter. This slower revenue growth has likely contributed to a 45% drop in Amazon’s stock price from its 52-week high.
Nonetheless, analysts believe it can recover to 12% revenue growth taken by 2022. Moreover, the lower stock price has the price-to-earnings ratio to 50, a substantial discount for a stock that has often sold for over 100 times earnings in recent years. Given cloud resilience and a likely retail recovery, such a price point could make today a good time to start adding Amazon positions.
The Trade Desk’s stock sells at a 60% discount at the moment
Investors who don’t know this company may assume it has something to do with trading stock. While it most certainly operates a market, this particular trade desk buys available advertising inventories.
Additionally, to foster a competitive advantage, it helps clients tailor media campaigns and set spending parameters to ensure they buy ad spaces that would enhance the marketing goals of clients. And it utilizes further advantages through software. Thanks to a new platform called Solimar, it can work around privacy updates from Manzana and Alphabet. Also, with its Unified ID 2.0 solution, clients no longer need access to third-party cookies, a concern that has hurt some media stocks in recent months.
In the first three months of 2022, its revenue of $315 million emerged by 43% year over year. This means revenue growth had remained consistent with 2021, when revenue also grew by 43%. Though the company reported a $15 million GAAP loss, non-GAAP income rose 50% to $105 million when excluding stock-based compensation and an income tax adjustment.
Still, The Trade Desk also predicts modest slowing as it forecast $364 million in second-quarter revenue, which would mean a 30% surge year over year if that figure holds.
Investors have turned on the company amid the more modest increases, and it sells at a nearly 60% discount to the 52-week high. However, the price-to-sales ratio of 18 is a two-year low and has fallen from 50 in November. This discount and its growth potential could make it a great time for a starter investment.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and The Trade Desk. The Motley Fool recommends Nasdaq and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.