Annie, the lead character in the popular Broadway musical bearing her name, had some great advice for investors: The sun will come out tomorrow. From an investing perspective, she was definitely right in principle if not in the details. The stock market will be brighter in the not-too-distant future.
Astute investors will realize that such optimism can help them make money. The key is to put that sunny outlook into action by scooping up shares of well-run businesses whose stocks trade at a discount. With that in mind, here are three growth stocks down 25% to 71% to buy in August.
The sun already appears to be coming out to some extent for Amazon (AMZN 2.48%). Just six weeks ago, shares of the internet giant were down 45% from the peak set in November 2021. But a rebound is now underway, with Amazon stock now close to 25%.
Amazon’s 20-for-1 stock split conducted in early June wasn’t much of a catalyst. However, investors seemed to like several of the company’s moves since then, including the company’s announcement on July 21 that it plans to acquire primary care provider 1 Life Healthcare, better known as One Medical.
Even better, Amazon easily beat revenue expectations with its second-quarter results. The company’s Amazon Web Services (AWS) cloud hosting unit and its advertising business led the way. Amazon forecast a strong third quarter as well.
The near-term prospects for Amazon look better than many predicted. More importantly, though, the company’s long-term prospects remain strong with the potential for e-commerce growth and expansion into new markets such as healthcare.
2. Intuitive Surgical
Intuitive Surgical (ISRG 0.23%) stands out as another beaten-down growth stock that’s attempting to make a comeback. Shares of the robotic surgical systems company are now down around 29% from the 52-week high after sinking as much as 41%.
Unlike Amazon, Intuitive Surgical delivered disappointing Q2 results. The company’s earnings fell year over year and missed the consensus estimate. Intuitive also reported a 15% year-over-year decline in system placements.
However, the easily overlooked good news for Intuitive was that procedure volume continued to grow, up 14% from the prior-year period. The more procedures that are performed with its robotic surgical systems, the more recurring revenue that Intuitive makes. And over 80% of the company’s total revenue is recurring revenue.
Intuitive’s future looks bright over the long run. Aging populations should drive growth in surgical procedures. The company’s innovation should expand the types of procedures for which its technology can be used. August is a great time to buy this disruptive stock at a discount.
3. PayPal Holdings
There’s still no rebound in sight for PayPal Holdings (PYPL 2.68%). The fintech stock has plunged 71% over the past 12 months.
Several culprits are to blame for PayPal’s dismal performance. The company continues to deal with the loss of eBay‘s business. E-commerce growth has slowed following the COVID-fueled surge of 2020 and 2021. Apple‘s introduction of its “Tap to Pay on iPhone” contactless payment technology rattled investors. There are worries about the potential impact of a recession. Of course, the overall sell-off of growth stocks that began last year has weighed heavily on PayPal’s shares as well.
Overall, though, PayPal’s business is doing fine. The company continues to generate solid revenue and total payment volume growth. PayPal’s balance sheet remains strong.
The shift away from cash to digital payments won’t stop. PayPal is still the biggest player in this transition. With the stock trading at the cheapest valuation ever based on price-to-sales multiples, PayPal looks like a good pick for August if you’re a long-term investor.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon, Apple, Intuitive Surgical, and PayPal Holdings. The Motley Fool has positions in and recommends Amazon, Apple, Intuitive Surgical, and PayPal Holdings. The Motley Fool recommends eBay and recommends the following options: long March 2023 $120 calls on Apple, short July 2022 $57.50 calls on eBay, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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