2 recovering growth stocks to buy after excellent trading updates

Growth stocks have seen a slight recovery of late due to several strong trading updates. Here are my two top picks.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Growth stocks have struggled significantly this year, with issues such as inflation and rising interest rates particularly damaging factors. The Nasdaq, which includes many growth stocks, has dipped 14% in the past 12 months. However, over the past month, it has started to see a slight recovery, rising over 12%.

This has been driven by several trading updates that were better than expected. These two companies have recently issued very promising news, giving me another reason to buy. 

A growing fintech

As cost-of-living pressures have increased, it has been a difficult time for fintechs. This has been reflected in the PayPal share price, which has dropped 65% in the past year, and the Visa share price, which has fallen 10%. However, SoFi Technologies (NASDAQ: SOFI), which is one of the newer fintechs, is my favourite pick in the sector. It has fallen 50% in the past year, worse than many other growth stocks. 

The main reason I like SoFi is due to the business’s strong growth in recent times. For example, in the recent Q2 trading update, it said net revenue rose 57% year on year to reach $363m. At the same time, adjusted EBITDA reached $20m, an 81% year-on-year rise. Its total membership also hit 4.3m, a 69% year-on-year increase. This meant the group now expects full-year revenues of over $1.5bn, higher than previously expected. 

Such a resilient performance has been enabled by SoFi’s diverse portfolio, which includes a Lending, Technology and Financial Services Platform. The recent bank charter it obtained has also allowed it to be resilient, despite the recent macroeconomic pressures. 

There are some major risks, of course, including the major fact that SoFi is still loss-making. In the high-inflation environment, where investors are searching for profitable companies, this is an issue. The ‘short’ interest in SoFi is also very high, another bearish sign. 

However, its growth potential is clear to me, as demonstrated by that recent trading update. Therefore, I may add more SoFi shares to my portfolio. 

A growing e-commerce stock

E-commerce has also been struggling post-pandemic. In fact, some e-tail specialists, like Shopify, have been forced to lay off workers. However, MercadoLibre (NASDAQ: MELI), an e-commerce company based in Latin America, has performed far more resiliently. 

Indeed, in its own Q2 trading update, net revenues were up 56.5% year on year to reach $2.6bn. Most impressively, the group recorded income from operations of $250m, with a 9.6% margin. This has left the company with an extremely strong cash position, which should be used for further reinvestment. 

Like with many other growth stocks, there are risks. In particular, MercadoLibre operates in Latin America, which is prone to financial instability. This may disrupt future growth. 

Even so, this has been a factor burdening the company for many decades and, so far, it has continued to post excellent growth every year. I feel that it can continue to do so and I’ll add more MercadoLibre shares to my portfolio. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stuart Blair owns shares in MercadoLibre, PayPal Holdings and SoFi Technologies Inc. The Motley Fool UK has recommended MercadoLibre, PayPal Holdings and Shopify. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

How I’d use an empty Stocks and Shares ISA to aim for a £1,000 monthly passive income

Here's how using a Stocks and Shares ISA really could help those of us who plan to invest for an…

Read more »

Investing Articles

This FTSE stock is up 20% and set for its best day ever! Time to buy?

This Fool takes a look at the half-year results from Burberry (LON:BRBY) to see if the struggling FTSE stock might…

Read more »

Investing Articles

This latest FTSE 100 dip could be an unmissable opportunity to pick up cut-price stocks

The FTSE 100 has pulled back with the government’s policy choices creating some negative sentiment. But this gives us a…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

As the WH Smith share price falls 4% on annual results, is it still worth considering?

WH Smith took a hit after this morning’s results left shareholders unimpressed. With the share price down 4%, Mark Hartley…

Read more »

Investing Articles

The Aviva share price just jumped 4.5% but still yields 7.02%! Time to buy?

A positive set of results has put fresh life into the Aviva share price. Harvey Jones says it offers bags…

Read more »

Investing Articles

Can a €500m buyback kickstart the Vodafone share price?

The Vodafone share price has been a loser for investors in recent years, and the dividend has been cut. We…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Growth Shares

3 mistakes I now avoid when choosing which growth stocks to buy

Jon Smith runs through some of the lessons he's learnt the hard way over the years about what to look…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Should I follow Warren Buffett and sell my favourite shares?

Billionaire US investor Warren Buffett has been selling tons of Apple shares and other stocks of businesses he thinks are…

Read more »