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.
