4 Best Growth Stocks for 2022 to Buy and Hold
Growth investors are having a tough year as many past leaders are giving back over half their returns. At the same time, the fallout is giving investors a chance to buy the best growth stocks for 2022 at a discount.
With pandemic leaders such as Netflix (Nasdaq: NFLX) down 73% from its ATH, investors are skeptical of growth stocks. And for a good reason, it may take years to recoup some of these losses.
However, not all growth stocks are the same. For example, Apple (Nasdaq: AAPL) is still considered a growth stock after returning over 1,000% to shareholders since 2013. With this in mind, the iShares Russell 1000 Growth ETF (NYSE: IWF) is down almost 20% YTD.
With The Conference Board forecasting the U.S. GDP slowing to 1.5% compared to 6.9% in Q4 2021, the growth outlook is lousy. But some companies are expecting to still grow significantly in 2022.
If you want to turn your portfolio around this year, keep reading to discover the best growth stocks for 2022.
What Are the Best Growth Stocks for 2022?
If the U.S. economy does slow as predicted, certain areas of the economy like manufacturing and construction may see less demand. Meanwhile, many businesses feel the pressure of slowing profits and slimming margins.
As a result, investors rush to defensive stocks such as household products or healthcare. But what if I told you that you could get the best of both worlds?
The best growth stocks for 2022 are predicting their earnings will continue improving despite an overall economic slowdown.
No. 4 Funko (Nasdaq: FNKO)
- YOY EPS Growth: 31%
- YOY Revenue Growth: 58%
- Analyst Price Target (% Upside): $29 (74%)
If you are not familiar with the name Funko yet, get ready. The brand is taking the pop culture market by storm with action figures, collectibles, NFTs and other merchandise.
Funko is taking advantage of the cultural shifts and deep fan loyalty with 15 years of strategic IP investments. For example, the firm owns rights to Harry Potter, Marvel, Pokémon, DC and Star Wars, to name a few.
With evergreen properties accounting for 69% of sales in Q4, the company is well-positioned to continue building momentum. Even with an economic slowdown, companies like Disney, Netflix and Warner Brothers will continue spending money on content, promoting Funko’s business indirectly.
Lastly, from 2007 to 2011, the Toymaker behind Lego saw sales quadruple, showing toys can remain in demand during slowdowns.
No. 3 Mercado Libre (Nasdaq: MELI)
- YOY EPS Growth: 9%
- YOY Revenue Growth: 78%
- Analyst Price Target (% Upside): $1,550 (50%)
Mercado Libre continues growing at an impressive rate. Yet MELI stock is down almost 50% from its all-time high of $2020 per share.
The e-commerce and digital payments company sales grew by 78% in 2021 after achieving 73% growth in 2020. Furthermore, MELI continues growing its market position with an extra $7.4 billion in GMV this past year.
Latin America has close to double the number of people of the U.S., meaning there is still a ton of room for growth. All signs point to strong momentum as we advance with record GMV, payment volumes, and credit portfolio size in Q4.
MELI’s market cap is around $50 billion, close to half it was at the start of 2021 ($97 billion). Is Mercado Libre worth 50% less? No. Instead, investors are discounting MELI’s ability to keep growing.
Keep reading to discover the best growth stocks for 2022.
No. 2 Enphase Energy (Nasdaq: ENPH)
- YOY EPS Growth: 41%
- YOY Revenue Growth: 75%
- Analyst Price Target (% Upside): $228 (40%)
The world’s leading Microinverter solar systems supplier, Enphase Energy, is becoming more prominent. Enphase beat expectations with record revenue of $441 million in the first quarter of 2022 and EPS of $0.79.
Solar installations made up 46% of all new electric capacity in the U.S. in 2021, the third year as the leading electric source. On top of this, with electricity rates soaring due to the war in Ukraine, we are likely to see solar capacity accelerate overseas, where Enphase is well-positioned for the demand.
Most importantly, the growth looks sustainable with Enphase expanding in the international markets. So far, the firm has operations in the U.S., Mexico, Netherlands, India, China, Australia, Spain and now France.
With this in mind, as solar energy continues to be adopted, Enphase’s superior equipment is proving to be the go-to option. The solar leader expects revenue to be between $490 million and $520 million in Q2. The upbeat outlook makes it one of the best growth stocks for 2022 to buy and hold.
No. 1 Airbnb (Nasdaq: ABNB)
- YOY EPS Growth: 100%
- YOY Revenue Growth: 77%
- Analyst Price Target (% Upside): $197 (23%)
The travel industry is back in a big way after coming to a halt after the pandemic. For example, United Airlines (NYSE: UAL) is projecting record revenue in Q2, while other airline companies expect similar results.
More people traveling means they also need a place to stay while away from home. Sure, you can always rent a hotel. But Airbnb is promoting the “future of travel” with its home-hosting services.
What started as a single hosting experience in San Fransico has reached over 100,000 towns. Although still not quite to pre-pandemic levels, with over 300 million nights booked in 2021, Airbnb is bigger than ever by some factors.
For example, revenue reached $6 billion in 2021, up 77% YOY and 25% from 2019. The growth in sales shows Airbnb is resilient and in position to recoup its losses.
With millions of hosts in almost every corner of the world, Airbnb creates an ecosystem for travel. Even with increasing competition, Airbnb is the market leader. Being a leader has its benefits, like brand awareness and loyalty.
Especially when it comes to travel, people don’t want any issues. As Airbnb perfects the hosting experience, look for travelers to continue trusting the brand and its services.
Is Now the Time to Invest in the Best Growth Stocks for 2022?
Although many growth stocks are down right now, there is reason to be optimistic about the future. Of course, many of these companies are losing money by the millions with foggy plans to generate profit.
As the Federal Reserve raises interest rates to cool the surging inflation, high-growth companies are falling hard. When interest rates are rising, future earnings are worthless. In particular, we are seeing this with tech stocks that have higher valuations compared to earnings.
Many of these stocks are down over 50% from their ATHs, so multiples are again compressing. On top of this, investor sentiment is low with fears of a recession.
With this in mind, these are some of the best growth stocks for 2022 to buy and for long-term returns. Even though short-term volatility is likely, these companies are outpacing the competition while establishing dominant market positions.
About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.