2 Beaten-Down Growth Stocks Set to Shine in 2022

Even though the stock market has been on shaky ground in September and October, the S&P 500 index remains just a few percentage points from its all-time high. For the most part, 2021 has been another good year for investors.

Some companies have had a difficult time, though, with their languishing stock prices heavily underperforming the broader market. But stock prices aren't everything, and in the case of Paysafe (PSFE -1.31%) and Offerpad Solutions (OPAD 6.58%), they come attached to high-quality businesses, which means strong growth might be right around the corner. 

Here's why those stocks are set for a strong comeback in 2022.

Image source: Getty Images.

The case for Paysafe

Online gambling is a growing industry in the U.S. as more states continue to legalize the practice. Paysafe is a key facilitator for online casinos and bookmakers, providing secure payment processing services and digital wallets.

The company's flagship brands, Skrill and Neteller, are in high demand from some of the largest online gambling providers in the world. Paysafe has a decade-long relationship with European giant Flutter Entertainment, which owns popular platform Pokerstars, and the two companies are now working together in the U.S. through Flutter's Fox Bet sportsbook subsidiary. 

Paysafe is active in 15 of the 17 U.S. states where online gambling is legal, and with seven more states set to open up in late 2021 and 2022, the company's market opportunity continues to expand. In Canada, it's No. 1 in the online gambling industry, processing almost 100% of payments across the country. That's only a $2.5 billion market right now, so there's big upside as laws are slowly easing there, too.

The company's North American iGaming (online gambling) segment grew payment volumes by 72% in the most recent second quarter, far outpacing the rest of its business at 41%. But that's not to say the rest of the business isn't worth talking about.

In addition to gambling, Paysafe has a growing presence in the online gaming industry. Its partnership with Microsoft now spans 22 countries where it processes payments for in-game purchases made through the Xbox platform. And of course, no payments powerhouse is complete without a cryptocurrency segment -- Paysafe's Skrill digital wallet is used with 30 cryptocurrency exchanges, and offers 37 different tokens for trading.

The result is $1.54 billion in estimated revenue for fiscal 2021, and with a recent market capitalization of $5.7 billion, Paysafe stock trades at a price-to-sales multiple of 3.7 times.

Paysafe's public listing was met with enthusiasm as it was caught up in the special purpose acquisition company craze of early 2021. Its recent stock price around $8 is a hefty discount to its $19.20 all-time high, and with the company operating in all the right growth areas, this might be a great long-term opportunity. 

Image source: Getty Images.

The case for Offerpad

Real estate hasn't changed much in recent decades. Even the onset of the internet wasn't disruptive to the entrenched brokering business -- if anything, it made it even stronger. Consumers are accustomed to paying 2.5% listing fees because buying or selling a home themselves is far too complex. 

But a new practice called iBuying is shaking things up. It involves high-growth technology companies purchasing thousands of homes from willing sellers each year, and on selling them for a profit. That's essentially the business model -- house flipping on a mammoth scale.

Founded in 2015, Offerpad is one of the most recent entrants to this new industry. Given the U.S. housing market is worth over $36 trillion, there's plenty of room for new players -- it's simply too big for one or two companies. As iBuying matures, competition will likely occur based on prices paid for homes, and the geographical areas companies choose to operate in. 

Offerpad asks sellers to provide a few details about their home on the company's website, including a walk-through video, and within 24 hours it will make a cash offer to purchase it. 

The company sold 4,281 homes in 2020 and generated over $1 billion in revenue, but it's set to crush that in 2021. 

Data source: Offerpad. Midpoint of Offerpad's 2021 estimates used.

While this leap in financial performance is impressive, Offerpad's case gets better. The amount of gross profit it earns from each home sold grew to $31,500 in the recent second quarter, up from just $1,400 in the same period last year. The 2,150% improvement is partially attributable to increasing house prices and a hot real estate market, but also to Offerpad's growth as it begins to achieve scale. 

But it might get better still, because Offerpad purchased a record 2,025 homes in the recent second quarter. They'll need to be sold, and that means record revenue could be right around the corner. 

After falling victim to the meme craze last month, Offerpad's stock is down 59% from its highs at recent prices. That might be an opportunity for investors looking for a high-growth company that is carrying huge business momentum going into 2022.