The recent market sell-off has driven many stock prices down. Most impacted are high-flying tech stocks that were overextended with extreme valuations. Three stocks I think are no-brainer buys and under $100 per share are The Trade Desk (TTD 4.08%), Procore Technologies (PCOR 1.34%), and Cloudflare (NET 4.01%).
Each is down at least 40% from its 52-week high and used to trade above $100, yet all three of their businesses are thriving. Industry tailwinds are also in favor of this trio, and wise investors will use this opportunity to scale into these discounted stocks.
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The Trade Desk
The Trade Desk powers digital advertisement through its demand-side platform. Businesses use its software to bid on advertisement space on podcasts, connected TV, or just static images. It also provides insights into how an advertising campaign is going and its Koa artificial intelligence can give suggestions on how to maximize success. With about 10% of a business's budget typically spent on advertising, The Trade Desk is in a prime market.
Back in November 2021, The Trade Desk reported an excellent third quarter. Its revenue growth accelerated from 32% to 39% when compared the year-ago quarter. Net income (yes, actual un-adjusted profits) rose even quicker at 44% at a 20% margin. For the seventh year in a row, more than 95% of customers were retained, showcasing the platform's stickiness.
Looking forward to The Trade Desk's fourth-quarter earnings, the company projected $388 million in revenue which would equate to 21% revenue growth. While this would mark a deceleration of revenue growth, growing profitably at more than a 20% clip makes The Trade Desk a safe stock to grab almost down almost 50% from its all-time high.
Procore
Construction is one of the last industries touched by the digital revolution. Until recently, technology hadn't advanced enough for the internet and hardware to be usable on job sites. Now, all involved parties -- like contractors, engineers, and project owners -- can be informed on progress through a single platform provided by Procore.
Additionally, it ensures everyone is on the same page. For example, the owner could request a building change, the engineer or architect then updates the drawings, and the modification is passed to the contractor through Procore. The old method of processing changes through paper and pencil is slow and causes $500 billion in rework expenses globally, according to the company.
Procore's solution is seeing gradual adoption, as the construction industry is notorious for resisting change. However, Procore still grew its Q3 revenue 30% over the last year to $132 million. Additionally, it is rolling out its platform into Germany and France, which will expand Procore's reach.
Net customer adds increased 4% to more than 11,605 customers over the second quarter's count. Plus, for those interested in the long haul, 85% of accredited construction management programs teach Procore's platform at the university level. Tomorrow's construction management leaders are learning and using the program, and this bodes well for the future of the company.
Cloudflare
The internet has expanded into something its creators never anticipated. Cloudflare's products usher in a new age for speed, security, and reliability. Instead of bulky on-premise hardware, Cloudflare connects its users to the internet through the cloud, a hybrid approach, or still on-premise if the customer desires.
Cloudflare's operations aren't small; it has over 132,000 paying customers and 1,260 of those pay more than $100,000 annually. Its dollar-based net retention rate -- which measures how much customers spent this quarter versus last year -- was 124% in Q3, up from 116% last year. Total revenue grew 51% quarter over quarter, in line with its five-year compound annual growth rate of 50% dating back to 2016. Clearly, Cloudflare is an execution machine and with an $86 billion total addressable market, it has plenty of room to grow its business.
With how successful Cloudflare has been, it's no surprise the market valued it highly.
NET PS Ratio data by YCharts
Even after it has fallen nearly 60% from its peak (which was probably warranted due to extreme valuation), it still trades at a premium price-to-sales ratio. Cloudflare remains an expensive stock, but its future potential and past execution make it a strong stock pick for the future. The internet isn't going anywhere, and anybody who wants to put content on it is a potential Cloudflare customer.
With any stock sell-off, investors must analyze the cause to see if the stock or the business is struggling. If it is a broken business, it could be time to sell with the crowd and move on. With these three, I believe it is a case of a broken stock. While none may return to previous valuation levels, business growth will push each stock to new highs. I don't know when this will occur, but holding these stocks for at least five years should give the companies plenty of time to execute their vision. If the businesses flourish, the stocks will follow.
