Growth stocks have gotten off to a rocky start in 2022, but the turbulence is also creating opportunities for long-term investors. With the market generally more cautious about technology stocks, some great companies are now trading at less than half of their recent highs.
If you're willing to take on some risk in pursuit of massive returns, consider Appian (APPN +8.42%) and PubMatic (PUBM +4.55%) -- a pair of tech players that have what it takes to deliver incredible performances from here. Let's find out a bit more about these two growth stocks with the potential to double your money.
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1. Appian
Appian's share price has gotten crushed as the market has shied away from growth-dependent software stocks. The low-code specialist's business thrived as companies looked for solutions that could help them accelerate their workflows amid social distancing and work-from-home conditions. Now, though, investors seem to be losing interest in it as office conditions move closer to normal. But the recent sell-offs have created a worthwhile entry point.
Appian's software makes it easy to quickly develop and launch software applications without much coding knowledge. Users can essentially drag and drop features and parameters into a flow chart in order to create software. The Appian toolset might not be an ideal fit for building complex, consumer-facing applications, but it makes it easy for businesses to easily develop applications for internal use without the need to hire expensive development teams.
With investors adopting a more cautious stance on Software-as-a-Service (SaaS) stocks lately, Appian's cloud subscription sales growth of 36% year over year in the third quarter didn't wow investors, nor were they happy that the business posted a wider-than-expected loss in the period.
Management's fourth-quarter earnings guidance also underwhelmed the market. That combination of factors led to another big pullback for the stock. The share price is now down by roughly 79% from the high that it hit at the end of January 2021. Its market capitalization is now down to roughly $3.8 billion.
Appian is still valued at roughly 9 times this year's expected sales, but the stock could deliver explosive upside. It's a virtual certainty that businesses will continue striving to automate more of their operations, and Appian's software suite offers them a way to do this in a flexible and cost-effective manner.
2. PubMatic
PubMatic (PUBM +4.55%) provides a platform that uses data analysis and machine learning to improve performance for internet content publishers and digital advertisers. The company is growing at a rapid clip, and its shares look significantly undervalued in the context of its strong business performance and favorable long-term growth outlook.
Revenue climbed 54% in the third quarter to $58.1 million, and earnings per share surged by 140%. But PubMatic stock currently trades down roughly 68% from its 52-week high. Even better, the company also has a strong balance sheet to work with. The advertising specialist closed out Q3 with $136.7 million in cash and short-term assets on its balance sheet, and no debt, so it's got plenty of flexibility when it comes to pursuing acquisitions and funding internal growth initiatives.
While recently implemented restrictions on how user data may be tracked in mobile and browser platforms are adding uncertainty to the programmatic advertising space, PubMatic has a huge opportunity in connected television. Right now, mobile accounts for a much bigger portion of the company's overall sales, but that's changing quickly. In Q3, its connected-TV service revenue was more than seven times higher than it was in the prior-year period. That's rapid growth in a category that looks poised for further big gains over the long term.
PubMatic currently has a market capitalization of roughly $1.3 billion and trades at roughly 4.6 times this year's expected sales and 32 times expected earnings. These valuation metrics look very attractive for a company that's delivering such strong sales and earnings growth.
