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Growth Stock Sell-Off: What Should You Do?

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·5-min read
In this article:
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  • SHOP
  • PINS
  • LULU
  • EXAS
  • PYPL
  • (1:15) - Stock Market Dip: Is The Growth Stock Rally Slowing Down?

  • (11:00) - How Should You Navigate The Recent Stock Market Sell Off?

  • (18:30) - Buying Opportunities: Stocks To Keep On Your Radar

  • (28:15) - Episode Roundup: LULU, RH, MSFT, PINS, EXAS, SHOP, DKNG, SQ, CRM, NEWR, FB, BIGC, IGV, EXSW, PYPL

  •                Podcast@Zacks.com

 

Welcome to Episode #294 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey talks with Kevin Cook, Zacks Senior Stock Strategist, and the Editor of the TAZR and Healthcare Innovator portfolios, about the growth stock sell-off.

Some of the most popular growth stocks are down over 30% from their 2021 highs including Exact Sciences, Pinterest and PayPal. But others have been holding onto most of their gains, including Shopify and Lululemon.

What Should Investors Be Doing Right Now?

Should investors be buying the dip?

How do you know what stocks to buy, and which to sell?

Kevin recommends investors find answers on what strategy to follow based on “knowing” about their companies. Information is power. Sell-offs don’t seem so scary if you actually know what is happening in the business of a company you own.

Check out the earnings and sales estimates on Zacks.com. Watch the Zacks Rank. Listen in on the conference calls.

Is it as bad as the sell-off makes it out to be?  

Strategies for 5 Popular Growth Stocks in 2021

1.       Lululemon LULU

Lululemon continues to be the leader in athleisure and one of the most popular global retailers.

Lululemon is still the first retailer of choice for yoga pants, but it’s not just for women. The men’s business is growing fast so it’s now truly a unisex brand.

Unlike other growth stocks, shares are still near all-time highs, up 30.5% year-to-date. They have only fallen 2.5% in the last month.

But Lululemon remains very expensive, with a forward P/E of 61.

It reports earnings on Dec 9, 2021 so that could be a catalyst for the shares, either up or down. Lululemon has beat on earnings 5 quarters in a row.

But up until now, Lululemon has avoided the growth stock sell-off.

Is it one growth stock that will not sell-off?

2.       Exact Sciences EXAS

Exact Sciences is best known for being the creator of the Cologuard, which makes an at-home test for colon cancer.

Exact Sciences was a high flier over the last 5 years, with shares up over 500% in that time period. Cathie Wood, at the Ark Funds, invests in it.

But 2021 hasn’t been fun, as shares have fallen 35.6% year-to-date.

Yet Exact Sciences revenue is expected to rise 16.1% in 2021 and another 14.9% in 2022.

Is Exact Sciences a buying opportunity on this weakness?

3.       Pinterest PINS

Pinterest was a pandemic winner as people turned to social media apps for entertainment during the initial lock downs.

But on the reopen, Pinterest lost monthly active users, especially in the United States, its most lucrative market. This decline spooked the Street and the shares sold off.

Shares have fallen 39.5% year-to-date.

Yet revenue is expected to jump 51.5% in 2021 and another 28.7% in 2022.

Pinterest is now “cheap” on a valuation basis, with a PEG ratio of just 0.7.

Should Pinterest be on your buy list on this weakness?

4.       PayPal PYPL

PayPal has been one of the leaders of the fintech innovators but this year those stocks have faltered.

PayPal shares have fallen 21% year-to-date, and has now officially entered into a bear market.

Shares remain expensive on a P/E basis as it trades at 40.5x forward earnings.

Yet PayPal still has a strong sales growth trajectory. Sales are forecast to rise 18% in both 2021 and 2022.

PayPal has been one of the hot growth stocks over the last 5 years, gaining 559% during that time.

Is this sell-off a great buying opportunity in one of the top fintech names?

5.       Shopify SHOP

Shopify has been one of the best performing growth stocks of the last 5 years, with shares gaining 2861% during that time.

Even in 2021, as other growth stocks have faltered, Shopify shares have not. They’re up another 34% year-to-date.

Investors have shown a desire to pay up for its sales, which are expected to rise 56.6% this year and another 33.5% next year.

But even with that amazing high-growth trajectory, Shopify still trades with a sky-high P/S ratio of 47.5.

Shopify is often called a “general” in this stock market. One of a just a handful of stocks that investors must own and that will be a leader in their portfolio.

So far, in 2021, Shopify has lived up to its reputation.

But will it too falter in this growth stock sell-off, and if it does, should you buy Shopify on a 20% pullback?

What Else Should You Know During this Growth Stock Sell-Off?

Tune into this week’s podcast to find out.

[In full disclosure, Tracey owns shares of LULU, EXAS and PINS in her own personal portfolio.]


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
Exact Sciences Corporation (EXAS) : Free Stock Analysis Report
 
PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
 
Shopify Inc. (SHOP) : Free Stock Analysis Report
 
Pinterest, Inc. (PINS) : Free Stock Analysis Report
 
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