The latest market correction seems to be over now, with the major indexes bouncing back. Time will tell if this bounce will hold or if it's a bull trap, but for now things seem to have settled down in the U.S. markets.
Tech stocks in particular have been down over the past year or so after their pandemic bubbles popped. With prices down significantly for many tech names, now could be the time to look for the long-term winners among the rubble.
Using the GuruFocus All-in-One Screener, I looked for stocks which are at least 70% off their three-year highs and which also had some positive free cash flow, i.e., they are not burning cash. I also looked at companies whose IPO dates preceded the pandemic, so as to exclude very recent IPOs.
I came up with the following six candidates to research as potential investment opportunities: Coupa Software Inc. (COUP, Financial), Fiverr International Ltd (FVRR, Financial), Chegg Inc. (CHGG, Financial), Teladoc Health Inc. (TDOC, Financial), Sea Ltd (SE, Financial) and Zoom Video Communications Inc. (ZM, Financial). I believe these candidates deserve a second look as we search for diamonds in the rough. They are all high-growth tech companies which went crazy during the "once a century" pandemic market madness.
| Ticker | Company | CurrentPrice ($) | Price (3yHigh)($) | 3-Year Revenue Growth Rate (Per Share)(%) | Total Revenue Growth Rate(Future 3Y To 5Y Est)(%) | Market Cap ($millions) | Price-sales Ratio | Price-to-Free-Cash-Flow Ratio | IPO Date |
| COUP | Coupa Software Inc. | 81.91 | 377.04 | 30.90 | 24.56 | 6,117.07 | 9.01 | 56.14 | 2016-10-06 |
| FVRR | Fiverr International Ltd | 67.13 | 336 | 41.10 | 27.59 | 2,470.18 | 8.62 | 72.76 | 2019-06-13 |
| CHGG | Chegg Inc. | 32.88 | 115.21 | 24.70 | 15 | 4,433.82 | 6.34 | 29.06 | 2013-11-13 |
| TDOC | Teladoc Health Inc. | 63.94 | 308 | 26.80 | 24.96 | 10,251.31 | 5.15 | 82.33 | 2015-07-01 |
| SE | Sea Ltd | 114.23 | 372.70 | 97 | 36.44 | 63,710.41 | 5.74 | 244.70 | 2017-10-20 |
| ZM | Zoom Video Communications Inc. | 111.29 | 588.84 | 121.70 | 12.18 | 33,289.51 | 8.51 | 23.98 | 2019-04-18 |
Coupa Software Inc.
Coupa Software Inc. (COUP, Financial) is a cloud-based provider of business spend management, or BSM, solutions. Coupa's BSM platform provides visibility into all spend, allowing companies to gain control over their spending, optimize their supplier network and supply chains and manage liquidity. The platform's transactional core consists of procurement, invoicing, expense management and payment solutions, while supporting modules ranging from strategic sourcing solutions to supply chain design and planning solutions round out the comprehensive spend management ecosystem.
Coupa has been public since 2016, is cash flow positive and is expected to continue growing in the double-digits well into the future according to Wall Street analysts.
Fiverr International Ltd
Fiverr International Ltd (FVRR, Financial) develops and maintains an e-commerce platform that allows people to buy and sell digital services. Its platform connects businesses with freelancers offering digital services in more than 200 categories, across more than seven verticals, including graphic design, digital marketing, programming, video and animation. Its buyers include businesses of various sizes, while sellers comprise a group of freelancers and small businesses. The company’s global community of freelancers spans across more than 160 countries.
Chegg Inc.
Chegg Inc. (CHGG, Financial) engages in the operations of learning platforms and study services for students. The company is headquartered in Santa Clara, California and currently employs 1,613 full-time employees. The company went public on on Nov. 13, 2013. Chegg aims to support students on their journey from high school to college and into their career with tools designed to help them learn their course materials, succeed in their classes, save money on required materials and learn the skills they need. Its services are available online, with the motto "anytime and anywhere." It operates a subscription revenue model, Chegg Services, which includes Chegg Study, Chegg Writing, Chegg Math Solver, Chegg Study Pack, Thinkful and Mathway.
Teladoc Health Inc.
Teladoc Health Inc. (TDOC, Financial) is a provider of telehealth services, allowing patients to connect with health care providers digitally via mobile devices, computers or phones. The company is headquartered in Purchase, New York and currently employs 5,100 full-time employees. It went public on July 1, 2015. The firm provides virtual access to care with a portfolio of services and solutions, which includes various medical subspecialties from non-urgent, episodic needs, such as the flu and upper respiratory infections, to chronic, complicated medical conditions, such as hypertension, cancer and congestive heart failure. The company provides provide virtual health care services on a business-to-business (B2B) basis to its clients, including employers, health plans, hospitals and health systems, and insurance and financial services companies spanning the global healthcare landscape. It also provides services to consumers directly and through channel partners. The company’s consumer brands, including Teladoc, Livongo, Advance Medical, Best Doctors, BetterHelp and HealthiestYou, provide access to advice and resolution for an array of health care needs.
Sea Ltd
Sea Ltd (SE, Financial) is an internet and mobile e-commerce and gaming company. The firm operates under three segments: digital entertainment, e-commerce and digital payments and financial services. Its businesses include Garena, Shopee and SeaMoney. Garena's platform offers mobile and personal computer (PC) online games and develops mobile games for the global market. The company offers e-sports and provides access to other entertainment content and social features, such as live streaming of gameplay, user chat and online forums. Shopee's platform is a mobile-centric, social-focused e-commerce marketplace. The company provides users a shopping environment with integrated payment, logistics infrastructure and seller services. SeaMoney provides various payment services and loans to individuals and businesses. The company also integrates with third party merchant partners and covers a set of consumption use cases. The company operates primarily in Southeast Asia, which includes Indonesia, Taiwan, Vietnam, Thailand, Singapore, Malaysia and the Philippines, among others.
Zoom Video Communications Inc.
Zoom Video Communications Inc. (ZM, Financial) operates a video-first communication platform. The company is headquartered in San Jose, California and currently employs 6,787 full-time employees. It went public on April 18, 2019. The firm's platform connects people through video, phone, chat and content sharing and enables face-to-face video experiences. Its core products include Zoom Meetings, Zoom Phone, Zoom Chat, Zoom Rooms, Zoom Conference Room Connector, Zoom Video Webinars, Zoom Developer Platform and Zoom App Marketplace. Zoom Meetings provide high-definition video, voice, chat and content sharing across mobile devices, desktops, laptops, telephones and conference room systems.
Conclusion
Unlike the majority of stocks that crashed during the bursting of the dot-com bubble, the above names have real revenue which is increasing rapidly, and they are already producing free cash flow. Thus, they seem to have viable business models which appear to be working. I believe they could rebound now that the bubble has burst; they are certainly worth looking into.
