Sharek’s Top Speculative Stocks for a Bear Market

This Bear Market has wrecked havoc on speculative growth stocks.

But when the tide turned, these stocks might be excellent bounce-back candidates.

Here’s six speculative stocks that I think will do well once this Bear Market turns in a Bull Market.

Note: we make all our own charts & tables, old school style. The charts are one-year charts from our 2022 Q2. Not the company’s Fiscal Q2, we update our spreadsheets on the stocks we cover once per month, which for us when each company reported earnings April 1 to June 30th. These stock prices (and perhaps earnings estimates) have since changed.

Cloudfare (NET) is an amazing company that is getting compared to Amazon Web Services. NET built one of the world’s largest networks in 200 cities across 100 countries to store date and stop attacks for its clients, while keeping things flowing swiftly online. 

NET is a consistent rapid grower, with revenue growth of 50% or greater for the past five years. I believe edge computing is the next big thing in technology, as it makes computing so much faster because of the shorter travel distance.

We are in a Bear Market so valuations have come down. My Fair Value fell from 25x revenue to 15x

Crowdstrike (CRWD) is a crowd-sourced security, that’s learning from other cyber attacks. The company has a threat intel platform that is spying on customer traffic. When one customer gets hit by an attempted cyber attack, CRWD sees this first attack and can strike the threat for all its customers.

CRWD is the third-fastest cloud-native software as a service company (SaaS) to reach over $1 billion in Annual Recurring Revenue (ARR), behind Salesforce and Zoom. CRWD recently acquired Preempt Security and Humio. These new acquisitions put the company in two new arenas for growth (1) data analysis and (2) zero-trust security.

I’m lowering my Fair Value valuation from 30x annual revenue estimates to 25x revenue, as the stock seems to be “fairly valued” around that figure.

Snowflake (SNOW) provides organizations a platform for all their data, then gives managed secure access of the data to company users (or other organizations) without the need for the client to control the database infrastructure. It is the top choice for large enterprises to store their data. 

SNOW continues to perform magnificently well, but the stock is still tumbling lower. Last qtr, the company grew revenue 85%, while profits were $0.08 per share versus -$0.11 a year ago. Meanwhile, the stock has fallen from $220 last qtr to $119 this qtr. The problem with SNOW is its valuation.

This qtr, my Fair Value drops from 35x annual revenue to 20x. That equates to a $127 stock this year and $194 next year.

HubSpot (HUBS) offers online software that can keep track your business’ customers and potential customers, do online marketing campaigns, trace if people are opening your emails, and even automate customer service team.

Last qtr, the company grew its customer count 26% to a grand total of 143,689. In addition, the average price each customer is paying HUBS for its software increased 12% to $11,030 due to the company’s continued adoption of a multi-hub strategy and resilience of its Enterprise tier. That price jump is a big deal, as the company had been trending around $10,000 for years. Perhaps this software company is being positively affected by inflation?

My Fair Value came down from 15x revenue to 10x this qtr.

MercadoLibre (MELI), the largest online commerce platform in Latin America based on visitors and page views, is designed to give users a portfolio of services to do commercial transactions. It is like South America’s combination of eBay, PayPal, and Shopify rolled into one.

MELI continues to grow rapidly, but the stock continues to trend lower with the rest of the speculative stocks. And I call MELI speculative as the P/E of 88 is high. Overall, MELI delivered 291% profit growth as revenue surged 63%, year-over-year. Profit margin improved, but operating expenses increased to 41.5% of revenue, up from 36.3% a year earlier. The cause of the added expenses was an increase in bad debt provisions from the ramp up in MELI’s credit card offering.

My Fair Value is getting cut from 8x to 4x revenue.

Data monitoring  & analytics company, Datadog (DDOG), helps organization monitor their websites and application. Organizations have many different programs running continuously. DDOG’s dashboards allow users to customize their vies and see data by different hosts or devices.

DDOG seems to be the best stock in the data analysis world (which includes Dynatrace and Splunk among others). But these shares are selling for 33x 2022 revenue estimates, and that’s a high price to pay for a stock nowadays. This is an excellent company, but I feel the stock has high risk right now.

My Fair Value is a super-high 30x revenue (but don’t trust this high valuation).

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