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Stock Market Correction: Buy These 2 Stocks to Help You Retire Rich

GitLab (NASDAQ: GTLB) and Advanced Micro Devices (NASDAQ: AMD) are two growth stocks that reported strong momentum in their first-quarter results this year. Both stocks have been hit hard by the market sell-off, but these companies have a long runway of growth ahead and should be great investments.

While these stocks have big return potential, new investors should keep in mind that all it takes to get rich in the stock market is time, persistence, and patience. If you simply added $1,000 a month to a diversified portfolio of well-chosen stocks, you could easily accumulate savings worth $2.2 million after 30 years. That's just earning the historical average market return of 10% per year.

That said, GitLab and AMD are doing some cool things in the world of software and semiconductors that could keep your average return pacing toward early retirement.

GitLab

GitLab is a relatively small company with just $290 million in trailing-12-month revenue, but it has experienced high demand for its DevOps software platform that helps employees collaborate and create software more efficiently. Consistently high revenue growth has given the stock a market cap of over $7.5 billion, which looks high for a company that has reported losses on the bottom line. But GitLab's long-term opportunity is big enough to warrant an expensive price-to-sales multiple.

The heart of the company's offering is the DevOps Platform. It's an app that allows teams to better communicate across operations, IT, and software development. This comes in handy when there is a problem that needs troubleshooting. DevOps provides the tools for employees to quickly identify a problem and write new code to fix it.

One reason the platform is growing in popularity is its open-source availability, which provides basic functionality at no cost. But the company offers additional features across two subscription tiers.

Despite intense competition in the software development market, GitLab reported a 75% year-over-year increase in revenue in the first quarter, an acceleration over the previous quarter. That's a good sign that its product continues to catch on in a competitive environment, especially after Microsoft's $7.5 billion purchase of GitHub in 2018.

For sure, GitLab will have to continue introducing new features to stay ahead of heavyweights like Microsoft, but its growth so far suggests it is providing a differentiated offering that customers want. Management pegs the long-term addressable market for its software at $40 billion. With shares down during the bear market along with the recent acceleration in revenue growth, this software-as-a-service stock could be a truly wealth-building investment.

Advanced Micro Devices

AMD is one of the leading providers of central processing units (CPUs) and graphics processing units (GPUs) for the consumer, enterprise, and data center markets.

Market participants are worried about slowing demand in personal computers and cloud services, where companies deploy specialized GPUs for mission-critical data processing. Concerns that we might be headed for a recession are weighing on all stocks right now, but especially on semiconductor companies. This gives investors an opportunity to buy shares of this fast-growing chipmaker at a bargain valuation.

AMD reported a revenue increase of 71% year over year in the first quarter, yet the stock trades at just 16.7 times this year's consensus earnings estimate. The low price-to-earnings (P/E) ratio suggests the market is valuing AMD like an average company, but the business is far from mediocre. In fact, the market seems to be significantly undervaluing the extra growth that the addition of Xilinx brings to AMD.

AMD completed its acquisition of Xilinx in the first quarter. The combined company will have a broader chip portfolio to meet demand across a variety of connected devices and new markets over the next decade. Xilinx brings its leading field-programmable gate arrays (FPGAs) and adaptive systems-on-chip (SoCs) to AMD's lineup of CPUs and GPUs for data centers. It's an impressive offering that could capture a chunk of a $300 billion addressable market over the next decade.

Organizations will continue to invest in advanced chip technology to process massive data workloads. The artificial intelligence chip market is exploding, and AMD should benefit. Management believes revenue can grow at a compound annual rate of 20% over the next three to four years. With the stock selling at an excessively low P/E multiple, AMD shares are too cheap.

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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Microsoft. The Motley Fool has a disclosure policy.


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