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2 Top Stocks Down 55% to 73% to Buy Hand-Over-Fist

The first half of 2022 left no company unharmed. The Nasdaq Composite index is down a staggering 29.6% so far in 2022, with many individual stocks falling much more than that.

While some investors are starting to think about the back half of the year, long-term investors keep their eyes focused a bit farther out: the next five years or longer. If you're going bargain hunting right now and looking to buy stocks for the rest of 2022 and beyond, Adyen (OTC: ADYE.Y) and Global-E Online (NASDAQ: GLBE) -- which are 55% and 73% off their all-time highs, respectively -- look like potentially great choices.

1. Adyen

Adyen is a Netherlands-based digital payments processor. Many people likely have not heard of it, but they certainly know some of the company's customers: Microsoft, McDonald's, and Spotify. The company processed over 516 billion euros in 2021, 70% higher versus 2020. Adyen makes money on the transaction-based activity it facilitates, so if consumer purchase activity slows, the company will see less revenue. Because of this, worries about a recession in the U.S. and parts of Europe have fueled a 44% drop in the company's stock in 2022.

However, Adyen might not deserve to be down this much. In 2021, the company posted astounding growth figures, with revenue jumping 48% year over year to 1 billion euros. What's more impressive is that its free cash flow soared 53% year over year to 566.6 million euros, representing a 57% margin in 2021.

Adyen has one competitive advantage that helped it achieve these stellar results: It is the low-cost leader. To convince enterprise customers to rely more heavily on its platform, Adyen lowers its take rate as customers push additional total payment volume (TPV) through its platform. This results in activity growth that supersedes its lower prices. In 2021, the company's take rate decreased 14% year over year to 19.4 basis points, yet revenue still skyrocketed 48%.

The company plans to continue to leverage this appealing business model into sustained success over the medium term. Adyen is projecting mid-20% to low-30% annual revenue growth, while posting a stellar EBITDA margin above 65% for the foreseeable future.

With the company's competitive advantage and its adoption thus far, Adyen looks like a high-quality stock. However, it isn't valued as such. The company trades at 22 times free cash flow, which is significantly lower than its past valuations. Since the beginning of 2020, shares have never traded this low, making it an appealing time to buy shares now.

At this valuation, it looks like a great time to get in on this disruptive player.

2. Global-E Online

Despite its continued operational success, Global-E is also trading at an all-time low valuation of 11 times sales. Global-E is trying to break down borders by helping e-commerce businesses increase their cross-border sales. It does this by easing frictions on factors that can prevent international e-commerce, like payments, shipping, differing languages, and even regulatory and legal requirements. While the company is small, it has caught the eyes of big-name brands like Adidas, which is using Global-E to expand into over 16 markets worldwide.

The company makes money from fees correlated to the gross merchandise volume (GMV) that it facilitates, so less activity means less revenue for Global-E. The company could get hit by investor concerns about a potential recession in the U.S., especially with 37% of its Q1 2022 revenue coming from U.S. merchants.

However, while the short term could be rough for Global-E, the long-term adoption of global commerce is only expected to grow. Forrester predicts that by 2023, the cross-border e-commerce market will reach $736 billion. Considering Global-E believes it will facilitate just $2.34 billion in GMV in 2022, this opportunity is wide open for the company.

The main risk, however, is that many e-commerce platforms offer a version of these services. For example, Amazon might offer these services if you sell on its platform. Global-E, however, targets large enterprises that run their own e-commerce operations. Therefore, its customers aren't typically ones that use services like Amazon.

The short term might be rough for Global-E if its merchants see a pullback in e-commerce spending, but it's clear that the long-term opportunity for Global-E is still immense. If the company can see stable adoption from new customers and increasing reliance from its existing customers over the coming years, Global-E could be a steal at today's prices.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jamie Louko has positions in Amazon and Global-e Online Ltd. The Motley Fool has positions in and recommends Adyen N.V., Amazon, Global-e Online Ltd., Microsoft, and Spotify Technology. The Motley Fool recommends Adyen. The Motley Fool has a disclosure policy.


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