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3 Best Growth Stocks to Buy in February

The Motley Fool logo The Motley Fool 2/9/2023 Jeremy Bowman
3 Best Growth Stocks to Buy in February © Provided by The Motley Fool 3 Best Growth Stocks to Buy in February

After a rough 2022, growth stocks have surged this year. Through Feb. 6, the Nasdaq Composite is up 14% as investors have responded to cooling inflation and slowing interest rate hikes from the Federal Reserve.

With a number of growth stocks having plunged last year, there are also opportunities in the sell-off. On that note, keep reading to see three of the best growth stocks you can buy in February.

1. Perion Network

Perion Network (NASDAQ: PERI) is an Israeli adtech company best known for its intelligent hub that connects ad buyers and sellers to optimize ad campaigns for both sides.

During a challenging period in the digital advertising industry, Perion has continued to post strong results. In the fourth quarter, revenue jumped 30% to $205 million, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged by 63% to $47 million, giving it an EBITDA margin of 23%.

Perion has delivered strong growth on both the top and bottom lines by scaling up the intelligent hub, offering a premium ad experience from brands on Connected TV and other channels, and offering ad products like a "connected cart," which allows a viewer to buy something on a Connected TV ad by scanning a QR code.

Additionally, Perion has its own cookie-less technology, SORT, that helps build customer loyalty as advertisers are looking for a replacement for third-party cookies, which Google is planning to phase out soon.

Perion also has a relationship with Microsoft and is a preferred partner for its Bing search engine, which could give it significant upside potential as Microsoft is expected to roll out a ChatGPT-powered version of Bing. If Bing can gain significant market share, Perion could be a big winner.

Finally, the stock is cheap at less than 12 times adjusted EBITDA, which is a great price for a stock growing as fast as Perion is.

2. MercadoLibre

Latin American e-commerce company MercadoLibre (NASDAQ: MELI) has bucked the broader trend in the industry; it's put up impressive growth even during a challenging 2022 for domestic e-commerce operators like Amazon and Shopify.

MercadoLibre has built a network of competitive advantages through businesses that include e-commerce, payments through MercadoPago, and logistics through MercadoEnvios. It has a lending business, MercadoCredito, along with asset management.

Those businesses complement each other well. For instance, more than 90% of the company's orders are shipped through MercadoEnvios. MercadoPago has grown from a payment platform supporting MercadoLibre to one that gets most of its payment volume off the MercadoLibre platform, including through point-of-sale machines at brick-and-mortar stores. That helps extend the reach of the company's credit business.  

MercadoLibre's profitability is also ramping up quickly thanks in part to the growth of its advertising business, and its operating margin reached a record of 11% in the third quarter. Finally, one of MercadoLibre's biggest rivals, Americanas S.A., is reeling from an accounting scandal, potentially giving MercadoLibre an opportunity to gain market share.

MercadoLibre doesn't give guidance, but it's set to report earnings at the end of February. Another strong report could send the stock soaring again.

3. Revolve Group

Revolve Group (NYSE: RVLV) is an online apparel seller known for its influencer-driven marketing strategy and its focus on occasion wear for Gen Z and millennials. 

Over its history, the company has grown rapidly, but it's hit a speed bump lately due to difficult comparisons with 2021 and a combination of macroeconomic headwinds, a stronger dollar, and inflationary pressures. After revenue grew 9% in the third quarter, the company said it rose just 3% in October, implying that the fourth quarter could be even slower.

However, Revolve's long-term strategy still remains intact, and the company should benefit from the continuing interest in travel and making up for lost experiences during the pandemic, even during a year when most economists are predicting a recession. For example, Coachella, the California music festival where Revolve hosts its Revolve Festival party, sold out quickly after tickets went on sale.

Despite the recent headwinds, Revolve's unit economics also remain strong as its gross margin came in at 53% in its most recent quarter, an enviable margin for any retailer.

There's a good chance the company's numbers will improve later in the year as comparisons get easier and headwinds in the dollar could turn into tailwinds. Additionally, growth stocks like Revolve could surge if the Fed stops raising interest rates.

With the stock still down 67% from its peak and analysts having low expectations for its performance, a return to profitable growth could put Revolve stock on the upswing again.


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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in, MercadoLibre, Perion Network, Revolve Group, and Shopify. The Motley Fool has positions in and recommends, MercadoLibre, Microsoft, Revolve Group, and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.


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