2 Stocks I Will Buy If the Stock Market Keeps Crashing


For long-term investors, dips in the stock market can present some great buying opportunities. As of this writing, the tech-heavy Nasdaq Composite index is down almost 21% from its all-time highs, with many individual stocks down much more than that. Some of these businesses, however, are extremely strong operationally. With such a disparity between business performance and stock price, it can be an opportune time to invest in new companies. 

Unity Software ( U -5.12% ) and Doximity ( DOCS -7.09% ) are two examples of this. Their stock prices have fallen 56% and 47%, respectively, off all-time highs, yet both companies reported strong earnings. I have had Unity and Doximity on my watchlist for some time now, but if the stock prices keep dropping, they might become parts of my portfolio.

Image source: Getty Images.

1. Unity Software

When it comes to building, operating, and scaling a video game, Unity is the top choice for game developers. The company has over 1.5 million monthly active creators across the gaming, automotive, film, and construction industries using its software to build video games and 3-D spaces to simulate real-world experiences. Unity is a leader in the game development space, operating in a duopoly with Epic Games’ Unreal engine. Some estimate that Unity has a 48% market share in the gaming space, showing the company’s dominance.

Unity has made two big acquisitions in the graphics and visualization space recently: Weta Digital and Ziva Dynamics. Weta, which it fully acquired in December, provides sophisticated visual effects tools to create games and visual content like never before. Ziva, which Unity bought in late January 2022, uses machine learning and knowledge from over 72,000 facial expressions to produce futuristic, life-like virtual characters. In combination with Unity’s own developers and research team, the company is quickly becoming the best game development platform when it comes to graphics, which could be a major selling point going forward. 

I have held off on buying the stock until now for two reasons. First, the company is both unprofitable and free-cash-flow negative. In 2021, the company’s cash burn was $153.5 million, and its net loss surpassed $533 million — or 48% of revenue for the year. Second, the company’s competition with Epic Games is fierce, although Unity’s graphics could give it a competitive edge. Another advantage is that Unity uses an easier coding language than Epic’s Unreal engine does. Unreal has a no-code solution where developers can plug and play with specific pre-built nodes, but for users that want to literally build their own game from scratch, Unity is the easiest way to do so.

The free cash flow burn is still concerning, but Unity has over $1.7 billion in cash and marketable securities to subsidize this cash burn for a long time, so Unity looks more appealing with every passing day. Shares now trade at 22 times sales — an expensive price — but this is the lowest valuation Unity has ever had as a public company. It might be smart to dollar-cost average into a position because of its higher multiple, which is what I might do if the stock continues to sink.

2. Doximity

Doximity is another fast-growing stock that has been hammered. The company still has an expensive valuation of 31 times sales, but with the consistent execution, high growth, and jaw-dropping profitability, it is beginning to look like a major bargain right now. 

Doximity’s platform allows doctors, physicians, and other healthcare professionals to communicate with patients, network with other healthcare professionals to grow their careers, and learn about emerging drugs and practices. The company’s cash cow is its ad business, where pharmaceutical manufacturers pay to get in front of the eyes of its users. Doximity has over 80% of American physicians on the platform, making it one of the best places for advertisers to promote their drugs. As a result, the company grew its revenue 67% year over year to $98 million in its fiscal 2022 third-quarter (which ended Dec. 31). What was even more impressive, however, was the company’s net income margins, which reached 57% in the quarter, meaning 57% of its revenue fell to the bottom line.

While these financial figures were impressive, the main question is whether this can continue. The vast majority of physicians are on its platform already, so the value for advertisers could flatline unless the company increases user engagement. Management expects continued revenue growth in the coming years, however: Revenue for fiscal 2023 — which ends March 31, 2023 — is expected to grow 33%. While this is slower than the company’s current growth rate, it could still provide investors with fruitful returns over the long term.

Doximity share prices are near their all-time low today, making the company look especially appealing. With its leadership in the industry and incredible profitability, investors have the potential to be well compensated over the coming years. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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