The stock market has rebounded in recent weeks as investors digest the tariff mayhem engulfing world trade. But many stocks still trade down significantly from all-time highs.
Whether due to changes in investor sentiment, a sector washout, or just being broadly underestimated, there are plenty of growth stocks now trading on the cheap that look like great long-term investments. Market drawdowns are when many investors make their best investments.
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Although it may not feel like it now, buying a stock with a cratering price is how an investor gains ownership in high-quality businesses at a discount and builds long-term wealth for a retirement portfolio.
Here are three growth stocks of varying risk profiles still trading down 25% or more from all-time highs to consider buying today.
1. Taiwan Semiconductor's dominant market position
Taiwan Semiconductor Manufacturing(NYSE: TSM) -- otherwise known as TSMC -- is the world's largest manufacturer of advanced semiconductors. The computer chips it makes for customers such as Apple or Nvidia are the backbone of the fast-growing cloud computing, artificial intelligence (AI), and supercomputer end markets.
Last quarter, TSMC registered trailing-12-month revenue of up to $97 billion. Its high-performance computing segment now makes up 59% of overall sales and is experiencing a huge boom due to the increased spending on AI computing infrastructure across the globe, with 7% quarter-over-quarter growth in the first quarter.
This should continue over the next five to 10 years, especially once its new $100 billion in factories in the United States get up and running.
TSMC's 48.5% operating margin is much better than other manufacturers. It has this high level because of the virtual monopoly it holds in advanced semiconductor manufacturing, allowing it to sell its products at a premium price. If a customer wants to get cutting-edge computer chips, sometimes the only place it go is TSMC. This gives the company immense pricing power.
At the current share price of $163, TSMC stock is down 27.5% from all-time highs and trades at a price-to-earnings ratio (P/E) of 21. For a company set to grow at a fast clip over the next decade, this is a cheap earnings ratio and indicates that its stock has plenty of room to run over the next 10 years.
2. Coupang's underrated retail marketplace
Perhaps one of the most underrated stocks in the world is Coupang(NYSE: CPNG). Share prices of the e-commerce and retail marketplace in South Korea are trading down over 50% from all-time highs set near the company's initial public offering (IPO) in 2021. Since then, the business has grown like gangbusters, with increasing profitability.
Gross profit -- the best non-GAAP metric for gauging topline growth with this type of company because it accounts for revenue for third-party sales -- grew 29% year over year last quarter excluding a one-time insurance payout and inorganic growth from its acquisition of luxury marketplace Farfetch. Gross margin was 29%, giving the company plenty of room to generate healthy profits as it gets to a larger scale. Free cash flow has been positive since the start of 2023, meaning that Coupang can self-fund its growth ambitions.
Coupang's market share is large in South Korea, but it is not resting easy. Management has large ambitions to expand its retail operations with grocery delivery, sponsored listings, and even some video streaming and financial technology investments. It is also successfully expanding into Taiwan.
Overall revenue reached $30 billion in 2024. Revenue grew 136% year over year in the first quarter when excluding inorganic acquisition revenue and foreign currency movements for these developing offerings. With $1.1 billion in quarterly revenue from these new initiatives, the segment can be an increasingly strong growth driver for Coupang in the years to come.
At a market cap of $42 billion, Coupang barely trades at a price-to-sales ratio (P/S) above 1, even with the strong margin potential and huge growth runway. With the ability for overall revenue to grow much larger in the years to come, I think Coupang is a great growth stock to add to your portfolio right now.
3. High risk and high potential upside with Rocket Lab
The last one on the list is a fast-growing company with a lot of risks: Rocket Lab USA(NASDAQ: RKLB). The space-flight upstart has seen its stock slip nearly 29% from all-time highs set earlier this year even as its revenue grows at a blistering pace -- including a 78% year-over-year gain to $436 million in 2024.
A bet on Rocket Lab is a bet on its future space flight and systems revenue. It currently launches only one rocket type, called the Electron, with a smaller payload than competing products at companies like SpaceX. This year, it hopes to bring to market the Neutron, which has a much larger payload and therefore will generate much more in revenue per launch.
On top of this, Rocket Lab has built a robust space systems division that sells capsules, energy generators, communication systems, and other products a third party may want to operate in orbit above Earth. In the long run, it hopes to build out a satellite constellation and sell data and software capabilities to customers, similar to SpaceX.
With a market cap of $10 billion, Rocket Lab stock looks overvalued compared to its current revenue base of under $500 million. It may well be a poorly performing stock if the company cannot execute on its product road map.
But if the products it is developing can get to market and start winning a share of the hundreds of billions of dollars spent on the space economy every year, I think that Rocket Lab's revenue will be significantly higher in 10 years than today, along with its stock price.
Don't make it your entire portfolio, but Rocket Lab USA is an exciting and fast-growing upstart in the space economy that has a chance to deliver big gains for patient investors.
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Brett Schafer has positions in Coupang. The Motley Fool has positions in and recommends Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Coupang and Rocket Lab USA. The Motley Fool has a disclosure policy.
