March hasn't been a great month for the stock market. As of this writing, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average indexes are down by 4.4%, 5.3%, and 3.6%, respectively.
But there's a silver lining: Many fantastic stocks are now on sale. According to this trio of Motley Fool contributors, three that you should consider buying on the dip are Duolingo(NASDAQ: DUOL), Sea Limited(NYSE: SE), and SentinelOne(NYSE: S).
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Investors may come to regret overlooking shares of this red-hot stock
Jake Lerch (Duolingo): Shares of online learning platform operator Duolingo have been on quite the ride over the past year. As of this writing, the stock is down nearly 24% from the all-time high it reached in February. However, that pullback is small potatoes when taking the longer view. As of this writing, shares of Duolingo are up by more than 50% over the last 12 months and are up more than 261% over the last three years.
In that context, I see this pullback as a buying opportunity for long-term investors. That's because Duolingo's fundamentals remain strong, led by excellent revenue growth.
In the fourth quarter, Duolingo booked $210 million in revenue, up 39% from a year earlier. Incredibly, that's a pretty ho-hum growth rate for the company. Over the last three years, quarterly revenue growth has averaged 42%.
Similarly, the company reported a 51% increase in daily average users (DAUs) and a 43% increase in paid subscribers. The latter figure is crucial for the company, as more than 80% of its revenue is generated through subscriptions.
According to analysts' estimates compiled by Yahoo! Finance, in 2025, revenues are expected to rise 30% to $975 million. However, given its track record and the appeal of its fun -- and slightly addicting -- app, I believe Duolingo could beat that.
I remain bullish on this growth stock. Investors would be wise to give it a look before it's once again making new all-time highs.
After missteps and misfortune, Sea Limited may have finally found its sea legs
Will Healy (Sea Limited): During the first couple of years of the pandemic, the gaming, e-commerce, and fintech segments of Southeast Asian company Sea Limited grew at a rapid clip as locked-down consumers sought indoor shopping and entertainment options.
Then the stock experienced a perfect storm in 2022 as a bear market coincided with management's ill-advised plans to expand its e-commerce platforms outside of its core markets. Additionally, India's move to ban its popular video game Free Fire came at a time when consumers were already spending less time on mobile games.
Even though its fintech segment remained solid, the stock experienced a drop of more than 90% at one point. Sea Limited stock has partially recovered, but it's still 64% below its all-time high.
Nonetheless, the company wisely decided to take a page out of MercadoLibre's (NASDAQ: MELI) e-commerce playbook. It pulled out of most markets outside of Southeast Asia and invested heavily in logistics to bolster its competitive advantages in its core markets. Also, players are returning to its games, and Free Fire could soon become available in India again. Consequently, its 2024 revenue grew 29% to $17 billion and, as of Q4, its gaming segment has returned to growth. In sum, all three of its segments are now firing on all cylinders.
Moreover, its 2024 net income was $448 million, compared to $163 million in 2023. Its trailing-12-month P/E ratio of around 175 drops to a more reasonable forward P/E ratio of 34. That forward earnings multiple is arguably more appropriate for a slower-growth stock, indicating that Sea Limited's valuation should be attractive for new buyers.
Admittedly, investors have taken notice of the business' turnaround, as the stock is up by over 130% over the last year. However, with all three segments back in growth mode and a relatively low forward P/E ratio, it is likely not too late to capitalize on the discount in Sea Limited stock.
A top-tier cybersecurity stock at a fraction of the valuation of its peers
Justin Pope (SentinelOne): It's been a tough several years for investors in SentinelOne. The up-and-coming cybersecurity company went public during a market bubble in 2021 and is still down roughly 75% from its all-time high. It would be easy to write the stock off, but there's evidence that SentinelOne is a compelling buy at these prices.
For starters, SentinelOne sells a top-tier product in a security space that demands innovation. Its software, which uses artificial intelligence to hunt and eradicate threats autonomously, has garnered positive industry recognition and high scores in Gartner's Magic Quadrant and the MITRE Engenuity ATT&CK® Evaluations.
The business results track, too. SentinelOne remains one of Wall Street's fastest-growing companies, with nearly 30% year-over-year revenue growth in its most recent quarter and trailing 12-month revenue of $821 million. It isn't profitable yet, but it has been free-cash-flow positive over the past four quarters, has no debt, and has $186 million in cash on the books to invest in growing the business.
Admittedly, it's not as impressive as archrival CrowdStrike, which is larger, still growing, and comfortably profitable, but SentinelOne could offer investors more bang for their buck. It trades at an enterprise-value-to-revenue ratio of just 6.8, compared to CrowdStrike's 22.4. I wouldn't say that CrowdStrike is so superior that investors should pay three times as much for its stock.
As SentinelOne continues to grow and progress toward GAAP profitability, that valuation gap could narrow. Investors looking for a value trade or a long-term investment in a promising growth stock should check out SentinelOne while it's still beaten down.
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Jake Lerch has positions in CrowdStrike, Duolingo, and MercadoLibre. Justin Pope has no position in any of the stocks mentioned. Will Healy has positions in CrowdStrike, MercadoLibre, and Sea Limited. The Motley Fool has positions in and recommends CrowdStrike, MercadoLibre, and Sea Limited. The Motley Fool recommends Duolingo and Gartner. The Motley Fool has a disclosure policy.
