The stock market officially entered a correction this week, declining 10% from the most recent high. Many stocks are down even more. Stock market corrections like this can feel brutal since no one likes losing money.
However, they can also be excellent opportunities for long-term investors to scoop up shares of great companies at lower prices. Two stocks that look like unbelievable bargains given their growth prospects are Brookfield Renewable (NYSE:BEPC)(NYSE:BEP) and Pinterest (NYSE:PINS). That makes them smart options for those with $500 to deploy right now.
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A dirt cheap way to invest in this megatrend
Shares are Brookfield Renewable have slumped more than 45% over the past year. That sell-off makes no sense whatsoever. The renewable energy giant delivered excellent results last year. It produced record third-quarter earnings, pushing its total for the first nine months up 20% year over year.
With its earnings surging while the stock tumbled, Brookfield Renewable now trades at a much lower valuation. It has generated $1.69 per share of cash flow over the last 12 months. Given its recent sub-$32 share price, it trades at less than 19 times cash flow. That's dirt cheap, considering its growth prospects.
Brookfield has a quartet of growth drivers that should power 10%+ cash flow per share growth through at least 2026. It sees upside potential of as much as 20% annually. One of its power sources is inflation. Its energy contracts allow it to raise rates along with inflation. With inflation near a 40 year high of 7% last year, Brookfield's inflation-related earnings should surge. That's on top of the growth from higher power prices, its large-scale development pipeline, and M&A activities.
Brookfield should be able to deliver high-powered growth for decades to come, given the investment needed to switch the entire global economy from carbon-emitting fossil fuels to cleaner alternative energy sources. That long-term upside makes it look like a smart investment these days, given the decline in its share price.
Growth at a value price
Social media platform Pinterest has plunged more than 60% in the past year. That's partly due to two rumored buyouts that failed to materialize. Payments giant PayPal (NASDAQ:PYPL) reportedly explored a deal valued at $70 a share ($45 billion) last fall. Meanwhile, tech behemoth Microsoft (NASDAQ:MSFT) reportedly approached Pinterest with a $51 billion deal earlier in the year.
The big draw for those tech giants was Pinterest's large and growing user base. The company ended the third quarter with more than 444 million global monthly active users (MAUs). These giants saw Pinterest as a way to expand their user base and further monetize the platform. However, they couldn't agree to terms, taking some of the air out of the stock.
Those failed buyouts might be a blessing in disguise for long-term investors. Pinterest is still in the early days of cashing in on its highly engaged userbase. Its revenue grew 43% in the third quarter, while earnings more than doubled. It still has a lot of room to run. The platform tallied only $1.41 in average revenue per user (ARPU) during the quarter. Of note, its ARPU was $5.55 in the U.S., where it has 89 million MAUs, against $0.38 globally, where it has 356 million MAUs. Its international monetization opportunity alone is massive. Meanwhile, its overall ARPU is still a fraction of most other social media sites.
With Pinterest's stock tumbling this year, it trades at a ridiculously low valuation, given its growth potential. At the recent price below $30 a share, it sells at around 21 times its forward price to earnings. That's only a little bit more expensive than the S&P 500's current forward PE ratio of 19.6 times. That makes Pinterest seem dirt cheap since it's growing at a much faster rate than the market.
Standing out in a sea of red
The recent stock market dip has made many stocks look more attractive these days. Among the most compelling opportunities are Brookfield Renewable and Pinterest. They look like absolute bargains, given their long-term growth prospects. And that means they look like smart ways to deploy $500 these days.
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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January 29, 2022 at 11:16PM
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The Smartest Stocks to Buy With $500 Right Now - Motley Fool
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