After recent volatility and declines, there are a number of ASX growth shares that could be top ideas in 2022.
These are businesses that are expecting to grow revenue significantly over the coming years.
Companies that expect rising margins and fast revenue growth could be a strong combination.
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Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is a leading e-commerce business that sells a wide variety of beauty products from different brands.
Since 4 November 2021, the Adore Beauty share price is down 23% to $3.98. That could make it an even more compelling opportunity.
Morgan Stanley currently rates the business as a buy with a price target of $6.50. If that price were reached next year, it would lead to a doubling of the Adore Beauty share price.
The Australian beauty and personal care market has a total addressable market of $11 billion, with online being $1.3 billion of that. If Australia follows the same trend as the UK and USA, the online penetration of the market could reach the high-teens in the next couple of years.
Adore Beauty continues to grow quickly. Revenue in the FY22 first quarter increased 25% to $63.8 million and active customers rose 24% to 874,000. Returning customers grew 63% for the ASX growth share.
In the short-to-medium-term it's going to maintain an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of between 2% to 4% to re-invest and drive above market growth. Over time, it plans to benefit by leveraging its scale and grow its operating profit percentage.
Redbubble Ltd (ASX: RBL)
Redbubble is another e-commerce business. This one specialises in providing products which have designs on them which have been created by artists. Those artists get a cut of the gross revenue, which then results in Redbubble earning 'marketplace revenue'.
It is slowly but steadily adding more product categories. Some of the things it sells includes clothing, stickers, masks, phone cases, wall art, bedding and clocks.
Mask sales sent Redbubble marketplace revenue to record highs in FY21. The ASX growth share is expecting FY22 marketplace revenue to be slightly above FY21's underlying marketplace revenue (excluding masks).
Redbubble is expecting its EBITDA in FY22 to be in the mid single digits, with expansion to between 13% to 18% in 2024 onwards.
It wants to grow its marketplace revenue at a compound annual growth rate (CAGR) of between 20% to 30% to 2024 so that it can reach $1.25 billion of marketplace revenue. Management believe this is achievable through organic investment and growth, whilst also keeping an eye out for acquisition opportunities that will help accelerate the business towards that target.
Scaling the network improves the customer experience and unit economics.
