This year has served as a reminder to both Wall Street and the investing community that stocks don’t move up in a straight line. The first six months of 2022 saw the S&P 500 deliver its worst return in 52 years. Meanwhile, the growth-propelled Nasdaq Composite (^IXIC 2.09%) plunged as much as 34% from its record-closing high set in November 2021. You’ll note by the magnitude of this decline that the widely followed Nasdaq entrenched itself firmly in a bear market.
Although bear market declines can be unnerving, unpredictable, and test the resolve of investors, they’re a perfectly normal part of the investing cycle and the ideal time for long-term investors to put their money to work. After all, each and every double-digit percentage decline in the major U.S. indexes, including the Nasdaq Composite, has eventually been recouped (and some) by a bull market rally.
The current bear market is an especially smart time to scoop up growth stocks at a sizable discount. What follows are five brilliant growth stocks you’ll regret not buying during the Nasdaq bear market dip.
PayPal Holdings
The first phenomenal growth stock that investors are liable to kick themselves over if they miss on this Nasdaq bear market dip is fintech specialist PayPal Holdings (PYPL 2.01%). Though historically high inflation is disproportionately hurting low earners at the moment, which could lessen activity on PayPal’s digital payment platforms, the company’s long-term growth potential remains unchanged.
PayPal finds itself at the center of the digital payment revolution. According to a report from The Insight Partners, the digital payment industry is forecast to grow by a compound annual rate of more than 15% through 2028. PayPal has the potential to blow these figures out of the water. Total payment volume on its platform grew 13% on a constant-currency basis during a second quarter that saw inflation hit a four-decade high and U.S. gross domestic product decline 0.9%. Imagine what PayPal can do during the long-winded periods the U.S. economy is expanding.
What’s been truly impressive is the engagement PayPal has been able to get out of its active users. When 2020 came to a close, active users were completing an average of 40.9 transactions over the trailing-12-month (ttm) period. As of June 30, 2022, this was up to an average of 48.7 transactions per active user of in the ttm. Since PayPal is predominantly a fee-driven business, increasing engagement should drive profits steadily higher.
With many regions of the world still underbanked, the addressable market for digital payments is enormous.
Intuitive Surgical
A second stellar growth stock that investors will regret not picking up during the Nasdaq bear market dip is robotic-assisted surgical systems company Intuitive Surgical (ISRG 1.00%). Despite the COVID-19 pandemic pushing back some selective surgeries, the future is bright for this high-growth stock.
To start with, healthcare stocks are generally defensive. No matter how well or poorly the U.S. economy and stock market are performing, there will always be demand for prescription drugs, medical devices, and healthcare services. Though some procedures are elective, Intuitive Surgical should have a pretty high demand floor.
More importantly, this is a company that absolutely dominates the robotic-assisted surgical industry. In a little over two decades, it’s placed 7,135 of its da Vinci surgical systems worldwide. That’s far and away more than any of its competitors. Given the price of these systems and the training given to surgeons to use them, buyers tend to remain clients for a long time.
But the best aspect of Intuitive Surgical is its razor-and-blades operating model. Throughout the 2000s, most of the company’s revenue derived from selling its pricey da Vinci systems (the “razor”). Unfortunately, these are intricate machines that are costly to build, which means the margins associated with them weren’t the best. Over time, selling instruments with each procedure and servicing its da Vinci systems (the “blades”) have become the lion’s share of sales. These are much higher margin segments.
Sea Limited
The third brilliant growth stock that’s begging to be bought by opportunistic investors during this Nasdaq bear market dip is Singapore-based Sea Limited (SE 0.15%). What makes Sea such an intriguing buy for patient investors is its three diverse but rapidly growing operating segments.
For the moment, the company’s digital entertainment segment, known as Garena, is the only of the three generating positive earnings before interest, taxes, depreciation, and amortization (EBITDA). In particular, global hit-game Free Fire continues to be Sea’s big winner. Whereas most gaming companies average a pay-to-play conversion rate of around 2%, Garena delivered a paying user ratio of 10% in the first quarter.
Second, the company’s SeaMoney digital financial services division is rapidly gaining new customers. Many of the markets Sea targets are underbanked or have limited access to basic financial services. Offer digital/mobile wallets looks to be a quick way to sustainable double-digit sales growth.
But most investors are enamored with Shopee, the company’s e-commerce segment. Shopee has pretty consistently been the most-downloaded retail app in Southeastern Asia, and the company has made significant inroads in Brazil. After seeing $10 billion in gross merchandise value (GMV) cross its network in 2018, Sea’s first-quarter GMV of $17.4 billion puts it on pace for close to $70 billion in annual GMV in 2022.
Cresco Labs
The fourth fantastic growth stock that you’ll regret not scooping up with the Nasdaq plunging into a bear market is U.S. multi-state (MSO) cannabis operator Cresco Labs (CRLBF -2.79%).
There’s no two ways about, marijuana stocks have been a buzzkill since February 2021. Wall Street was jazzed on the idea that a Democrat-led Congress and President Joe Biden would usher in an era of federal weed legalization. With none of this coming to fruition, the buzz around pot stocks died. However, with individual states able to legalize cannabis, there remains more than enough opportunity for companies like Cresco Labs to thrive.
At the end of March, Cresco had 50 operating dispensaries and was primarily focused on expanding its brand(s) in limited-license markets. Choosing markets where dispensary licensing is capped ensures that Cresco won’t be steamrolled by an MSO with deeper pockets.
Furthermore, Cresco is in the midst of a transformative acquisition that’ll see it buy MSO Columbia Care in an all-share deal. When closed, the combined company will have a footprint in 18 states (up from the current 10) and sport north of 130 operating dispensaries.
But arguably the best aspect of Cresco Labs is its industry-leading wholesale operations. Wall Street often dismisses wholesale cannabis because of its weaker margins. However, with Cresco holding a cannabis distribution license in California, it can more than make up for weaker wholesale margins by placing its proprietary pot products into over 575 dispensaries throughout the Golden State.
Alphabet
The fifth and final brilliant growth stock you’ll regret not buying on the Nasdaq bear market dip is none other than FAANG stock Alphabet (GOOGL 2.39%) (GOOG 2.36%). Alphabet is the parent company of search engine Google and streaming platform YouTube.
One of the most-logical reasons to add Alphabet to your portfolio is because of its ultra-dominant internet search segment. According to data from GlobalStats, Google has controlled no less than 91% of worldwide internet search market share over the past two years. As a practical monopoly, Google has little trouble commanding top-tier pricing power for ad placement.
While this foundational segment is a cash cow, it’s the growth initiatives Alphabet has been funneling its cash into that should have investors excited. YouTube, which is easily one of the best acquisitions of all-time, is now the world’s second most-visited social media site (2.48 billion monthly active users). With so many active users, it’s perhaps no surprise that YouTube could hit $30 billion in ad revenue this year — not counting subscription sales!
Additionally, Google Cloud has grown into the global No. 3 in cloud infrastructure service spending. Not only is cloud growth still in its very early innings, but cloud service margins are usually higher than advertising margins. While Cloud is a money-loser for Alphabet at the moment, it could be a serious cash flow driver by mid-decade.
If you need one more good reason to buy Alphabet, consider this: It’s never been cheaper relative to Wall Street’s forward-year earnings forecast.
Nasdaq Bear Market: 5 Brilliant Growth Stocks You’ll Regret Not Buying on the Dip & Latest News Update
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