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There’s never a dull moment when investing on Wall Street. Over the past four years, major stock indexes have bounced back and forth between bear markets and bull markets several times. Nasdaq Composite (^IXIC 1.74%) Withstands the most intense shaking.
In 2022, the Nasdaq Composite Index lost 33%, dragging the entire market lower. In 2023, it recorded a blistering 43% increase rate, leading the major indexes. But despite this massive post-2022 bear market rally, the Nasdaq is the only one of the three major indexes that has yet to hit a new all-time high. Since the closing price on January 31, 2024, it has remained at a level nearly 6% below the highest closing price in November 2021.
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For short-term traders, this growth stock’s underperformance will hurt. But for long-term investors, the notable decline is a blessing in disguise. After all, every correction and bear market throughout history has been fully recovered by a bull market rally. The Nasdaq Composite Index is nearly 6% below its all-time high, which simply means there may still be bargains to be found.
Here are four growth stocks to watch that you will regret if you don’t buy them after the NASDAQ bear market decline.
Etsy
The first surprising growth stock you should blame yourself for not adding to your portfolio, even though the Nasdaq is still below all-time highs, is specialty e-commerce companies Etsy (ETSY 4.24%). Despite certain predictive indicators warning that a recession is likely in 2024, Etsy’s competitive advantages are strong enough to meaningfully enrich patient shareholders over the long term.
Etsy’s first differentiator is its operating model. When most people think about e-commerce, Amazon It probably comes to mind. According to his 2022 report for Insider Intelligence, Amazon accounts for his nearly 40% share of U.S. online retail sales.
However, Amazon’s operating model is based on volume and has little to do with personalization of products and services. Etsy’s e-commerce platform relies entirely on small sellers and independent contractors willing to customize and personalize their orders. No matter how big Amazon gets, it will never directly compete with what Etsy has to offer. In fact, no other company comes close to the level of personalization that Etsy offers at scale.
Many of Etsy’s key performance metrics improved dramatically over the next four years (before the COVID-19 pandemic began). Notably, his subscriber count tripled to 7.1 million. A “recurring buyer” is a buyer who has made purchases totaling $200 or more in the past year. The growing number of frequent buyers allows Etsy to charge higher fees to its seller base.
We encourage current and prospective investors not to overlook Etsy’s innovative capabilities. The company is actively investing in improving data analytics for its merchants, introducing video as a way to keep shoppers engaged and leveraging artificial intelligence (AI) to improve purchase rates. .
Etsy’s expected annualized earnings growth rate of 16% over the next five years makes it a stock to own.
Pubmatic
The second most eye-catching growth stock you’ll regret not buying after the Nasdaq bear market stall is an ad tech company. Pubmatic (PUBM 1.47%). Although the advertising environment has been challenging this past year, a number of macro and company-specific catalysts are working in PubMatic’s favor.
The first thing to note about advertising-driven businesses is that time is on your side. Although recessions are a normal and inevitable part of the economic cycle, they have never lasted more than 18 months since 1945. In comparison, economic expansions typically last multiple years. Advertising-driven businesses often enjoy significant pricing power during long-term expansion.
What makes PubMatic such an attractive investment is its position in the advertising industry’s fastest growing channel: digital advertising.
Specifically, PubMatic’s cloud-based programmatic advertising platform helps publishers sell digital display space. It is primarily focused on video, mobile and connected TV programmatic advertising, with the latter driving the strongest growth. It’s no secret that advertising dollars are steadily shifting from billboards and print to digital channels. This is especially true for political advertising during the 2024 election period.
In addition to being in the right place at the right time, PubMatic’s management team also made the (in hindsight) genius decision to design and build their own cloud-based infrastructure. Not having to pay fees to third parties is a clear benefit as the company’s revenue continues to grow. Ultimately, this decision will result in PubMatic’s operating margins easily outpacing most of its peers.
Finally, PubMatic is located in a veritable goldmine of capital. The company ended September with no debt and $171.4 million in cash, cash equivalents, and marketable securities. It is ideally positioned to grow in any economic climate.
Image source: Getty Images.
jazz pharmaceutical
Biotech stocks are the third bright growth stock you’ll regret not buying on the Nasdaq Composite index as it looks to recover from the 2022 bear market jazz pharmaceutical (jazz -0.63%). Generic competition is always a concern for drug developers, but Jazz’s innovation and cash flow security is a relief.
The first thing to know about Jazz is that it primarily targets orphans or patients with rare diseases. There are definitely risks involved in developing treatments for patients who previously had few or no treatment options. On the other hand, it’s very rewarding when jazz is successful. In addition to helping patients live a higher quality of life, Jazz typically faces minimal competition in some indications and can offer high prices without major pushback from insurance companies. You can charge the list price.
Jazz Pharmaceuticals’ superstar drug has long been its sleep disorder treatment Xyrem. But the most important thing the company did was develop next-generation treatments using its blockbuster drug.
Xywav has 92% less sodium than Xyrem, making it a smart choice for patients with high cardiovascular risk factors. Additionally, the approval of Xywav allowed Jazz to transition users to the new drug, thereby avoiding concerns about competition from generic Xyrem drugs. In other words, Jazz’s continued innovation is helping it secure cash flow for a long time to come.
Equally interesting is what’s happening beyond Jazz’s oxybate franchises of Xywav and Xyrem. Label expansion opportunities for the cannabidiol-based drug Epidiolex could ultimately push the drug’s peak annual sales past his $1 billion mark. Similarly, cancer drugs are on track to take his 2023 sales to over $1 billion (as of this writing, the Jazz have not yet reported fourth-quarter operating results) ). The company plans to announce up to five late-stage clinical results by the end of 2024, including for its investigational oncology drug.
Jazz is valued at about six times last year’s profits, but its net income is expected to grow by an average of 10% a year over the next five years. That’s quite a bargain!
Baidu
The fourth hot growth stock you’ll regret not buying in the wake of the Nasdaq bear market drop is none other than the company behind China’s leading internet search engine. Baidu (Bidu -2.09%). Despite China’s weaker-than-expected economic growth data, Baidu is well-positioned to make long-term shareholders richer.
One of the main factors working in Baidu’s favor is the restart of China’s economy. After three years of strict coronavirus lockdowns, Chinese regulators shelved the controversial “zero coronavirus” strategy in December 2022. Although it will take time to resolve long-standing supply chain constraints, this is an important step in restoring strong growth rates. We aim to become the world’s second-largest economy in terms of gross domestic product.
Baidu’s basic business segment remains the Internet search engine. According to data provided by GlobalStats, Baidu accounted for 61% of China’s internet search share in December. Being the clear leader in Internet search gives Baidu extraordinary advertising pricing power.
But there’s more to love about Baidu than just the cash cow of a search engine. For example, the company’s large AI investments could lead to continued double-digit growth rates in non-online marketing departments.
According to estimates by technology analysis firm Canalys as of the end of the first quarter of 2023, Baidu’s AI Cloud has become the fourth largest cloud infrastructure service provider in China. Apollo Go is the world’s leading provider of autonomous ride-hailing services based on total ridership since its inception. AI is the driving force behind Baidu’s sustainable long-term growth.
Evaluation also has great meaning. Baidu ended September with more than $26 billion in cash, cash equivalents and short-term investments, but is currently valued at less than 10 times last year’s profits. Even considering the regulatory uncertainty associated with Chinese stocks, this is an incredible deal.
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