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It’s truly incredible how much change a year can bring to Wall Street. In 2022, we will drive growth. Nasdaq Composite (^IXIC 0.02%) It lost 33% of its value during the bear market. However, growth stocks rebounded strongly in 2023, with the Nasdaq Composite Index rising 43%.
Despite this monumental rise for the Nasdaq, it remains about 7% below its all-time high set more than two years ago. While short-term traders tend to view a nearly 7% decline over 26 months as a disappointment, long-term investors wisely view this decline as an opportunity to establish or add to positions in high-quality growth stocks. with a perceived discount.
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Here are four growth stocks to watch that you’ll regret not buying following the Nasdaq bear market decline.
Nioh
The first abnormal growth stock you’ll be kicking yourself for not buying while the Nasdaq Composite Index is still well below its all-time high is a China-based electric vehicle (EV) maker. Nioh (NIO -3.11%). Although EV demand has weakened slightly in the U.S., Nio appears well-positioned to ramp up production and seize valuable market share in the world’s largest auto market, namely China.
The biggest challenge Nio has been grappling with is China’s strict approach to mitigating the spread of the coronavirus. Until December 2022, the country’s “zero-corona” strategy resulted in unpredictable lockdowns and serious problems in supply chains. Chinese regulators abandoned this controversial policy a little more than a year ago, leaving Nio free to focus on innovation and worry a little less about supply chain constraints. As a result, EV production increased by nearly 31% last year to more than 160,000 units.
Beyond just macro factors, Nio has benefited from the introduction of the NT 2.0 platform. NT 2.0 offers improved advanced driver assistance systems (ADAS), driving demand for second-generation SUVs. A truck or his SUV almost always produces a better auto gross profit than a sedan. The recovery in Nio’s SUV shipments is a result of the ADAS technology upgrade with NT 2.0.
Thinking outside the box won’t hurt Nio’s long-term growth prospects either. Starting in August 2020, Nio began offering Battery-as-a-Service subscriptions (BaaS). BaaS provides a way for Nio to collect high-margin, sustainable revenue and, most importantly, keep early buyers loyal to the brand.
Even though Nio is several years away from reaching recurring profit, it had $6.2 billion in cash, cash equivalents, and various short- and long-term investments at the end of September. The company also secured a $2.2 billion equity investment from CYVN Investments just before the end of 2023. We have enough capital to expand production and continue to innovate.
NextEra Energy
The second notable growth stock you’ll regret not adding to your portfolio after the Nasdaq bear market crash in 2022 is power companies. NextEra Energy (Hey 0.53%). Utilities are typically slow-growing, dividend-focused businesses, but NextEra has delivered a compound adjusted earnings growth rate of just under 10% since 2012. This makes NextEra a growth stock in a mature sector.
NextEra’s biggest headwind is the rapid rise in U.S. Treasury yields. Income investors buy utilities for their yield and low volatility. But by 2023, yields on short-term government bonds exceeded 5%, leaving companies like NextEra Energy with a chopped-up liver. With the country’s central bank expecting three rate cuts in 2024, utilities appear poised for a year of recovery.
The catalyst that has fueled NextEra’s impressive growth rate for more than a decade is its renewable energy portfolio. Of the company’s 70 GW of capacity, almost half, or 34 gigawatts (GW), comes from renewable energy. In addition, our 23 GW of wind power capacity and 6 GW of solar power capacity are both among the highest of any power company in the world. Investing in clean energy projects is expensive, but the return is a significant reduction in the cost of electricity generation.
Despite rising interest rates, NextEra Energy’s management has no intention of taking its foot off the gas. The company expects to have 32.7 GW to 41.8 GW of renewable projects in operation from the beginning of 2023 until 2026. This is a driving force for maintaining superior growth rates in an industry typically known for low-single-digit adjusted earnings growth rates.
Another thing investors should remember about power companies is that they provide basic needs services. If you own or rent a home, it’s very likely that you will need electricity to power your appliances and heating and cooling systems. This means electricity demand does not change significantly from year to year, leading to predictability in NextEra’s operating cash flows.
Image source: Getty Images.
jazz pharmaceutical
The third sensational growth stock you’ll regret not buying after the Nasdaq bear market decline is specialty drug development company jazz pharmaceutical (jazz -1.21%). Sales exclusivity concerns have weighed on Jazz’s stock price in recent years, but the company’s product portfolio and pipeline appear poised for growth.
Before digging into the portfolio details, it’s important to note that one of Jazz Pharmaceuticals’ biggest competitive advantages is its focus on rare diseases. Targeting indications in small patient groups can be risky, but it also has many rewards if successful. Approved orphan drugs are less likely to have their list price pushed back by insurance companies and are less likely to hinder competition.
Jazz’s mainstay remains its oxybate franchise (Xyrem and Xywav), which focuses on patients with sleep disorders such as narcolepsy. The smart move Jazz made was to develop his Xywav, the next generation version of his Xyrem with 92% less sodium. Not only will this make the company’s best-selling treatment safer for patients with high cardiovascular risk factors, but it will also make up most of the company’s cash flow for years to come as Xyrem users migrate to his Xywav. will help ensure that.
Another reason why growth investors can buy Jazz Pharmaceuticals stock with confidence is the company’s rapid growth in oncology, led by its acute lymphoblastic leukemia drug Ryleyse. . The goal of anti-cancer drug sales to reach $1 billion in 2023 appears to be on track (Jazz has not released full-year operating results for 2023 at this time), and this year has seen several important milestones. A later stage announcement is expected.
Finally, Jazz Pharmaceuticals is a particularly cheap growth stock. Despite strengthening its oxybate franchise’s cash flow and achieving double-digit sales growth for its cancer drugs, Jazz stock can be purchased for just six times prior-year earnings. You’d be hard-pressed to find a cheaper publicly traded drug developer.
sea limited
The fourth growth stock you’ll regret not buying after the Nasdaq bear market decline is based in Singapore sea limited (S.E. -3.29%). While Sea’s latest quarterly report leaves a lot to be desired, the company’s three fast-paced business segments offer a lot to look forward to for long-term investors.
Sea’s longest-running positive earnings before interest, tax, depreciation, and amortization (EBITDA) division is its Digital Entertainment division (also known as Garena). Despite the decline in the proportion of paid mobile users following the worst of the pandemic, Garena recorded 40.5 million paid users in the third quarter, representing 7.5% of its active user base. Masu. The pay-to-play ratio of 7.5% is many times higher than the industry average for mobile games.
There’s also a lot of excitement around SeaMoney, the company’s digital financial services division. As Sea focuses on the underbanked emerging markets of Southeast Asia, offering loans and other digital financial solutions could become a serious cash flow driver by the second half of the decade.
But it’s the e-commerce division known as Shopee that (unsurprisingly) generates most of the buzz for Sea. With Southeast Asia’s rapidly growing middle class, Shopee should be able to maintain double-digit growth rates for a long time to come. Throughout 2018, Shopee recorded a gross merchandise value (GMV) of $10 billion on its platform. As of September 30, 2023, the company’s annual gross merchandise value was just over $80 billion.
The final piece of the puzzle is that Sea holds approximately $7.9 billion in cash, cash equivalents, short-term investments, and restricted cash. This currently represents more than a third of Sea Limited’s market capitalization and represents a healthy floor for the company’s stock.
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