Nasdaq bear market: 5 brilliant growth stocks you’ll regret not buying on the downside

This year has reminded Wall Street and the investing community that stocks do not move in a straight line. The first six months of 2022 saw the S&P500 deliver its worst performance in 52 years. Meanwhile, the propelled growth Nasdaq Compound (^IXIC 2.09%) plunged as much as 34% from its closing high set in November 2021. You will notice by the magnitude of this decline that the widely followed Nasdaq has firmly entrenched itself in a bear market.

While bear market declines can be confusing, unpredictable, and test investors’ resolve, they are a perfect part of the investment cycle and the perfect time for long-term investors to put their money to work. After all, every double-digit percentage decline in major US indexes, including the Nasdaq Composite, was eventually recovered (and some) by a bull market rally.

Image source: Getty Images.

The current bear market is a particularly good time to buy growth stocks at a deep discount. Below are five brilliant growth stocks you’ll regret not buying during the Nasdaq bear market decline.

PayPal Credits

The first phenomenal growth stock that investors are likely to flip over if they miss this Nasdaq bear market drop is a fintech specialist PayPal Credits (PYPL 2.01%). Although historically high inflation is currently disproportionately affecting low-income people, which could reduce activity on PayPal’s digital payment platforms, the company’s long-term growth potential remains unchanged.

PayPal is at the center of the digital payment revolution. According to a report by The Insight Partners, the digital payment industry is expected to grow at a compound annual rate of more than 15% through 2028. PayPal has the potential to blow those numbers. Total payment volume on its platform grew 13% at constant exchange rates during a second quarter that saw inflation hit a four-decade high and US gross domestic product fell 0.9%. Imagine what PayPal can do during long periods of expansion in the US economy.

What’s really impressive is the engagement that PayPal has been able to get from its active users. At the end of 2020, active users performed an average of 40.9 transactions in the last 12 months (ttm) period. As of June 30, 2022, this amounted to an average of 48.7 transactions per active ttm user. Since PayPal is primarily a fee-based business, increasing engagement should lead to steadily increasing profits.

With many parts of the world still underbanked, the addressable market for digital payments is huge.

Intuitive surgery

A second stellar growth stock that investors will regret not buying during the Nasdaq bear market decline is the robotic-assisted surgical systems company Intuitive surgery (ISRG 1.00%). Despite the COVID-19 pandemic pushing back some selective surgeries, the future is bright for this high-growth stock.

For starters, health values ​​are generally defensive. No matter how the US economy and stock market perform, there will always be demand for prescription drugs, medical devices and healthcare services. Although some procedures are elective, Intuitive Surgical is expected to have a fairly high demand floor.

More importantly, this is a company that absolutely dominates the robot-assisted surgery industry. In just over two decades, it has placed 7,135 of its da Vinci surgical systems around the world. This is far more than any of its competitors. Given the price of these systems and the training of surgeons in their use, buyers tend to remain customers for a long time.

But the best thing about Intuitive Surgical is its razor and blade operating model. Throughout the 2000s, most of the company’s revenue came from the sale of its expensive da Vinci (the “razor”) systems. Unfortunately, these are complex machines that are expensive to build, meaning the associated margins weren’t the best. Over time, the sale of instruments with each procedure and the maintenance of its da Vinci systems (the “blades”) became the lion’s share of sales. These are much higher margin segments.

A miniature orange basket and a small pyramid of mini boxes on top of a tablet and an open laptop.

Image source: Getty Images.

Sea Limited

The third bright growth stock just begging to be bought by opportunistic investors during this Nasdaq bear market decline 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.

At the moment, the company’s digital entertainment segment, known as Garena, is the only one of the three to generate positive earnings before interest, taxes, depreciation and amortization (EBITDA). In particular, the worldwide hit game Free fire continues to be Sea’s big winner. While most game companies average a pay-to-play conversion rate of around 2%, Garena saw a 10% paid user rate in the first quarter.

Second, the company’s SeaMoney digital financial services division is rapidly gaining new customers. Many target markets in the sea are underbanked or have limited access to basic financial services. Offering digital/mobile wallets seems like a quick way to achieve sustainable double-digit sales growth.

But most investors are drawn to Shopee, the company’s e-commerce segment. Shopee has consistently been the most downloaded retail app in Southeast Asia, and the company has made significant inroads in Brazil. After seeing $10 billion in gross market value (GMV) flow through its network in 2018, Sea’s Q1 GMV of $17.4 billion puts it on track for nearly $70 billion in annual GMV. in 2022.

Cresco Laboratories

The fourth fantastic growth stock you’ll regret not recovering with the Nasdaq plunging into a bear market is the US Multistate Cannabis Operator (MSO) Cresco Laboratories (CRLBF -2.79%).

There’s no two ways marijuana stocks have been buzzing since February 2021. Wall Street has been hyped that a Democrat-led Congress and President Joe Biden would usher in an era of federal legalization of weeds. With none of that 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.

By the end of March, Cresco had 50 operating dispensaries and was primarily focused on expanding its brand(s) into limited license markets. Choosing markets where dispensary licenses are capped ensures that Cresco won’t be crushed by a deeper-pocketed MSO.

Additionally, Cresco is in the midst of a transformative acquisition that will see it buy MSO Care British Columbia under a fully shared agreement. When closed, the combined company will have a footprint in 18 states (up from 10 currently) and the sport north of 130 operating dispensaries.

But arguably the best part of Cresco Labs is its industry-leading wholesale operations. Wall Street often rejects wholesale cannabis because of its lower margins. However, with Cresco holding a cannabis distribution license in California, it can more than compensate for low wholesale margins by placing its proprietary pot products in more than 575 dispensaries across the Golden State.

Alphabet

The fifth and final bright growth stock you’ll regret not buying during the Nasdaq bear market decline is none other than FAANG stock. Alphabet (GOOGL 2.39%) (GOOG 2.36%). Alphabet is the parent company of the Google search engine and YouTube streaming platform.

One of the most logical reasons to add Alphabet to your portfolio is its ultra-dominant internet search segment. According to data from GlobalStats, Google has controlled no less than 91% of the global Internet search market share over the past two years. As a convenient monopoly, Google has no trouble imposing industry-leading pricing power for ad placement.

While this fundamental segment is a cash cow, it’s the growth initiatives that Alphabet has funneled its cash into that should excite investors. YouTube, easily one of the best acquisitions of all time, is now the second most visited social media site in the world (2.48 billion monthly active users). With so many active users, it’s perhaps no surprise that YouTube can hit $30 billion in ad revenue this year, not including subscription sales!

Additionally, Google Cloud has become the #3 global cloud infrastructure services spender. Not only is cloud growth still in its infancy, cloud service margins are generally higher than advertising margins. While Cloud is a money loser for Alphabet right now, he could be a serious cash flow driver by the middle of the decade.

If you need another good reason to buy Alphabet, consider this: it’s never been cheaper than Wall Street’s earnings forecast for the year.

About Troy McMiller

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