It’s been an ugly year for Wall Street. This has largely followed since hitting an all-time closing high in the first week of January S&P500 has fallen by up to 24%. In fact, it posted its worst first-half return in more than half a century.
But it was even harder when you hooked your car to the growth stocks that propelled the stock Nasdaq Composite (^IXIC -1.80%) to a record high. Since mid-November, we’ve seen the Nasdaq lose as much as 34% of its value, falling firmly into the bear market.
On the one hand, bear markets can be frightening given the unpredictability and speed of moves down. But on the flip side, bear markets have presented a surefire opportunity to buy innovative companies at a discount. After all, every significant drop in major US indices, including the Nasdaq Composite, was eventually (and more) offset by a bullish rally.
With that in mind, here are five electrifying growth stocks you’ll regret if you didn’t buy on Nasdaq’s bearish plunge.
The first sensational growth stock investors shouldn’t miss during Nasdaq’s bear market decline is the China-based electric vehicle (EV) maker. no (NOK -3.87%). Despite supply chain issues and China’s zero-COVID-19 strategy hurting Nio’s near-term production, the future looks as bright as ever.
With most developed countries focused on reducing their carbon footprint, Nio is perfectly positioned to benefit from a vehicle replacement cycle that should last several decades for consumers and businesses. Nio gets an extra boost by being based in the #1 car market in the world. By 2035, almost half of all new vehicles sold in China will be powered by alternative energy.
But it’s Nio’s innovation that really helps him stand out. The company introduced at least one new vehicle every year and managed to deliver over 100,000 electric vehicles in the last 12 months (until June 2022). Management has previously opined that without supply chain constraints, the company has the potential to ramp up to 50,000 electric vehicles produced per month within 12 months.
We also see innovations out of the box. Two years ago, Nio introduced its Battery-as-a-Service subscription, which allows its electric vehicle buyers to charge, swap, and upgrade their batteries at a later date. Registration also lowers the initial purchase price of a Nio EV. In return, Nio generates high-margin recurring subscription revenue and retains the loyalty of its early buyers.
A second phenomenal growth stock that you’ll regret not catching during the Nasdaq bear market plunge is the online services marketplace Fiverr International (FVRR 2.81%). Although economic data continues to point to short-term weakness in the US economy, Fiverr has clear competitive advantages that make it a no-brainer.
The biggest catalyst Fiverr has is its differentiated freelance marketplace. While most competing online services marketplaces list jobs on an hourly basis, the freelancers who use Fiverr market their jobs as a bundle. Providing an all-encompassing price for a task has greatly improved cost transparency and encouraged buyers to spend more and more per transaction over time. Even as economic uncertainty has increased, spending per buyer on Fiverr has continued to increase.
Additionally, Fiverr International’s adoption rate is unmatched in the online services markets arena. “Take Rate” describes the amount of money Fiverr is allowed to keep from each deal negotiated on its platform. While most of its peers have take rates in the mid-teens, Fiverr reported a 29.8% take rate in the second quarter.
With the U.S. economy spending significantly more time expanding than contracting, long-term betting on remote work growth seems like a smart move.
Palo Alto Networks
The third electrifying growth stock you’ll regret not buying right away while the Nasdaq plummets is a cybersecurity company Palo Alto Networks (PANW -2.77%). While near-term economic weakness has hit virtually all tech stocks, Palo Alto offers sustained double-digit growth for a long time to come.
The beauty of cybersecurity is that it has evolved into a basic on-demand service in every economic environment. No matter how bad the US economy or stock market is doing, hackers and robots don’t take the time to try to steal company and customer data. This provides Palo Alto Networks and many of its competitors with predictable cash flow from operations.
What makes Palo Alto so fascinating is the company’s ongoing transformation that emphasizes cloud-based subscriptions. Over the past five years, the company’s total revenue from subscriptions and support has grown from about 60% to 75%. This shift is important because cloud-based subscriptions typically generate higher margins than physical firewall products. Additionally, relying on subscriptions should minimize customer churn and reduce revenue clusters associated with physical product replacement cycles.
Palo Alto Networks has also done a great job making bolt-on acquisitions to expand its service ecosystem and reach new customers.
A fourth standout growth stock not to add during the Nasdaq bear market decline is US cannabis multi-state operator (MSO). Real cannabis (TCNNF -6.38%). While marijuana reform hasn’t caught on on Capitol Hill, state-level legalization is providing plenty of fuel for Trulieve’s success.
Staying on topic for this list – differentiation – what has really allowed Trulieve Cannabis to stand out is its expansion strategy. While most MSOs have planted their proverbial flag in as many legalized markets as possible, until last year, Trulieve focused almost exclusively on Florida’s legal medical marijuana market. The company has 174 pharmacies as of September 6, 2022, including 120 in Florida. These 120 pharmacies represent more than a quarter of all open retail locations in the Sunshine State.
By saturating the Florida market, Trulieve has been able to keep its marketing costs down while also building its brands and gaining a loyal following. With minimal marketing spend, Trulieve has reported 18 consecutive quarters (4 1/2 years) of adjusted earnings. Keep in mind that most MSOs are not yet profitable.
Trulieve also caused a stir when it acquired Harvest Health & Recreation in 2021. The acquisition of Harvest Health immediately made Trulieve the dominant player in Arizona, which legalized recreational cannabis in November 2020 and began retail sales in January 2021. Trulieve should have no problem compounding its success in new markets.
The fifth electrifying growth stock you’ll regret if you didn’t buy in the Nasdaq bear market crash is fintech stocks PayPal Stocks (PYPL -0.79%). Though historically high inflation is ravaging the bottom decile of earners, PayPal’s key performance metrics suggest the company is as strong as ever.
For example, US gross domestic product declined in each of the first two quarters of 2022, signaling something of a “technical recession,” although one hasn’t been officially declared. Despite this economic slowdown, total payment volume (TPV) passing through PayPal’s platforms grew 13% year over year in the second quarter on a constant currency basis. Since expansions last much longer than recessions, just imagine how much TPV could expand in the years to come.
More importantly for PayPal, it keeps its users engaged. Through June, active accounts averaged nearly 49 transactions over the last 12 months. In comparison, active accounts at the end of 2020 have completed just under 41 transactions over the last 12 months. Since PayPal’s operating model is primarily based on fees, an increasing number of transactions through active accounts bodes well for gross profit.
As I mentioned earlier, innovation is key at PayPal as well. The company’s acquisition of paidy service Buy Now, Pay Later (BNPL) last year is a perfect example. Paidy is a leading BNPL service in Japan, offering consumers more payment options and additional opportunities for merchants to grow their business.
Basically, PayPal is the cheapest it’s ever been as a public company — 19 times Wall Street’s earnings forecast for the coming year — making it an absolute buy.