It’s been a wild four years for Wall Street. Since the beginning of this decade, the three major stock indexes have fluctuated between bear and bull markets for several consecutive years. These swings are especially pronounced for growth-driven stocks. Nasdaq Index (NASDAQ: ^IXIC).
The Nasdaq has lost a third of its value in 2022, making it the worst-performing major index so far. Last year, its 43% gain topped the list. But despite this, the Nasdaq remained the only worst-performing major index. Stock indexes have yet to reach all-time highs. After 2022 bear marketstill 4% below the record closing price in November 2021.
To some investors, this 26-month lull will be viewed as a lost period for growth stocks. But for long-term investors, this represents an opportunity to buy growth stocks, innovators and industry leaders at discount prices.
Here are four compelling growth stocks you’ll regret not buying after the Nasdaq’s bear market decline.
With the Nasdaq Composite still trading below all-time highs, the number one growth stock you’ll regret not buying is a fintech leader PayPal Holdings (NASDAQ: PYPL)Although competition in the digital payments space is increasing, PayPal has the tools it needs to succeed.
First, it’s at the forefront of one of Wall Street’s hottest growth trends. According to a report, annual financial technology revenue is expected to grow sixfold from 2022 to 2030, from US$245 billion to US$1.5 trillion. said researchers at Boston Consulting Group.Even though this estimate is not accurate, it Shows we’re still in the early stages of adopting digital payments.
Although active account growth has stalled in recent quarters, user engagement among PayPal’s active accounts is higher than ever. In less than three years, active accounts have risen from an average of 40.9 transactions during the trailing 12 month (TTM) period. As of September 30, 2023, TTM trading volume was 56.6. Since PayPal is primarily driven by fees, more transactions should equate to higher gross profits.
The hiring of Alex Chriss as CEO is another watershed moment for PayPal.Chris is from IntuitChriss understands the innovation and opportunities PayPal offers small merchants, but is not afraid to make hard choices and reduce the company’s operating expenses to increase profits.
Finally, PayPal stock is actually cheaper than it has ever been as a public company. As of this writing, shares can be purchased for less than 12 times forward earnings. Considering the company’s long-term growth prospects, industry-leading position in finance in technology and aggressive stock repurchase program, this is a very good deal.
The second amazing growth stock you’ll regret not buying after the Nasdaq bear market slump is a furniture company Lovesac (NASDAQ: LOVE)While simply saying “furniture stock” is enough to put some investors to sleep, I can assure you that this small furniture company is nothing like its peers.
The most obvious difference between Lovesac and other furniture companies is its products. While it was originally known for its bean bag chairs (“sacs”), about 90% of its net sales now come from sactionals, modular sofas that can be rearranged in a variety of ways to fit most Living space. Sactionals has a variety of high-margin upgrade options and offers over 200 different cover options. The yarn used in its production is made from recycled plastic water bottles. It is a unique and highly functional product without comparison.
Uniqueness does come with a price and a purpose. While sectionals are more expensive than typical sectionals, Lovesac’s furniture is purposefully targeted at middle- and upper-income consumers. High earners are less likely to change their buying habits during a downturn. A recession or period of above-average inflation.
Another reason why Lovesac easily outshines other furniture companies is its omni-channel sales platform. Although it has brick-and-mortar stores in 40 U.S. states, the company relies on online sales, pop-up showrooms, and partnerships with major retailers to increase brand awareness and visibility. Increase sales. This omnichannel platform reduces overhead and increases Lovesac’s operating margins.
Like PayPal, Lovesac’s share price has historically been cheap. Its shares trade at 11 times forward earnings, which is cheap considering the company can more than triple earnings per share over the next five years.
Following the Nasdaq Composite Bear Market Drop in 2022, the third amazing growth stock you’ll regret not adding to your portfolio is a Chinese e-commerce company Alibaba (NYSE:BABA)Despite recent weak economic data from China, Alibaba’s long-term growth story and valuation cannot be ignored.
The first significant catalyst for Alibaba was the reopening of China’s economy after about three years of strict COVID-19 lockdowns. Although Chinese regulators ended the controversial zero-COVID-19 mitigation strategy in December 2022, it will still take time to resolve ongoing supply chain issues. When China’s economy hits its stride again, Alibaba will undoubtedly benefit.
Investors should also appreciate Alibaba’s leadership in e-commerce. China’s growing middle class means there’s still plenty of room for online retail sales to grow. Alibaba’s Taobao and Tmall together account for 50.8% of the e-commerce market share in one of China’s largest markets for world consumption.
In addition to e-commerce, Alibaba has also made a name for itself in the field of cloud computing. Technology analysis company Canalys estimates that Alibaba’s market share in China’s cloud infrastructure services market will be 34% in the first quarter of 2023. Cloud services have much higher margins and are a faster-growing segment than e-commerce.
In keeping with the theme, Alibaba’s stock price as a public company is cheaper than ever. Excluding restricted cash, Alibaba had more than $78 billion in cash, cash equivalents, short-term investments and equity securities as of the end of September. Supporting its net cash For a company with a history of double-digit growth, exceeding this equation results in a forward P/E ratio of just 5.
The fourth amazing growth stock you’ll regret not buying after the Nasdaq’s bear market drop is none other than the world’s leading coffee chain Starbucks (Nasdaq: SBUX)Even with the headwinds of rising labor costs, Starbucks still has a competitive advantage that makes it a natural acquisition target.
One factor working in Starbucks’ favor is a return to normalcy after the worst of the COVID-19 pandemic. In addition to more than 16,300 stores in the United States, Starbucks also has more than 6,800 stores in China. The reopening story in China is just as important for companies like Starbucks and Alibaba.
Another thing that stands out about Starbucks is the incredible brand loyalty of its customers. In particular, Starbucks ended fiscal 2023 (ending October 1) with 32.6 million rewards members. While the company does offer perks to its Rewards members, such as free rides sometimes, Rewards members tend to spend more per ticket when purchasing food or drinks and are more likely than non-members to use mobile ordering. The latter speeds up the ordering process and reduces queue times at Starbucks stores.
This is also due to Starbucks’ management team adapting to the challenging environment. The pandemic forced the company to rethink its drive-thru lanes. Starbucks has overhauled its order board, beefed up high-margin food offerings and introduced video to make the drive-thru experience more personal.
Finally, from a valuation perspective, Starbucks makes a lot of sense. Its forward price-to-earnings ratio of 19 is the lowest in at least a decade and is inconsistent with Wall Street’s consensus annualized earnings growth forecasts. It will grow by nearly 17% in the next five years.
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Sean Williams The Motley Fool holds positions in Lovesac and PayPal. The Motley Fool owns and recommends Intuit, PayPal and Starbucks. The Motley Fool recommends Alibaba Group and Lovesac and recommends the following options: Short March 2024 $67.50 calls on PayPal. Motley Fool holds disclosure policy.
4 Amazing Growth Stocks You’ll Regret Not Buying After Nasdaq Bear Market Drop Originally published by The Motley Fool