There is no doubt that investors' resolve has been tested numerous times since this decade began. Wall Street's three main stock indexes have oscillated between bullish and bear markets on a couple of occasions over the last four years, with the focus focused on growth Nasdaq Composite (^IXIC 0.19%) spinning more.
Through the closing bell on December 20, the Nasdaq Composite was up 41% year-to-date and nearly 45% from its 2022 bear market closing low of 10,213.29 on December 28, 2022. However, the Nasdaq is still 8% below its record. -closing maximum, which was set in November 2021.
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Short-term traders are likely to view the last 25 months as a wasted period for growth stocks. But for patient investors who rely on time as an ally, the Nasdaq Composite's declines are nothing more than red carpet opportunities to attack big companies at a discount.
What follows are four colossal growth stocks you'll regret not buying in the wake of the Nasdaq bear market crash.
Alphabet
The first industry giant that is asking to be bought with the Nasdaq Composite still significantly below its all-time closing high is Alphabet (GOOGLE 0.76%) (GOOG 0.65%)the parent company of the popular Internet search engine Google, the streaming platform YouTube and the autonomous vehicle company Waymo, among other companies.
The best argument I can muster for why Alphabet isn't hitting its all-time high right now is because investors are worried about a recession in 2024. A couple of economic data and prediction tools indicate a slowdown is likely. in the new year. Given that Alphabet generated 78% of its sales from advertising during the quarter ended in September, there is a very real chance that the weak economy will weaken advertising spending and some of its advertising pricing power (at least temporarily ).
But the American economy is a two-way street that greatly favors optimists. While the typical recession lasts less than a year, most periods of economic growth since the end of World War II have lasted several years, if not a full decade. More often than not, Alphabet enjoys incredible advertising pricing power.
Besides, Google is a virtual monopoly in Internet searches. It performed 91.54% of global searches in November, according to GlobalStats, and has been responsible for at least 90% of global searches monthly for the past eight years. This stranglehold on Alphabet's core operating segment makes it a logical choice for advertisers looking to target potential customers.
Cloud infrastructure service provider Google Cloud is also not far behind. Enterprise cloud spending can maintain a double-digit growth rate for a long time. Besides, Google Cloud has obtained three consecutive quarters of operating profit subsequent years of losses.
Among those with extensive property FAANG Stocks, Alphabet is one of the cheapest. The stock can currently be purchased for around 14 times forward-year cash flow, which is well below the 18 times cash flow it averaged over the previous five years.
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Ali Baba
A second colossal growth stock you'll regret not adding to your portfolio following the Nasdaq bear market crash is based in China. e-commerce giant Ali Baba (Slime -1.28%).
Let me say at the outset that Chinese stocks carry additional regulatory and supervisory risks. For example, Alibaba was fined a record $2.75 billion in 2021 by Chinese regulators for its antitrust practices. There was also a period in 2022 when Chinese stocks risked being delisted from major US exchanges if Chinese companies did not allow US regulators access to three years of audited financial statements. While these issues are now in the rearview mirror, they are a reminder of why Chinese stocks typically have lower price-to-earnings (P/E) ratios than U.S. stocks.
However, there are many reasons to be excited about Alibaba's future. For starters, China is still in the process of recovering from the COVID-19 pandemic. The country's strict and unpredictable lockdowns wreaked havoc on supply chains. Since China's e-commerce industry is still in its early stages of growth, There is a long runway for growth ahead of Alibaba as the Chinese economy regains its footing.
In addition to the above, Alibaba dominates the e-commerce space. Data from the International Trade Administration finds that Alibaba's online shopping sites, Taobao and Tmall, together account for nearly 51% of China's e-commerce share.
Don't Overlook Alibaba's Leading Cloud Services Segment, any. According to Canalys, Alibaba accounted for more than a third of spending on cloud infrastructure services in China during the quarter ending in March. This is another opportunity for sustained double-digit growth.
Alibaba shares can be bought right now for 7 times forward-year earnings, or closer to 5 times forward-year earnings if you cash out its more than $77 billion in net cash, cash equivalents, investments at short term and variable income securities. That's very cheap for an industry leader!
Fiverr International
The Third Tremendous Growth Stock You'll Regret Not Buying After the Nasdaq Bear Market Crash is online services market Fiverr International (FVRR 0.50%).
Fiverr stock has retreated more than 90% from its all-time high, which was set during a period of investment euphoria that occurred in 2021. The company's valuation at the time, along with the aforementioned outlook for further economic growth weak, have worked together to significantly lower Fiverr's shares. But after a more than two-year bearish trend, Fiverr stock looks like a bargain.
A factor that clearly works in its favor is the permanent change we have witnessed in the labor market. Although some workers have returned to the office with the worst of the COVID-19 pandemic now in the rearview mirror, more people than ever have chosen to remain remote. This is music to the ears of a freelancer-powered platform like Fiverr that connects mobile workers with companies that need their services.
Another reason Fiverr should have no problem standing out is the company's unique online services marketplace. While most of their competitors allow freelancers to market their tasks by the hour, Fiverr freelancers price their jobs as a total cost. The pricing transparency offered on the Fiverr platform is unparalleled and has likely played a key role in the continued increase in spend per buyer.
But the main selling point of this fast-growing small-cap stock is its take rateโthat is, the percentage of each deal traded on its platform, including fees, that you get to keep. Although the acceptance rate of its main competitors is between medium and high, Fiverr's take rate in the quarter ended September expanded to 31.3%. Fiverr continually makes more profit from each deal without scaring away its freelancers or buyers.
TO Forward Price-Earnings (P/E) Ratio of 12 is a phenomenal deal for a company capable of doubling its adjusted earnings per share (EPS) many times over in the coming years.
PayPal Holdings
The fourth colossal growth stock you'll regret not buying after the Nasdaq bear market crash is none other than leader in financial technology PayPal Holdings (PYPL -0.35%).
Like Fiverr, PayPal stock has been hammered since hitting an all-time high in 2021. The stock fell more than 80% as fears of a recession grew and the prevailing U.S. inflation rate soared.
The latter is particularly worrying for digital payment networks. Above-average inflation has the potential to reduce the discretionary purchasing power of low-income people. It would be bad news for payment platforms like PayPal.
Despite these concerns, the total payment volume (POS) passing through PayPal's networks has continued to grow by a low double-digit percentage on a neutral monetary basis. With digital payments adoption still in its early stages, it's an encouraging sign that PayPal's year-over-year POS growth could once again approach 20% during long periods of economic expansion.
PayPal User Engagement Data Is Even More Encouraging than its constant growth in POS. As the curtain closed on 2020, active PayPal accounts averaged 40.9 transactions over the trailing 12-month (TTM) period. But as of September 30, 2023, the company's active accounts now have an average of 56.6 transactions during the TTM. Since PayPal generates most of its revenue from fees, consistent growth in usage by its active customers is a recipe for higher gross profit.
At the opposite end of the spectrum, newly appointed CEO Alex Chriss aims to eradicate operational inefficiencies and increase shareholder value. PayPal aims to save at least $1.3 billion in costs in 2023 and is on track to buy back about $5 billion of its common stock this year. This should lift the company's operating margin and increase its EPS.
A forward P/E ratio of 11 for a company that Wall Street expects to grow its EPS by 18% on an annualized basis over the next five years is too cheap to pass up.
