Bargains can still be found, even as the innovation-driven Nasdaq Composite hits a new all-time high.
Wall Street has been a breeding ground for volatility since the beginning of this decade. Although it has been an exceptional start to 2024, it was preceded by four consecutive years in which major stock indices traded in bear and bull markets. No widely followed index has been more volatile than the growth-focused one. Nasdaq Composite (^IXIC -0.07%).
In 2022, the index became trapped in a bear market and lost 33% of its value as the year came to an end. But since the opening bell rang in 2023, this innovation-driven index is up a fantastic 60% and hit a new record high. There is absolutely no doubt that the Nasdaq is in a bull market - although quite new.
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Even though the Nasdaq Composite hit a new all-time high on May 15, the usual bargains among growth stocks can can still be found. Opportunistic investors simply have to be willing to look for incredible deals.
What follows are four unparalleled growth stocks that you may regret not buying in the new Nasdaq bull market.
Metaplatforms
The first unrivaled growth stock that is begging to be bought with the relatively young Nasdaq bull market stretching its legs is social media leader Metaplatforms (GOAL -0.28%). Although Meta's forecast for higher capital spending recently spooked Wall Street, it has a couple of well-defined competitive advantages that make it easy to ignore this near-term headwind.
To start with the obvious, Meta Platforms is the parent company for many of the most visited social sites worldwide.. It owns Facebook (the most visited social site), along with Instagram, WhatsApp, Threads and Facebook Messenger.
Collectively, its family of apps attracted 3.24 billion daily active users during the first quarter and nearly 4 billion monthly active users in the quarter ended in December. Advertisers will struggle to find a social media platform with a broader reach.
In addition to the above, Meta benefits from disproportionately long periods of economic growth. Although advertising is highly cyclical and recessions are an inevitable aspect of the business cycle, periods of expansion last much longer than contractions. In simpler terms, long-term investors in advertising-driven companies (Meta generates nearly 98% of its sales from ads) typically receive generous rewards.
Another reason current and potential Meta investors shouldn't worry too much about CEO Mark Zuckerberg's desire to spend on artificial intelligence (AI), the metaverse, and virtual/augmented reality devices is the phenomenal war chest and cash flow. The company ended March with more than $58 billion in cash, cash equivalents and marketable securities, and generated about $19.2 billion in net cash from its operations. As a source of income, Zuckerberg's company has the luxury of investing for the future, even if the fruits of those investments won't be seen for years.
Finally, Meta Platforms stock remains a phenomenal bargain. The stock can be purchased right now for 13 times consensus 2025 cash flow, which represents a 12% discount to its average cash flow multiple over the prior five years.
Fiverr International
A second unrivaled growth stock you'll regret not adding to your portfolio as the Nasdaq hits new highs is the online services market. Fiverr International (FVRR 0.12%). Despite concerns that AI will negatively impact its operational performance, multiple dynamics appear to be working in the company's favor.
Although Fiverr stock has retreated more than 90% from its all-time high, the macroeconomic environment could not be more favorable for its long-term success. While some workers have returned to the office after the worst of the pandemic, more people than ever are working remotely. This significant increase in mobile workers is just what the doctor ordered for Fiverr. gig-economyplatform driven for freelancers.
As I've noted in the past, Fiverr's transparency is another key selling point. Instead of following in the footsteps of many of its peers and having freelancers price their services by the hour, Fiverr has its freelancers provide a lump-sum price for their tasks. This transparency is probably the fuel that continues to drive higher spending per buyer.
But secret sauce that makes Fiverr International a stellar investment is your take rate, that is, the percentage of revenue you earn from deals negotiated on your platform, including fees. While most of its competition has a medium to high acquisition rate, it closed March with a acquisition rate of 32.3%, 190 basis points higher than in the comparable period of 2023. The company maintains more and successively generating higher expenses per buyer.
The icing on the cake is that Fiverr also unveiled a share buyback program for up to $100 million. The share buyback could accelerate the company's adjusted double-digit growth. earnings per share (EPS).
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BioMarin Pharmaceuticals
The third unrivaled growth stock that will likely be criticized for not adding during the early innings of the new Nasdaq bull market is the specialty stock. biotechnology BioMarin Pharmaceuticals (BMRN 0.77%). Although the launch of Roctavian, a unique gene therapy treatment for patients with hemophilia A, has been marred by challenges (sales of the drug totaled just $800,000 in the first quarter), one bad apple won't ruin BioMarin's juicy portfolio. of novel therapies.
Before delving into the details of the product, it is important to recognize that BioMarin focuses its efforts on drugs for ultra-rare diseases. While there are risks associated with small groups of patients, the rewards are abundant. That is, drugs that have been approved by the Food and Drug Administration (FDA) often face little or no opposition from insurers regarding their high list prices and typically have minimal or no competition. non-existent.
Even with Roctavian stumbling out the door, growth of the anti-dwarfism drug Voxzogo has more than compensated for this error. Label expansion opportunities have expanded Voxzogo's use case, which in turn caused sales to soar 74% to nearly $153 million during the quarter ended in March. Greater acceptance and strong pricing power should give Voxzogo a legitimate shot at eventually surpassing $1 billion in annual sales.
BioMarin management also recently made the decision to focus its efforts and capital on its most promising experimental therapies. By limiting its clinical studies to three candidates, the company aims to reduce its annual operating expenses by up to $40 million.
With more than half a dozen FDA-approved drugs in its pipeline, BioMarin should be able to sustain double-digit sales and EPS growth through at least 2027. In fact, the Wall Street consensus calls for its EPS to catapult from $0 .87 reported in 2023 to almost $5 in 2027.
Digital West
A fourth unrivaled growth stock you might regret not buying into the new Nasdaq bull market is the storage solutions specialist. Digital West (WDC -2.70%). Despite some patchy weakness in demand from its consumer segment (i.e., personal computer sales have remained weak), many other aspects of Western Digital's operations are firing on all cylinders.
He The first unmistakable catalyst is the AI โโrevolution.. While artificial intelligence has raised concerns for some companies, it is set to catapult demand for Western Digital. High-computing AI data centers require increasing computing needs, which in turn will accelerate the demand for data center storage solutions.
Another thing to consider is that Enterprise spending on cloud-based platforms is still in its infancy.. As cloud spending increases, Western Digital's data center storage products come to the fore. Not surprisingly, the company's cloud segment was its biggest growth driver in the fiscal third quarter (ended March 29), with sales up 29% year-over-year.
Energy and utility pricing should also work in favor of businesses. Although hard drives have long been a data center staple, Western Digital NAND flash memory solutions support higher transfer rates and consume less energy. As NAND flash memory adoption increases, the company's pricing power should improve.
The final piece of the puzzle is that Western Digital's results are about to take a radical turn. After the company reported a loss of $3.59 per share in fiscal 2023, Wall Street expects about $8 in positive earnings per share next year. This is a company that should benefit in the coming years from growth in cloud and artificial intelligence.
