It's truly incredible what a difference a year can make on Wall Street. In 2022, growth driven Nasdaq Composite (^IXIC 0.02%) lost 33% of its value during a bear market. But in 2023, growth stocks came back strong and lifted the Nasdaq Composite to a 43% gain.
Despite this monumental rally for the Nasdaq, it remains approximately 7% below its all-time high, which was set more than two years ago. While short-term traders are likely to view a decline of nearly 7% over a 26-month period as a disappointment, long-term-minded investors wisely view this decline as an opportunity to establish or expand positions in assets. high quality. growth stocks with a perceived discount.
Image source: Getty Images.
Below are four notable growth stocks you'll regret not buying after the Nasdaq bear market crash.
child
The first extraordinary growth stock you'll be kicking yourself for not buying while the Nasdaq Composite is still noticeably below its all-time high is the China-based company. electric vehicle (EV) maker child (CHILD -3.11%). Although demand for electric vehicles has weakened somewhat in the United States, Nio appears perfectly positioned to increase its production and take a valuable share of the world's largest automobile market, namely China.
The biggest challenge Nio has faced is China's strict approach to mitigating the spread of COVID-19. Until December 2022, the country's "zero Covid" strategy led to unpredictable lockdowns that caused serious supply chain problems. When Chinese regulators abandoned this controversial policy just over a year ago, Nio has been free to focus on innovation and worry a little less about supply chain constraints. The result was a nearly 31% increase in electric vehicle production last year to more than 160,000 units.
Beyond macroeconomic factors, Nio benefits from the introduction of the NT 2.0 platform. NT 2.0 provides improved advanced driver assistance systems (ADAS), which have driven demand for its second-generation SUVs. Trucks and SUVs almost always generate a fatter automotive gross margin than sedans. The uptick in deliveries that Nio has seen for its SUVs is a result of upgrading its ADAS technology through NT 2.0.
Thinking outside the box hasn't hurt Nio's long-term growth prospects either. As of August 2020, Nio began offering a battery-as-a-service (BaaS) subscription. BaaS provides a way for Nio to earn sustainable high-margin revenue and, most importantly, keep early adopters loyal to the brand.
Although Nio is a couple of years away from reaching recurring profits, it ended September with $6.2 billion in cash, cash equivalents, and various short- and long-term investments. The company also secured $2.2 billion equity investment from CYVN Investments just before the end of 2023. It has more than enough capital to increase production and continue innovating.
NextEra Energy
A second notable growth stock you'll regret not adding to your portfolio following the Nasdaq bear market crash in 2022 is electrical services company NextEra Energy (SINGLE 0.53%). Although utilities are typically slow-growing, dividend-focused companies, NextEra has generated a compound adjusted earnings growth rate of just 10% since 2012. This makes it very much a growth stock in a mature sector.
The biggest headwind for NextEra has been the rapid rise in Treasury yields. Income investors buy utilities for their returns and low volatility. But with short-term Treasury yields topping 5% in 2023, companies like NextEra Energy were shorted. With three interest rate cuts predicted by the country's central bank in 2024, utilities appear poised for a year of recovery.
He catalyst that fueled NextEra's enormous growth rate It has been its renewable energy portfolio for more than a decade. Almost half (or 34 gigawatts (GW)) of the company's 70 GW of capacity can be attributed to renewable energy. Furthermore, the 23 GW of wind capacity and 6 GW of solar capacity are high marks for any electricity company in the world. Although investing in clean energy projects has been costly, the reward is substantially lower electricity generation costs.
Despite higher interest rates, NextEra Energy's management team has no intention of taking its foot off the accelerator. From early 2023 to 2026, the company plans launching between 32.7 GW and 41.8 GW of renewable projects. This is the fuel that should sustain a higher growth rate in an industry typically known for low-single-digit adjusted earnings growth.
Another thing investors should remember about electric utilities is that they provide a basic need service. If you own or rent a home, there's a good chance you need electricity to power your appliances and/or your heating/cooling system. This means that electricity demand won't change much from year to year, resulting in predictable operating cash flow for NextEra.
Image source: Getty Images.
Jazz Pharmacy
The third sensational growth stock you'll regret not buying after the Nasdaq bear market crash is the specialty drug developer. Jazz Pharmacy (JAZZ -1.21%). Although concerns about sales exclusivity have weighed on Jazz stock in recent years, the company's pipeline and product pipeline appear poised to thrive.
Before delving into the details of its portfolio, it's important to recognize that one of Jazz Pharmaceuticals' biggest competitive advantages is its focus on rare diseases. While focusing on indications for a small group of patients can be risky, success also has many rewards. Approved orphan drugs face little opposition to list prices from insurers, and there is rarely much competition.
Jazz's bread and butter continues to be its oxybate franchise (Xyrem and Xywav), which focuses on patients with sleep disorders such as narcolepsy. The smart decision Jazz made was to develop Xywav, a next-generation version of Xyrem that contains 92% less sodium. This not only makes the company's best-selling therapy safer for patients with higher cardiovascular risk factors, but will also help secure the majority of the company's cash flow for years to come as users from Xyrem go to Xywav.
Another reason growth stock investors can confidently buy Jazz Pharmaceuticals stock is its rapidly growing oncology segment, led by acute lymphoblastic leukemia drug Rylaze. Cancer drug sales appear on track to hit $1 billion in 2023 (Jazz has not yet reported its full-year 2023 operating results), and a couple of key late-stage readouts are expected this year.
Finally, Jazz Pharmaceuticals is especially cheap for a growth stock. Despite shoring up the cash flow of its oxybate franchise and achieving double-digit oncology sales growth, Jazz shares can be bought for just 6x. next year's earnings. You'll be hard-pressed to find a cheaper publicly traded drug developer.
Limited sea
The fourth notable growth stock you'll regret not buying after the Nasdaq bear market crash is based in Singapore. Limited sea (HE -3.29%). While Sea's latest quarterly report leaves much to be desiredThe company's three fast-paced operating segments offer a lot to excite long-term investors.
The division that has been generating positive earnings before interest, taxes, depreciation and amortization (EBITDA) Sea's largest is its digital entertainment division (commonly known as "Garena"). Although the percentage of paid mobile users has decreased after the worst of the pandemic, Garena registered 40.5 million paying users in the third quarter, representing a total of 7.5% of its active user base. A pay-per-play ratio of 7.5% is much higher than the industry average for mobile games.
There's also a lot of excitement around SeaMoney, the company's digital financial services segment. As Sea focuses its efforts on underbanked emerging markets in Southeast Asia, offering loans and other digital financial solutions could be a major cash flow driver for the second half of the decade.
But the segment that is (rightly) generating the most attention for Sea is its e-commerce division, known as Shopee. A flourishing middle class in Southeast Asia should allow Shopee to maintain a double-digit growth rate for a long time to come. In all of 2018, Shopee recorded $10 billion in gross merchandise value (GMV) on its platform. As of September 30, 2023, it had an annual GMV run rate of just over $80 billion.
The final piece of the puzzle is that Sea has approximately $7.9 billion in cash, cash equivalents, short-term investments and restricted cash. This equates to more than a third of Sea Limited's market capitalization at the moment and provides a healthy floor for the company's shares.
