4 Unforgettable Growth Stocks You’ll Regret Not Buying in the New Nasdaq Bull Market | The Motley Fool

For the first four years of this decade, Wall Street was nothing less than a seesaw. In successive years, the three major stock indices oscillated between bear markets, bull markets, and the growth-driven market Nasdaq Composite (^IXIC -0.01%) bearing the brunt of this volatility.

But after losing 33% of its value during the 2022 bear market, the Nasdaq Composite has been on the run for the past 17 months. Since the green flag waved in 2023, the Nasdaq Composite has gained 60% and soared to new all-time highs. There is absolutely no doubt that Wall Street's growth-focused index is at a relatively young stage. bull market.

While some investors may be hesitant to put their money to work with the Nasdaq hitting new highs, time has proven it to be an undefeated ally. Although we will never know in advance when stock market corrections will begin, how long they will last, or where the bottom will be, we do know that every crisis is eventually (keyword!) wiped out by a bull market rally. Buying large companies to position themselves for these prolonged bull market rallies can make patient investors significantly richer.

Even with the Nasdaq Composite within a stone's throw of an all-time high, as of this writing, growth stock Opportunistic investors who are willing to look for them can still find bargains.

What follows are four unforgettable growth stocks you'll regret not buying in the new Nasdaq bull market.

Block

The first notable growth stock that is begging to be bought with the new Nasdaq bull market spreading its legs is fintech ("fintech") promising Block (SQ -1.45%). Although competition in the digital payments space is increasing, Block's core operating segment and its push into digital payments are finding their respective brands.

This "core operating segment" is the company's Square ecosystem, which offers everything from point-of-sale solutions and data analytics to business lending. During the quarter ended in March, Square's ecosystem recorded gross purchase volume (GPV) of $50.5 billion across its network, or $202 billion in annual run rate terms. To put it in context, Square generated less than $7 billion in full-year GPV in 2012.

What makes the Square ecosystem such a promising cash flow driver is that its solutions are resonating with a growing merchant base. While 35% of GPV came from companies with at least $500,000 in annualized GPV in Q1 2022, 39% of GPV in the latest quarter can be traced back to these larger merchants. Since this is a transaction-based platform, larger companies are Block's ticket to higher gross profits.

The other key platform for Block is Cash App. This peer-to-peer digital payments platform closed March with 57 million active users transacting and a monetization rate (that is, the gross profit of Cash App minus the contribution from buying now, pay later (BNPL), divided by Cash App entries) that expanded. by 7 basis points to 1.48% compared to the period of the previous year.

The block has Consistently generated higher gross margin per active Cash App user than the cost of acquiring new Cash App users. Leaning on your BNPL offerings and aggressively investing in Cash App solutions (e.g. Cash App Card) are ways you can significantly increase your profitability and cash flow for the second half of the decade.

starbucks

A second unforgettable stock you'll regret not adding to your portfolio as the Nasdaq takes off into a new bull market is coffee chain starbucks (SEX 1.85%). Despite recently reporting what could be considered its worst quarter in years, Starbucks enjoys undeniable competitive advantages that can benefit patient investors.

To start with the obvious, Starbucks has exceptionally strong pricing power. No matter how much labor or product inflation the company has faced, it has rarely had trouble passing along price increases to its loyal and growing global customer base.

Perhaps Starbucks' main selling point is its 32.8 million active rewards members in the US., at the end of the second fiscal quarter (March 31). In exchange for a free drink and/or meal every once in a while, rewards members typically have larger tickets, will save your payment information on their smartphone, and use mobile ordering to their advantage. In other words, Rewards members are streamlining lines and shortening wait times.

Don't overlook the Innovation that Starbucks has consistently demonstrated for several decades.. Although some of its newest drinks may not reach consumers, the revamp of its self-service ordering board during the pandemic, along with the evolution of its food offerings, have helped the company maintain and/or grow its operating margin.

Starbucks is also cheaper than it has been in a very a long time, based on his Forward Price-Earnings (P/E) Ratio. Its forward P/E of 19 is roughly 31% below its average forward earnings multiple over the past five years.

Okta

A third distinctive growth stock you'll regret not buying with the relatively new Nasdaq bull market finding its footing is cybersecurity company Okta (OKTA -0.15%). While there has been some concern about Okta's valuation following the admission of a security breach in October 2023, the company's operating performance has allayed those concerns.

One of the best aspects of cybersecurity is that it is no longer an optional service. Businesses of all sizes with an online and/or cloud-based presence need to protect their sensitive information from robots and hackers who don't care whether the U.S. economy is thriving or struggling. As more data moves online and into the cloud, cybersecurity companies like Okta have enjoyed a steady increase in aggregate customer and subscription revenue.

Okta's success in identity verification is built on its cloud-native artificial intelligence (AI) and machine learning (ML)-powered cybersecurity platform. Although this service is not perfect, as the October breach confirmed, a platform powered by AI and ML should be created. More agile and significantly more efficient in identifying and responding to threats. than local solutions over time.

In the company's April quarter, it recognized a subscription portfolio of approximately $3.36 billion (an increase of 19% from the prior-year period) and had $2.32 billion in cash, cash equivalents and investments at short term. Since Okta is cash flow positive, management has no concerns about aggressively investing in new identity solutions. Meanwhile, its abundant order book should generate predictable operating cash flow, no matter what happens to the U.S. economy over the next year.

Lastly, the acquisition of Auth0 in 2022 may really opens new doors in foreign markets for Oktaas well as expand its reach into the $30 billion consumer identity market.

Metaplatforms

The fourth unforgettable growth stock you'll regret not buying in the new Nasdaq bull market is none other than social media expert Metaplatforms (GOAL -0.05%). Although Wall Street was less than enthusiastic about Meta raising its spending forecast, it is an industry leader with a long history of successful monetization efforts.

Meta's foundation remains its social media assets. It is the parent company of Facebook, the most visited social site in the world, as well as WhatsApp, Instagram, Threads and Facebook Messenger. These extremely popular apps, along with Meta's other social media assets, Together they attracted 3.24 billion daily active users during the first quarter. There is no social media platform that comes close to providing access to as many daily active users as Meta, and this is often reflected in its advertising pricing power.

This is a good time to mention that Meta benefits from disproportionately long periods of economic growth. While recessions are an inevitable part of the economic cycle, they resolve fairly quickly. By comparison, a company like Meta, which generates almost 98% of its sales from advertising, reaps the fruits of economic expansions that last for years.

Another reason to trust CEO Mark Zuckerberg's company are your deep pockets. Meta Platforms ended March with more than $58 billion in cash, cash equivalents and marketable securities, and has generated more than $76 billion in operating cash flow over the trailing four quarters. With a treasure chest of cash at its disposal, Meta can comfortably invest in AI and its metaverse ambitions, even knowing that these innovations are likely years away from becoming major revenue generators.

The last piece of the puzzle is Meta's cheap valuation. Despite quintupling from its 2022 bear market low, Meta still trades at less than 13 times estimated 2025 cash flow. This represents a 14% discount to its average forward cash flow multiple over the last five years.