Professional and everyday investors have taken their lumps this year. Following a relatively calm 2021, each of the three major U.S. stock indexes plummeted into a bear market at some point in 2022. The growth-focused Nasdaq Composite (^IXIC -0.97%) is the index that’s fared worst of all, with a peak decline of 38% from its all-time high.
When examined over a very short time frame, bear markets can be unnerving and test the resolve of new and tenured investors. But when that lens is widened from months or a year to decades, it becomes clear that bear markets represent once-in-a-decade opportunities to scoop up high-quality stocks at a discount.
The 2022 Nasdaq bear market is an ideal time to go shopping for innovative growth stocks that were unfairly beaten down by poor market sentiment. What follows are five astounding growth stocks you’ll regret not buying during the Nasdaq bear market dip.
The first awe-inspiring growth stock investors would be smart to grab during the Nasdaq bear market decline is end-user cybersecurity company CrowdStrike Holdings (CRWD -3.04%). Even though bear markets tend to weigh on stocks at a premium valuation, CrowdStrike has shown that it’s every bit worthy of the premium investors have bestowed on the company.
The key to CrowdStrike’s success is its cloud-native Falcon security platform. Falcon oversees trillions of events weekly and relies on artificial intelligence (AI) to grow more efficient at recognizing and responding to potential threats over time. Even though CrowdStrike’s solutions aren’t the cheapest, its gross retention rate among existing clients has steadily climbed to more than 98%.
What investors should really appreciate is the adjusted subscription gross margin of nearly 80% that CrowdStrike brings to the table. While it’s had no issue signing up new subscribers — 450 total subscribers to more than 21,100 subs in less than six years — it’s the company’s ability to encourage existing clients to purchase additional services that really stands out. In the most recent quarter, 60% of subscribers purchased five or more cloud module subscriptions. Less than six years ago, less than 10% of its subs had four or more cloud module subscriptions. This explains how CrowdStrike’s earnings growth can handily outpace its rapid sales growth for the foreseeable future.
One final thing to note is that cybersecurity is a basic necessity service for businesses of all sizes with an online presence, and in any economic environment.
A second attractive growth stock that’s ripe for the picking during the Nasdaq bear market retracement is China-based electric vehicle (EV) maker Nio (NIO -2.36%). Despite contending with historic supply chain headwinds tied to the COVID-19 pandemic, Nio is well positioned to become an auto industry disruptor.
Innovation is Nio’s driving force in the world’s leading auto market. This is a company that’s been introducing at least one new EV each year. This year, two sedans rolled off its production line for the first time, with ET7 and ET5 deliveries kicking off in March and September, respectively. In November, Nio delivered an all-time monthly record of 14,178 EVs, of which 6,175 were its premium electric sedans. With the top-tier battery options on these sedans offering approximately 621 miles of range, Nio’s EVs can take on even established/legacy players.
But it’s not just traditional innovation that’s spurring growth. I’ve praised Nio numerous times for its introduction of the battery-as-a-service (BaaS) subscription in August 2020. With BaaS, Nio’s buyers receive a discount on the purchase price of their vehicle and have the opportunity to charge, swap, and upgrade their batteries in the future. As for Nio, it locks in the loyalty of early buyers and rakes in monthly, high-margin subscription revenue.
By 2035, more than half of all new vehicles in China are expected to run on alternative energy. That gives Nio plenty of runway to grow its market share.
For investors with a high tolerance for risk and volatility, Singapore-based Sea Limited (SE -12.06%) is the astounding growth stock you’ll be kicking yourself for not buying during the Nasdaq bear market dip. Though near-term losses have been unsightly as the company spends aggressively on its expansion efforts, this spending should pay enormous dividends throughout the decade.
What makes Sea so special is that it has not one or two, but three rapidly growing and differentiated operating segments. The only one generating positive earnings before interest, taxes, depreciation, and amortization (EBITDA) at the moment is Garena, the company’s digital entertainment segment. Specifically, Garena benefits from the success of hit mobile game Free Fire. All told, 9.1% of Garena’s 568.2 million quarterly users paid to play its games in the third quarter. That percentage of pay-to-play users is well above the industry average.
Second, Sea has a burgeoning digital wallet business. Since the company operates in Southeastern Asia and Brazil (i.e., emerging markets where a sizable percentage of consumers are underbanked), it has a sizable opportunity to provide financial solutions where traditional banks have, thus far, failed.
Third, there’s e-commerce platform Shopee. Shopee moved $19.1 billion in gross merchandise volume (GMV) in the third quarter alone, compared to $10 billion in GMV for the entirety of 2018. That’s how quickly this e-commerce operation ramped up. With more mindful expensing, Shopee is expected to near break-even adjusted EBITDA by the end of 2023.
Green Thumb Industries
Marijuana stock Green Thumb Industries (GTBIF 7.67%) is a fourth phenomenal growth stock you’ll regret not buying during the Nasdaq plunge. Although sweeping federal cannabis reform efforts have failed, legalization at the state level offers plenty of promise for multi-state operators (MSO) like Green Thumb.
As of the beginning of December, Green Thumb had 77 operating dispensaries in 15 legalized states, but possesses enough retail licenses in its back pocket to effectively double its dispensary presence over time. The company has been focusing a lot of its attention on limited-license states where regulators purposely limit the number of retail licenses a single business can hold. Moving into limited-license markets ensures that Green Thumb’s dispensaries have time to build up brand awareness and grow their customer base.
What makes Green Thumb one of the best marijuana MSOs to own is its revenue mix. More than half of all sales derive from a combination of edibles, dabs, beverages, vapes, pre-rolls, and health and beauty products. These are known as “derivative” pot products, and they bear significantly higher price points and much juicier margins than traditional dried cannabis flower.
While most pot stocks are still in search of their first quarterly profit, Green Thumb has produced nine consecutive quarters of generally accepted accounting principle (GAAP) profits. In other words, it looks like a true leader in one of the fastest-growing industries in the U.S.
The fifth astounding growth stock you’ll regret not buying on the dip is social media giant Meta Platforms (META 2.82%). Though ad spending could weaken in the short run as fear builds about a possible recession in 2023, Meta offers sustained competitive advantages that make it a no-brainer buy at its current share price.
Despite pivoting to a metaverse focus (I’ll get to this in a moment), it can’t be overlooked just how dominant Meta’s social media assets are. Collectively, Facebook, WhatsApp, Instagram, and Facebook Messenger lured 3.71 billion unique visitors each month during the third quarter. That’s more than half of all adults on this planet at the disposal of advertisers. There’s not a social media platform anywhere that’s going to give merchants an opportunity to reach users quite like Meta — and its historic ad-pricing power shows it.
As for the metaverse, CEO Mark Zuckerberg is content investing for the future. Even with large losses tied to Reality Labs (the company’s metaverse operating segment), Meta’s advertising operations easily keep the company profitable. To boot, Meta is sitting on $31.9 billion in cash, cash equivalents, and marketable securities. There’s ample financial flexibility here for Zuckerberg to shape his company into a key metaverse onramp.
Meta has never been this cheap in its 10 years as a publicly traded company, and it’d be a shame if long-term investors let this opportunity to scoop up shares on the cheap go to waste.
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