2 Spectacular Growth Stocks You'll Regret Not Buying in the Wake of the Nasdaq Bear-Market Dip
Right time to buy these stocks
Iqra Bhatti
5 min read
It's been a wild four years for Wall Street. Since the decade began, all three major stock indexes have oscillated between bear and bull markets in successive years. These swings have been especially noticeable for the growth stock-driven Nasdaq Composite (NASDAQINDEX: ^IXIC).
In 2022, the Nasdaq Composite shed a third of its value and was, by far, the worst-performing major index. Last year, its 43% gain topped the charts. But in spite of this gain, the Nasdaq Composite is the only major stock index that's yet to reach a new all-time high. In the wake of the 2022 bear market, it remains 4% below its November 2021 record close.
For some investors, this 26-month lull will be viewed as a lost period for growth stocks. But for long-term investors, it represents an opportunity to pick up growth stocks, innovators, and industry leaders at a perceived discount.
What follows are four spectacular growth stocks you'll regret not buying in the wake of the Nasdaq bear-market dip.
PayPal Holdings
The first magnificent growth stock you'll be kicking yourself for not buying with the Nasdaq Composite still below its record high is fintech leader PayPal Holdings (NASDAQ: PYPL). Even though competition in the digital-payments space is heating up, PayPal has the tools necessary to succeed.
To start with, it's on the cutting edge of one of Wall Street's hottest growth trends. Annual fintech revenue is forecast to grow by a factor of six -- from $245 billion to $1.5 trillion -- between 2022 and 2030, according to a report from the researchers at Boston Consulting Group. Even if this estimate isn't spot-on, it demonstrates how early we still are in digital-payment adoption.
Despite stagnant active-account growth in recent quarters, PayPal's user engagement among active accounts is higher than it's ever been. In less than three years, active accounts have gone from averaging 40.9 transactions over the trailing-12-month (TTM) period to averaging 56.6 transactions over the TTM, as of Sept. 30, 2023. Since PayPal is mostly driven by fees, more transactions should equate to higher gross profit.
The hiring of Alex Chriss as CEO is another watershed moment for PayPal. Chriss comes over from Intuit, where he headed the company's segment focused on small businesses. Chriss understands the innovations and opportunities PayPal has with smaller merchants but isn't afraid to make tough choices and reduce the company's operating expenses to bolster its margins.
Finally, PayPal stock is effectively cheaper than it's ever been as a publicly traded company. Shares can be purchased, as of this writing, for less than 12 times forward-year earnings. Considering the company's long-term growth prospects, industry-leading position in fintech, and aggressive share-repurchase program, it's a screaming bargain
Lovesac
A second spectacular growth stock you'll regret not scooping up in the wake of the Nasdaq bear-market swoon is furniture company Lovesac (NASDAQ: LOVE). While simply saying "furniture stock" is enough to put some investors to sleep, I can assure you this small-cap furniture company is nothing like its peers.
The clearest differentiator between Lovesac and other furniture companies can be seen in its products. Though it was originally known for its beanbag-styled chairs ("sacs"), approximately 90% of net sales now derive from sactionals, which are modular couches that can be rearranged a host of ways to fit most living spaces. Sactionals have an assortment of high-margin upgrade options and come with over 200 different cover choices. The yarn used in their production is made from recycled plastic water bottles. It's a unique and highly functional product with no comparison.
Uniqueness does come with a price -- and a purpose. Although sactionals are costlier than typical sectional couches, Lovesac is purposefully targeting a mid-to-high-earning consumer with its furniture. High earners are less likely to change their buying habits during modest recessions or above-average periods of inflation.
Another reason Lovesac has handily outperformed other furniture companies is its omnichannel sales platform. Despite having a brick-and-mortar presence in 40 U.S. states, it leans on online sales, pop-up showrooms, and partnerships with major retailers to improve brand visibility and increase sales. This omnichannel platform has reduced overhead expenses and lifted Lovesac's operating margin.
Similar to PayPal, Lovesac is historically inexpensive. Shares can be had for 11 times forward-year earnings, which is cheap when considering that the company can more than triple its earnings per share over the next five years
It's been a wild four years for Wall Street. Since the decade began, all three major stock indexes have oscillated between bear and bull markets in successive years. These swings have been especially noticeable for the growth stock-driven Nasdaq Composite (NASDAQINDEX: ^IXIC).
In 2022, the Nasdaq Composite shed a third of its value and was, by far, the worst-performing major index. Last year, its 43% gain topped the charts. But in spite of this gain, the Nasdaq Composite is the only major stock index that's yet to reach a new all-time high. In the wake of the 2022 bear market, it remains 4% below its November 2021 record close.
For some investors, this 26-month lull will be viewed as a lost period for growth stocks. But for long-term investors, it represents an opportunity to pick up growth stocks, innovators, and industry leaders at a perceived discount.
What follows are four spectacular growth stocks you'll regret not buying in the wake of the Nasdaq bear-market dip.
PayPal Holdings
The first magnificent growth stock you'll be kicking yourself for not buying with the Nasdaq Composite still below its record high is fintech leader PayPal Holdings (NASDAQ: PYPL). Even though competition in the digital-payments space is heating up, PayPal has the tools necessary to succeed.
To start with, it's on the cutting edge of one of Wall Street's hottest growth trends. Annual fintech revenue is forecast to grow by a factor of six -- from $245 billion to $1.5 trillion -- between 2022 and 2030, according to a report from the researchers at Boston Consulting Group. Even if this estimate isn't spot-on, it demonstrates how early we still are in digital-payment adoption.
Despite stagnant active-account growth in recent quarters, PayPal's user engagement among active accounts is higher than it's ever been. In less than three years, active accounts have gone from averaging 40.9 transactions over the trailing-12-month (TTM) period to averaging 56.6 transactions over the TTM, as of Sept. 30, 2023. Since PayPal is mostly driven by fees, more transactions should equate to higher gross profit.
The hiring of Alex Chriss as CEO is another watershed moment for PayPal. Chriss comes over from Intuit, where he headed the company's segment focused on small businesses. Chriss understands the innovations and opportunities PayPal has with smaller merchants but isn't afraid to make tough choices and reduce the company's operating expenses to bolster its margins.
Finally, PayPal stock is effectively cheaper than it's ever been as a publicly traded company. Shares can be purchased, as of this writing, for less than 12 times forward-year earnings. Considering the company's long-term growth prospects, industry-leading position in fintech, and aggressive share-repurchase program, it's a screaming bargain
Lovesac
A second spectacular growth stock you'll regret not scooping up in the wake of the Nasdaq bear-market swoon is furniture company Lovesac (NASDAQ: LOVE). While simply saying "furniture stock" is enough to put some investors to sleep, I can assure you this small-cap furniture company is nothing like its peers.
The clearest differentiator between Lovesac and other furniture companies can be seen in its products. Though it was originally known for its beanbag-styled chairs ("sacs"), approximately 90% of net sales now derive from sactionals, which are modular couches that can be rearranged a host of ways to fit most living spaces. Sactionals have an assortment of high-margin upgrade options and come with over 200 different cover choices. The yarn used in their production is made from recycled plastic water bottles. It's a unique and highly functional product with no comparison.
Uniqueness does come with a price -- and a purpose. Although sactionals are costlier than typical sectional couches, Lovesac is purposefully targeting a mid-to-high-earning consumer with its furniture. High earners are less likely to change their buying habits during modest recessions or above-average periods of inflation.
Another reason Lovesac has handily outperformed other furniture companies is its omnichannel sales platform. Despite having a brick-and-mortar presence in 40 U.S. states, it leans on online sales, pop-up showrooms, and partnerships with major retailers to improve brand visibility and increase sales. This omnichannel platform has reduced overhead expenses and lifted Lovesac's operating margin.
Similar to PayPal, Lovesac is historically inexpensive. Shares can be had for 11 times forward-year earnings, which is cheap when considering that the company can more than triple its earnings per share over the next five years.
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