It's been an incredibly rough start to 2022 for Wall Street and investors. After hitting all-time closing highs during the first week of January, the widely followed S&P 500 and iconic Dow Jones Industrial Average have both retracted by more than 10%, thereby hitting official correction territory.
It's been an even tougher go for the technology-focused Nasdaq Composite (^IXIC -1.57%). Last week, the index dropped as much as 24% below its November 2021 high. This places the high-flying Nasdaq in a bear market.
Although big declines in the stock market can tug on investors' emotions, history is pretty clear that buying stocks during corrections and bear markets is an incredibly smart move. Over time, all notable declines in the major indexes, including the Nasdaq Composite, are eventually wiped away by a bull-market rally.
With the Nasdaq falling into a bear market, it's the perfect time for opportunistic investors to go on the offensive. What follows are three jaw-dropping growth stocks you'll regret not buying on the dip.
The first incredible growth stock you'll be kicking yourself over if you don't buy soon is cybersecurity company CrowdStrike Holdings (CRWD 0.35%). Shares of the company have tumbled 33% since hitting their all-time high.
The obvious worry at the moment for fast-paced companies is that historically high inflation, and the Federal Reserve raising rates to stamp out that inflation, will send the U.S. economy into a recession. That would be generally bad news, at least in the short run, for cyclical businesses.
However, cybersecurity isn't a cyclical business. Over the past two decades, it's evolved into a basic necessity that businesses of all sizes rely on. No matter how well or poorly the U.S. economy or stock market are performing, hackers and robots don't take days off from trying to steal consumer and enterprise data. As more businesses shifted their data online and into the cloud during the pandemic, third-party providers like CrowdStrike have seen demand soar.
What makes CrowdStrike tick is the company's Falcon security platform. Falcon was built entirely in the cloud and is guided by artificial intelligence. These factors -- which help it to oversee about 1 trillion events daily -- allow Falcon to quickly assess and respond to potential threats. While CrowdStrike isn't the cheapest option in end-user security, its gross retention rate of 98% suggests it's one of the best and well worth the cost.
CrowdStrike's operating results demonstrate that it's had no issue attracting new customers. Over the past five years, CrowdStrike's subscribing customer count has averaged annual growth of 105% (450 to 16,325).
But what's far more impressive is how successful it's been at getting existing clients to spend more. Over the past 16 quarters (four full years), CrowdStrike's dollar-based retention rates haven't dipped below 120%. Put another way, each year's existing customers are spending at least 20% more in the following year. Moreover, the percentage of clients that purchase four or more cloud-module subscriptions has grown from 9% to 69% in five years.
CrowdStrike has all the attributes of a company that can continue to blow Wall Street's loftiest expectations out of the water.
A second jaw-dropping growth stock you'll regret not picking up on the dip is biotech stock Novavax (NVAX -2.74%). If you think CrowdStrike has had it rough, shares of Novavax are lower by nearly 80% relative to their 52-week high.
The big concern Wall Street has with Novavax is the delayed rollout of its COVID-19 vaccine, NVX-CoV2373.
Last year, Novavax completed two large-scale studies involving its vaccine, which demonstrated respective efficacy of 89.7% (U.K. study) and 90.4% (U.S. and Mexico trial). It also reported an 80% vaccine efficacy in teens earlier this year. NVX-CoV2373 is one of only three COVID-19 vaccines to hit the 90% efficacy threshold in any late-stage study. That would, presumably, give it a good shot at becoming a key player in initial inoculations and booster shots.
However, Novavax delayed its emergency-use authorization (EUA) filings until the latter part of 2021 in many developed markets, and has somewhat struggled to ramp up production to meet orders. These short-term concerns have weighed heavily on its share price.
The good news is that Novavax fully expects $4 billion to $5 billion in sales this year. This suggests it'll have no trouble meeting its vaccine production obligations. Even with some developed countries returning to some semblance of normal, the global pandemic is still ongoing, and mutations of the SARS-CoV-2 virus give NVX-CoV2373 plenty of runway as a booster option.
What's more, a U.S. Food and Drug Administration's advisory committee plans to review Novavax's vaccine on June 7, 2022, which could lead to a possible EUA. Even though most Americans who wanted a COVID-19 vaccine have received one, Novavax can still play a key role in adult booster shots and perhaps initial inoculations for teens.
The company also has an opportunity to become a leader in combination vaccines, such as those aimed at both influenza and COVID-19. Whereas Novavax trailed other drugmakers to market with its COVID-19 vaccine, it could be one of the first to market with a combination vaccine.
Novavax can be purchased for less than 3 times Wall Street's forecast earnings for 2022, and is sitting on roughly $1 billion in net cash. It's one heck of a bargain.
PayPal's issues tend to mirror those I described with CrowdStrike. The difference is that PayPal is cyclical and not a basic-necessity business, and could therefore feel the pinch of higher inflation and reduced spending -- especially among lower-income consumers. Historically high inflation and an uncertain economic outlook have coerced PayPal to lower its earnings forecast three times over the past year.
Yet even with these near-term negatives, many of PayPal's key performance indicators are moving in the right direction. Although net new account (NNA) growth slowed, the company still increased its NNAs by 2.4 million in the first quarter. Keep in mind that first-quarter U.S. gross domestic product came in at negative 1.4%, but PayPal still grew its digital user base.
Total payment volume is also slated to increase by a double-digit percentage at a time when consumers are taking it on the chin. Even PayPal's reduced forecast calls for more than $1.4 trillion in TPV in 2022, with aggregate growth of 11% to 13% over 2021. If that's a bad year for PayPal, I can't wait to see what happens when economic activity normalizes in a couple of quarters.
Perhaps most exciting is the fact that PayPal's active counts are relying on digital payments to a greater degree with each passing quarter. In 2020, active users averaged 40.9 transactions on a trailing-12-month (TTM) basis. But in the most recently ended quarter, PayPal noted 47 transactions per active user on a TTM basis. This statistic above all others suggests that PayPal is on the right track, and that this latest pullback in its shares is a monster opportunity to buy.
Keeping in mind that Wall Street's earnings forecast for the company remains fluid, shares can be gobbled up right now for 18 times forward-year earnings. Simply put, this fintech juggernaut has never been cheaper.