Nasdaq Bear Market: 2 Supercharged Growth Stocks You'll Regret Not Buying on the Dip

The Nasdaq Composite is currently 23.8% off its high, well past the 20% threshold that defines a bear market. Losses of that magnitude can be unsettling, especially for newly minted investors, but it's important to remember that downturns are ultimately temporary. Macroeconomic headwinds have dragged stock prices down, but those headwinds will eventually disappear, and the market will rebound.

That doesn't mean every company will see its share price rebound. But high-quality stocks like Zscaler (ZS 1.63%) and MercadoLibre (MELI 3.41%) -- down 49% and 51%, respectively, from their highs -- are well positioned to spring back when market conditions improve. In the meantime, investors have a chance to buy both stocks at a discount.

Here's why you'll regret passing on the opportunity to buy these two stocks on the dip.

1. Zscaler: The largest network security cloud

Zscaler specializes in zero-trust network security, cloud workload protection, and digital experience monitoring. Its platform -- known as a secure access service edge (SASE) -- leans on artificial intelligence to inspect network traffic and enforce security policies in the cloud, eliminating the need for costly on-premise appliances. It securely connects users to applications and data across public clouds and private data centers from any device or location.

The Zscaler SASE spans more than 150 data centers and inspects 250 billion requests on a daily basis, capturing trillions of security signals in the process. That makes it the largest network security cloud in the world. The resultant data advantage theoretically means it offers better threat protection than any other vendor. In fact, research company Gartner has recognized Zscaler as an industry leader for 11 consecutive years.

Secular trends like software-as-a-service and other forms of cloud computing make traditional network security solutions ineffective and inefficient. It no longer makes sense to route traffic through a central corporate data center, simply because applications and data often live in the cloud. More broadly, cybersecurity is not a discretionary expense. Enterprises must protect their sensitive applications and data.

Zscaler's leadership continued to drive strong demand in the fourth quarter of fiscal 2022 (ended July 31). Its total customer count rose 20% year over year to 6,700, and the average customers increased spending by more than 25%. In turn, quarterly revenue rose 61% year over year to $318 million, and free cash flow (FCF) soared 170% to $75 million.

Going forward, investors have good reason to believe Zscaler can maintain that momentum. Management puts its addressable market at $72 billion, and Zscaler should benefit as more enterprises adopt cloud computing and remote work.

Currently, shares trade at 27.1 times sales. That certainly isn't cheap, but it is a discount compared to the three-year average of 37.2 times sales. And in light of Zscaler's rapid growth and sizable market opportunity, it seems like a reasonable price to pay.

2. MercadoLibre: The e-commerce market leader in Latin America

MercadoLibre operates the most popular online commerce ecosystem in Latin America, and its fintech platform (Mercado Pago) is the third-most-popular digital wallet in the region. The company reinforced its strong market presence in both ecosystems with a robust offering of adjacent products.

MercadoLibre provides fulfillment and digital advertising services to merchants, which simplifies logistics and helps them engage buyers. In fact, its logistic business (Mercado Envios) handled 91% of shipping volume in the second quarter, and 80% of that volume arrived within 48 hours. On the fintech side, its credit business (Mercado Credito) provides working capital loans to merchants, personal loans to consumers, and credit cards. Mercado Credito's credit portfolio expanded 230% in the second quarter.

Those value-added services make MercadoLibre's commerce and fintech ecosystems stickier, and that translates into pricing power. Case in point: Commerce take rate (commerce revenue as a percentage of gross merchandise volume) expanded to 16.5% in the first half of 2022, up from 15.7% in the first half of 2021. And fintech take rate (fintech revenue as a percentage of total payment volume) expanded to 3.9%, up from 3.2%.

Not surprisingly, that fueled impressive financial results. In the second quarter, revenue climbed 53% to $2.6 billion and earnings soared 77% to $2.43 per diluted share. And shareholders have good reason to believe that momentum will continue. Internet penetration is rising quickly in Latin American, boosting adoption of online shopping and digital payments.

In fact, Argentina, Brazil, and Mexico account for the majority of MercadoLibre's total revenue, and all three countries rank among the 10 fastest-growing e-commerce markets in the world. More broadly, Latin American itself is the second-fastest-growing e-commerce market in the world, as online retail sales should rise 19% to $167 billion in 2022, according to eMarketer.

Currently, shares trade at an inexpensive 5.5 times sales -- a bargain compared to the three-year average of 13.7 times sales. That's why this growth stock is a buy.