This year has served as a kick-in-the-pants reminder that the stock market doesn't move up in a straight line -- even if 2021 made you believe it did. The first half of 2022 saw the benchmark S&P 500 produce its worst return in more than a half-century.
On the surface, there's no denying that bear markets can be worrisome. The velocity of moves lower during these periods of heightened volatility certainly has the potential to make investors question their resolve to stick around. However, bear markets are also a bona fide wealth-building opportunity. That's because every double-digit percentage move lower in the major indexes, including the Nasdaq Composite, has eventually been recouped (and then some) by a bull market rally.
This looks to be the perfect time for patient investors to consider buying the innovative growth stocks that have been hit hard by the 2022 bear market. What follows are five sensational growth stocks you'll regret not buying during the Nasdaq bear market dip.
The first extraordinary growth stock investors will be kicking themselves over if they pass it up on the Nasdaq bear market dip is cloud-based lending platform Upstart Holdings (UPST 2.21%). Although rapidly rising interest rates and a weakening U.S. economy are bound to slow down the number of loan applications Upstart processes in the near term, the company brings clear-cut competitive advantages to the table that should translate to big wins over the long run.
For instance, Upstart's loan-vetting platform relies on artificial intelligence (AI). Leaning on predictive technology has allowed Upstart to process and approve nearly three-quarters of all loan applications online. This saves the company's approximately six dozen lending partners both time and money.
What's been particularly interesting about Upstart is that its AI-driven loan platform has led to a broader swath of applicants being approved. On average, Upstart-approved loans have a lower credit score than the traditional loan-vetting process. But in terms of loan delinquencies, Upstart approvals have similar delinquency rates to persons ushered through the normal loan-vetting process. In other words, Upstart can expand the loan pool for banks and credit unions without increasing their credit-risk profile.
This is also a company that's just starting to spread its wings into considerably larger addressable markets. Until recently, Upstart predominantly focused on personal loans. But with the company now vetting/processing auto loans and small business loans, its addressable market, based on loan originations, has grown tenfold.
A second phenomenal growth stock you'll regret not scooping up as the Nasdaq plunges into a bear market is robotic-assisted surgical systems developer Intuitive Surgical (ISRG 3.19%). Despite very short-term concerns about optional surgical procedures being pushed out to a later date, Intuitive Surgical's dominant market share and operating model make it a no-brainer buy on weakness.
When the June quarter came to a close, Intuitive Surgical had installed 7,135 of its da Vinci surgical systems worldwide. While this might not sound like a large figure, it's far more than its competitors by a long shot.
To add to this point, each da Vinci machine ranges in cost from $0.5 million to $2.5 million. When coupled with the intangible cost of training surgeons to use the da Vinci surgical system, it means hospitals and surgical centers are highly unlikely to switch to a competitor once the purchase is made.
Intuitive Surgical also benefits from its razor-and-blades operating model, which should help the company's operating margins expand over time. During the 2000s, the company generated most of its revenue from selling its pricey but mediocre margin, da Vinci systems (the "razor"). However, the bulk of revenue now comes from selling high-margin instruments with each procedure, as well as from servicing these systems (the "blades"). As the installed da Vinci base grows, so will Intuitive Surgical's higher-margin sales channels.
The third sensational growth stock begging to be bought during the Nasdaq bear market dip is social media stock Pinterest (PINS -0.82%). Although ad spending could prove challenging until the U.S. economy finds its footing, Pinterest looks poised to excel over the long term.
Ideally, Wall Street and investors would like to see Pinterest's monthly active user (MAU) count climb every quarter. However, the COVID-19 pandemic has whipsawed the company's MAUs over the past two years. But what's really important to note is that average revenue per user (ARPU) has continued climbing by a double-digit percentage.
Even with MAUs declining by 21 million to 433 million in the June-ended quarter, global ARPU rose 17%, with especially strong growth from international markets. What this demonstrates is that advertisers are willing to pay a premium to reach Pinterest's users, even with a high level of economic uncertainty.
Pinterest is also relatively immune to app developers altering their data-tracking software. Whereas most ad companies rely on data-tracking solutions to help merchants target their users, Pinterest's entire operating model is based on its MAUs willingly sharing the things, places, and services that interest them. This allows advertisers to easily target users and could eventually help Pinterest become a serious e-commerce player.
Green Thumb Industries
The fourth incredible growth stock you'll regret not buying as the Nasdaq Composite plummets is marijuana stock Green Thumb Industries (GTBIF 3.94%). Despite Capitol Hill failing to pass cannabis reform measures, the legalization of marijuana at the state level is providing more than enough opportunity for multi-state operators (MSO) like Green Thumb to blossom.
As of the beginning of September, Green Thumb had 77 operating dispensaries and a presence in 15 legalized states. While a number of these states are high-dollar markets (e.g., California and Florida), what's been noteworthy about Green Thumb's expansion has been its focus on limited-license markets, such as Illinois, Ohio, and Virginia. Limited-license states purposely limit how many dispensary licenses can be issued in total, as well as to a single business. Operating in these states allows MSOs to build up their brands without the fear of being overrun by a pot stock with deeper pockets.
What's more, Green Thumb's revenue mix is, arguably, more favorable than any other marijuana stock. Well over half of the company's sales come from derivative pot products, such as beverages, vapes, edibles, dabs, pre-rolls, and health/beauty products. These products have higher price points and significantly juicier margins than dried cannabis flower.
Whereas most MSOs are still in search of recurring profitability, Green Thumb Industries has delivered eight consecutive quarters of generally accepted accounting principles (GAAP) profits.
The fifth and final sensational growth stock you'll regret not buying on the Nasdaq bear market dip is fintech juggernaut PayPal Holdings (PYPL 0.33%). Although historically high inflation is doing a number on the lowest decile of earners, digital payment growth is still in its very early innings.
If you need evidence that the global digital payments market can sustain double-digit growth, look no further than PayPal. Even with the Nasdaq and S&P 500 entering a bear market during the second quarter and U.S. gross domestic product declining in the first two quarters of 2022, PayPal reported a 13% increase in total payment volume on a constant currency basis and saw its free cash flow jump 22% from the prior-year period. Just imagine how well PayPal will perform when the U.S. economy is, once again, firing on all cylinders.
What's been most impressive about PayPal is the increased engagement among its active accounts. Since the end of 2020, the average number of transactions completed over the trailing-12-month period by active accounts has risen from just shy of 41 to nearly 49, as of June 30, 2022. Because this is a predominantly fee-driven business, more transactions equate to higher gross profit for PayPal.
And don't overlook PayPal's innovative capacity or acquisition potential, either. Last year, it acquired Paidy, a buy now, pay later software platform based in Japan. Long-winded periods of global economic expansion should allow Paidy, and its new parent, PayPal, to thrive.