It's official: All three of the major U.S. stock indexes are now entrenched in a bear market. Since hitting their all-time closing highs, the iconic Dow Jones Industrial Average, benchmark S&P 500, and growth-dependent Nasdaq Composite (^IXIC 1.14%) have respectively shed as much as 20%, 24%, and 34% of their value.
While there's no denying that bear markets can test the resolve of both tenured and new investors, history also shows that they're the ideal opportunity to go hunting for bargains. No matter how bad things may appear for the leading indexes, a bull market rally eventually recoups all that was lost.
In particular, the beatdown the Nasdaq Composite has taken has made growth stocks quite attractive. What follows are five amazing growth stocks you'll regret not buying during the Nasdaq bear market dip.
The first phenomenal growth stock that's begging to be bought during the Nasdaq bear market decline is fintech stock PayPal Holdings (PYPL 0.33%). Even though historically high inflation threatens to reduce the discretionary spending capacity of low earners, the future for digital payments is bright.
According to a report from Fortune Business Insights, the global digital payment market is expected to reach nearly $20 trillion by 2026. This would equate to a roughly 24% average annual growth rate since 2018. PayPal is one of the leading players in the digital payment space.
Despite higher inflation and weaker domestic/global growth prospects weighing on consumer spending, the total payment volume traversing PayPal's digital platforms keeps climbing by a double-digit percentage on a constant-currency basis. What's more, PayPal's active accounts are more engaged than ever. Over the trailing 12 months (TTM) ended June 30, 2022, the average active account completed close to 49 transactions. That compares to around 41 transactions per TTM at the end of 2020. Since this is a fee-driven operating model, more transactions should lead to higher gross profit.
PayPal's innovation can't be overlooked, either. The company recently introduced monthly payment options to its buy now, pay later (BNPL) services for large purchases. It furthers PayPal's BNPL ambitions following its acquisition of Japan's BNPL company Paidy last year.
At less than 18 times Wall Street's forecast earnings for 2023, PayPal has pretty much never been cheaper.
A second incredible growth stock you'll be kicking yourself over if you don't buy it on the Nasdaq bear market dip is biotech stock Exelixis (EXEL 1.55%). Despite being weighed down by poor market sentiment, Exelixis has a number of catalysts that can eventually push its share price significantly higher.
It's no secret that leading cancer drug Cabometyx is what makes Exelixis tick. Cabometyx is approved to treat first- and second-line renal cell carcinoma and previously treated but advanced hepatocellular carcinoma. These indications are enough to lift the company's lead drug to more than $1 billion in annual sales. Improved cancer screening diagnostics and strong pricing power should push this figure steadily higher.
However, Cabometyx is also being examined in dozens of ongoing clinical trials. While they won't all be successful, there's a really good chance of label expansion opportunities increasing Cabometyx's long-term utility.
Something else to consider is that Exelixis is swimming with cash -- about $2 billion in cash, cash equivalents, and restricted cash and equivalents, as of June 30. This hearty capital position has allowed the company to reignite its internal research engine and forge collaborative partnerships to expand its drug pipeline.
A forward price-to-earnings ratio of less than 15 simply doesn't do justice to a biotech stock offering sustainable double-digit sales growth.
The third amazing growth stock investors will regret not scooping up as the Nasdaq plunges is China-based internet search giant Baidu (BIDU 2.65%). Although regulatory overhangs and China's zero-COVID-19 strategy have acted as cement weights on shares of Baidu in recent quarters, the company's clear-cut competitive advantages make it a no-brainer buy at depressed levels.
To begin with, Baidu accounts for the lion's share of internet searches in China. According to data from GlobalStats, Baidu's nearly 66% share of China's internet search market in August was more than six times higher than Microsoft's Bing, its next-closest competitor. Because the Chinese economy spends a substantial amount of time expanding relative to contracting, Baidu is able to command superior ad-pricing power for its internet search engine.
However, it's Baidu's investments beyond its foundational cash-cow segment that could really drive its valuation higher. In particular, the company has invested heavily in its artificial intelligence (AI)-driven cloud and AI-based intelligent driving solutions. The company's non-online marketing revenue (i.e., ventures that don't include internet search) delivered 22% sales growth during an especially weak second quarter for China-based businesses.
With over four times as much cash, restricted cash, and short-and-long-term investments on its books as various forms of debt, Baidu is in excellent financial shape as well. Currently trading around 12 times Wall Street's forecast earnings for 2023, Baidu looks like a screaming bargain.
A fourth sensational growth stock you'll regret not buying on the Nasdaq bear market decline is U.S. cannabis multi-state operator (MSO) Cresco Labs (CRLBF -1.16%). Though Wall Street has been less than pleased with Washington's lack of progress regarding federal cannabis reform, Cresco Labs is getting more than enough of a boost from state-level legalizations.
Like most MSOs, Cresco is aiming to make a name for itself as a national retailer. As of August, the company had 51 operating dispensaries in 10 states. While it's targeting a number of high-dollar markets, Cresco has wisely entered a handful of limited-license states. Markets where dispensary license issuance is capped should allow Cresco to garner a following and build up its brands without the fear of being overrun by an MSO with deeper pockets.
Furthermore, Cresco is in the midst of a transformative acquisition that'll soon close. When the all-share buyout of MSO Columbia Care is complete, the combined company will have more than 130 operating dispensaries in 18 legalized states. Overnight, Cresco should become a leading MSO in terms of annual sales.
But the true differentiator for Cresco Labs is its industry-leading wholesale operations. Wall Street typically isn't a fan of wholesale cannabis because of its weaker margins. However, Cresco has serious volume on its side. Since it possesses a cannabis distribution license in California, it's able to place its proprietary pot products in more than 575 dispensaries throughout the Golden State.
A fifth and final amazing growth stock you'll regret not buying on the Nasdaq bear market dip is payment processor Visa (V 0.18%). While Visa is facing many of the same inflationary and recessionary headwinds as PayPal in the short run, it's well positioned to excel over the long term.
Like virtually all financial stocks, Visa is cyclical. This means it struggles when recessions crop up and thrives during periods of economic expansion. The thing is, periods of expansion last substantially longer than contractions, which is what allows Visa to expand right along with the U.S. and global economy.
Visa also finds itself in the pole position in the leading market for consumption in the world (U.S.). As of 2020, Visa held a 54% share of credit card network purchase volume in the U.S. and was the only major payment processor to gobble up market share following the Great Recession (2007-2009).
As I've previously noted, Visa's overseas opportunities are abundant, too. It's been able to expand its reach by acquisition (e.g., Visa Europe in 2016) and has plenty of runway to organically infiltrate the Middle East, Africa, and Southeastern Asia, where cash is still king.
But the feather in Visa's cap might be the fiscal prudence of its management team. This is a company that avoids lending and strictly sticks to processing payments. By not lending, Visa avoids the direct pain of credit delinquencies and loan losses that arises during recessions. Since Visa doesn't have to set aside capital to cover any type of loan losses, it bounces back much faster than most financial stocks from an economic downturn.