Unless you're a short-seller, 2022 probably hasn't been a banner year. Since hitting their respective all-time highs between November 2021 and the first week of January, all three major U.S. stock indexes have plunged into a bear market. None has fared worse than the tech-centric Nasdaq Composite (^IXIC +1.23%), which has endured a peak-to-trough drop of as much as 38%.
While it's perfectly normal for investors to have their resolve tested during bear markets, it's important to recognize that these sizable declines represent unique opportunities for patient investors to buy into incredible businesses at a discount. That's because every double-digit drop in the major U.S. stock indexes, including the Nasdaq Composite, has eventually been cleared away by a bull market.
Image source: Getty Images.
The 2022 bear market is an especially good time to scoop up growth stocks at favorable prices. What follows are five stunning growth stocks you'll regret not buying on the Nasdaq bear market dip.
The Trade Desk
The first amazing growth stock investors will be kicking themselves for not buying during the Nasdaq bear market decline is adtech company The Trade Desk (TTD +5.53%). Although ad spending tends to be one of the first things hit when the U.S. and global economy weaken, The Trade Desk has demonstrated how valuable its technology and positioning are within the digital ad realm.
The Trade Desk is what's known as a demand-side provider, which is a fancy way of saying that it helps advertisers create digital ad campaigns using its cloud-based platform. With advertisers shifting their focus from print and billboard messaging to various digital channels, The Trade Desk is well positioned to capitalize on the lion's share of ad spending growth throughout the decade.
This is especially true of the connected TV (CTV) space. When given a choice, most consumers will opt for a cheaper ad-supported option. The Trade Desk is empowering advertisers by utilizing artificial intelligence (AI) and a mountain of targeted analytics, as well as relying on partnerships, to give CTV-focused advertisers the best possible chance to succeed. Plus, with the CTV ad channels not dominated by a single entity, the marketplace is more conducive to competitive pricing. That should make programmatic advertising via CTV an even more enticing proposition.
Considering that The Trade Desk is very profitable and sitting on more than $1.3 billion in cash, cash equivalents, and short-term investments, with no debt, it looks like a screaming buy following its latest pullback.
NYSE: SQ
Key Data Points
Block
The second jaw-dropping growth stock you'll regret not scooping up as the Nasdaq plunges is fintech stock Block (SQ +3.25%), the company formerly known as Square. Even though Bitcoin losing three-quarters of its value has taken the wind out of the company's cryptocurrency trading operations, there's a lot for long-term investors to be excited about.
To begin with, the company's Square Ecosystem remains its foundational gross profit driver. This is the operating segment that provides merchants with point-of-sale devices, loans, and analytics to help them grow their business. During a very challenging third quarter, the Square Ecosystem recognized $50 billion in gross payment volume (GPV). To offer some context, Square did $6.5 billion in GPV in the entirety of 2012. It's now pacing an annual run rate of $200 billion in GPV.
But the sheer dollar amount of GPV isn't what's most impressive. Rather, it's that approximately 40% of GPV in its latest quarter came from businesses with $500,000 or more in annual GPV. In other words, bigger businesses are using the Square Ecosystem. Since this is a fee-based segment, more transactions from bigger companies should equate to sustainably higher gross profit.
Putting aside slightly weaker Bitcoin trading revenue, digital peer-to-peer payment platform Cash App is also firing on all cylinders. Cash App is now up to 49 million active users, with gross profit per user many multiples higher than the cost to bring in each new user. Since digital payments are still in their infancy, Cash App looks to become Block's leading cash-flow generator sooner than later.
Image source: Getty Images.
CrowdStrike Holdings
A third stunning growth stock you'll regret not adding on the Nasdaq bear market decline is cybersecurity company CrowdStrike Holdings (CRWD +6.13%). Despite growth stocks with premium valuations being hit hard in 2022, end-user cybersecurity stock CrowdStrike has demonstrated that its premium is well deserved.
As I pointed out recently, cybersecurity stocks get the macro benefit of having evolved into a basic necessity service. It doesn't matter how poor investor sentiment is or how the U.S. economy performs -- hackers and robots are always trying to steal sensitive data. This leads to a base level of demand for cybersecurity stocks.
However, CrowdStrike isn't an ordinary cybersecurity company. It's the leading provider of end-user security solutions. The company's Falcon security platform was built in the cloud and relies on AI and machine learning to grow smarter at recognizing potential threats over time. Although it's already high, CrowdStrike's gross retention rate has crept above the 98% level, which demonstrates the value of its services.
Arguably even more impressive has been CrowdStrike's ability to encourage existing customers to purchase new cloud-module subscriptions. When fiscal 2017 came to a close, fewer than 10% of its 450 clients had purchased four or more cloud-module subscriptions. Midway through fiscal 2023, 59% of its nearly 19,700 clients have purchased at least five cloud-module subscriptions. Add-on sales are the not-so-secret sauce responsible for lifting CrowdStrike's adjusted subscription gross margin to nearly 80%.
OTC: PLNH.F
Key Data Points
Planet 13 Holdings
The fourth phenomenal growth stock you'll regret not buying during the Nasdaq bear market is U.S. marijuana stock Planet 13 Holdings (PLNH.F +3.70%). Even without cannabis reform progress on Capitol Hill, Planet 13 has ample opportunities to make its patient shareholders a lot richer.
Perhaps the top reason to buy Planet 13 stock is the differentiation it brings to the table. This isn't your run-of-the-mill multi-state operator (MSO) attempting to open dozens of dispensaries in 10 to 20 states where marijuana is legal. Rather, Planet 13 has only three operating dispensaries in two states. However, two of these dispensaries are unlike anything cannabis enthusiasts have ever seen before.
The Las Vegas SuperStore, just west of the Strip, is a 112,000-square-foot location with unparalleled product and paraphernalia selection, a café, and a consumer-facing processing center. Meanwhile, the Orange County SuperStore in Santa Ana, Calif., just 15 minutes from Disneyland, covers 55,000 square feet (30% of which is allotted for retail sales). These dispensaries focus on the experience as much as they do on selling pot products. It's an operating model that hasn't been duplicated in the cannabis space.
Planet 13's expansion also involves setting up neighborhood-concept stores in Florida's medical marijuana-legal market. By the end of 2023, a half-dozen dispensaries (each totaling 4,750 square feet) should be open in the highly lucrative Sunshine State. This expansion into Florida, coupled with its unique SuperStore concept, should help Planet 13 hit recurring profitability by as soon as next year.
NASDAQ: BIDU
Key Data Points
Baidu
A fifth stunning growth stock you'll regret not buying during the Nasdaq bear market dip is China-based internet search kingpin Baidu (BIDU +3.32%). Despite China's zero-COVID strategy wreaking havoc on near-term economic growth prospects, Baidu's foundational and ancillary segments offer plenty of promise for long-term investors.
Like Block, Baidu has its core operating segment to fall back on. In this instance, I'm talking about its leading internet search engine. Based on data provided by GlobalStats, Baidu accounted for just shy of 60% of all search market share in China during October. That's 44 percentage points higher than the next-closest competitor. The important takeaway here is that Baidu is the logical choice for advertisers looking to reach consumers in China.
But what's arguably even more impressive is its ancillary business segments. Baidu's AI Cloud and AI-intelligent driving units helped non-marketing revenue jump 25% year over year in the third quarter. Cloud growth is still in its very early stages, while Apollo Go is the most popular autonomous driving operation in the world.
Although there are added regulatory uncertainties that come with investing in China stocks, these potential headwinds appear to be more than baked in with shares of Baidu trading at just 10 times Wall Street's forecast earnings for 2023.
