When examined over multiple decades, Wall Street is a bona fide moneymaker. But on a year-to-year basis, the stock market can be unpredictable. Whereas 2021 featured minimal corrections and big gains for the broader market, last year produced the worst returns for the major stock indexes in more than a decade. The technology-focused Nasdaq Composite (^IXIC 2.02%) endured quite the spanking, with the index shedding 33% of its value.
But as the long-term performance of these major indexes has shown time and again, corrections, crashes, and bear markets are a surefire opportunity for patient investors to go shopping. That's especially true when it comes to growth stocks.
What follows are five magnificent growth stocks you'll regret not buying during the Nasdaq bear market dip.
Image source: Getty Images.
Nio
The first phenomenal growth stock begging to be bought as the Nasdaq tumbles is China-based electric-vehicle (EV) manufacturer Nio (NIO 8.72%). Although Nio is currently losing money and has contended with a plethora of supply chain issues, a number of favorable catalysts are now working in its favor.
To start with, China has reversed course on its stringent zero-COVID strategy. Though it could take a couple of quarters for China's population to develop some level of natural or vaccine-related immunity to COVID-19, the important takeaway here is that it removes unpredictable lockdowns that led to persistent parts supply shortages. In short, Nio finally has a green light to up its production capacity.
To add to this point, Nio's production needle has been pointing higher, even with these challenges. Prior to January 2023, where production totals are reduced by closures tied to the Chinese New Year, Nio had a seven-month streak of delivering 10,000 or more EVs. It's not out of the question that Nio could be pushing out 50,000 EVs/month by the first quarter of 2024.
Nio is also leading with traditional and out-of-the-box innovation. The ET5 and ET7 sedans, which hit showrooms last year, offer as much as 621 miles of range with the top-tier battery upgrade. That's practically double the estimated range of Tesla's standard Model 3 sedan.
What's more, Nio is positioning itself for future success with its battery-as-a-service subscription (BaaS). With BaaS, buyers receive a discount on their EV purchase and can swap/upgrade their batteries at the more than 1,300 swap stations operated by Nio. In turn, Nio locks in the loyalty of its early buyers and generates high-margin monthly subscription revenue.
Exelixis
A second special growth stock that you'll regret not scooping up during the Nasdaq bear market decline is biotech stock Exelixis (EXEL 0.72%). Despite the occasional clinical-trial failure, which happens to all top drug companies, Exelixis and its lead cancer drug (Cabometyx) are poised for ongoing success.
For example, even though blockbuster drug Cabometyx didn't meet its primary endpoint when combined with Roche's Tecentriq in a late-stage trial for patients with previously treated metastatic non-small cell lung cancer, Exelixis's key therapy is being examined in around six dozen total trials.
Even a small handful of successes is all that's needed to expand Cabometyx's label. A combination study with rival Bristol Myers Squibb's cancer immunotherapy Opdivo has already led to a label expansion to include first-line renal cell carcinoma.
In addition to label expansion opportunities and the strong pricing power of Cabometyx, which is producing sustained double-digit sales growth, Exelixis is able to use its abundant cash flow to reinvest in its future. This involves developing novel therapies, as well as forming collaborations to jointly examine new treatments.
Furthermore, Exelixis closed out 2022 with $1.31 billion in cash, cash equivalents, and short-term investments, along with $757 million in long-term investments. It has more than enough capital to fuel its internal research engine and perhaps even make acquisitions to expand its product portfolio or pipeline.
Image source: Pinterest.
The third magnificent growth stock you'll regret not adding to your portfolio during the Nasdaq bear market dip is social media stock Pinterest (PINS 4.04%). Although a weakening ad environment has weighed on Pinterest's valuation for the past year, this is a company with a rock-solid foundation.
Something investors should understand about the advertising industry is that it's nothing more than a numbers game. Though recessions and contractions are a normal part of the economic cycle, they tend to be short lived. This means ad-driven businesses like Pinterest benefit from disproportionately long periods of economic expansion.
What's been particularly intriguing about Pinterest has been its ability to monetize its user base in virtually any economic environment. Even with the ad market weakened, Pinterest delivered 10% average revenue per user (ARPU) growth worldwide in 2022. What the company's ARPU data clearly shows is that advertisers are willing to pay a premium to get their message in front of Pinterest's 450 million potential shoppers.
The other special thing about Pinterest is that it won't be hurt by users if they choose to turn off data-tracking tools when downloading the app. While most social media sites rely heavily on likes and other data-tracking tools to help advertisers targets users with their message(s), Pinterest's entire platform is based on its users willingly and freely sharing what interests them.
This is critical info that gives Pinterest pricing power with advertisers. It also sets Pinterest up to become an eventual e-commerce player.
Mastercard
A fourth unique growth stock you'll be kicking yourself for not buying during the Nasdaq bear market decline is payment processor Mastercard (MA 0.07%). While a recession would likely lead to reduced consumer and enterprise spending, Mastercard has far too many competitive advantages for long-term investors to pass up.
Just as I described with Pinterest, Mastercard is another beneficiary of the "numbers game." Since recessions don't last very long, Mastercard is able to grow in lockstep with the U.S. and global economy. As spending levels increase, Mastercard's fee-based business thrives.
Despite being one of the largest financial stocks in the world by market cap, Mastercard can sustain double-digit sales growth through at least mid-decade, if not well beyond. There are a number of emerging market regions that remain underbanked, such as Southeast Asia and the Middle East, that'll allow Mastercard to increase its organic growth rate. Meanwhile, it's established itself as the clear No. 2 in the U.S. -- the leading market for consumption worldwide.
Mastercard's fiscally prudent management team is another reason the company continues to outperform. Although Mastercard could have easily moved into lending, it's chosen to only focus on payment processing. This decision to shun lending means it's not hurt by loan losses when recessions arise. Not having to set aside capital to cover possible loan losses is a massive advantage over many of its payment-processing peers.
CrowdStrike Holdings
The fifth magnificent growth stock you'll regret not buying during the Nasdaq bear market dip is cybersecurity stock CrowdStrike Holdings (CRWD 2.03%). In spite of short-term recession fears weighing on the company, CrowdStrike's solutions and operating performance demonstrate it's the stock to own in cybersecurity.
Before getting into company specifics, it's worth noting that cybersecurity is effectively a basic necessity service. Businesses have been shifting their data online and into the cloud at a rapid pace since the onset of the pandemic. No matter how well or poorly the stock market or economy perform, businesses need their sensitive data protected. Put another way, CrowdStrike and its cybersecurity peers are, operationally, well protected from a recession.
The company's cloud-native Falcon security platform is what makes CrowdStrike tick. Falcon relies on artificial intelligence (AI) and machine-learning to grow smarter and more efficient over time. Overseeing trillions of events weekly has made Falcon one of the most-reliable end-user protection solutions. It's why the company's gross retention rate is now above 98%.
The other secret sauce to CrowdStrike's earnings growth is its uncanny ability to get existing customers to spend more. Although its subscriber growth has been impressive, having 60% of its 21,146 subscribers paying for at least five cloud module subs is why its adjusted subscription gross margin is near 80%. Sustaining adjusted subscription margins this high should allow earnings growth to outpace sales growth for the foreseeable future.
