As much as we'd like the stock market to move higher and never falter, it's important to recognize that corrections, crashes, and bear markets are a normal part of the long-term investing cycle. Last year, all three of the major U.S. stock indexes plunged into a bear market, with the tech-focused Nasdaq Composite (^IXIC 1.93%) getting hit hardest -- a 33% decline when the finish line was crossed.
While bear markets can be unpleasant in the short run and tug on investors' heartstrings, they're also, historically, the ideal time for patient investors to pounce. Even though we can't consistently forecast when a bear market will begin, how long it'll last, or how steep the decline will be, we do know that all previous bear markets have eventually been cleared away by a bull market rally. In other words, bear market volatility is a red-carpet invitation for opportunistic investors.
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With growth stocks taking it on the chin, they're a logical place for long-term investors to look for bargains. What follows are five jaw-dropping growth stocks you'll regret not buying on the Nasdaq bear market dip.
CrowdStrike Holdings
The first awe-inspiring growth stock that's ripe for the picking during the Nasdaq bear market decline is end-user cybersecurity company CrowdStrike Holdings (CRWD 2.24%). Though recessionary fears have weighed on CrowdStrike in the short run, it's well positioned with clear-cut competitive advantages over the long term.
On a macro basis, investors should be aware that cybersecurity solutions have evolved into basic necessity services. Hackers and robots don't take vacation days just because the U.S. economy hits a speed bump. Businesses of all sizes with an online and/or cloud-based presence are increasingly relying on third-party providers like CrowdStrike to protect their sensitive data.
The engine that powers CrowdStrike's incredible growth is Falcon, the company's cloud-native platform that's reliant on artificial intelligence (AI). Falcon is overseeing trillions of weekly events, which is helping it become smarter at recognizing and responding to potential threats over time. Despite CrowdStrike's services being costlier than its peers', the company's gross retention rate of 98% speaks volumes about Falcon's efficacy.
Although CrowdStrike hasn't had any trouble gaining new subscribers, the most intriguing aspect of its ascension is the add-on sales from existing clients. Six years ago, a single-digit percentage of its 450 clients had purchased four or more cloud-module subscriptions. Today, 62% of its more than 23,000 subs have purchased five or more cloud-module subscriptions. These add-on sales are the key reason CrowdStrike's subscription gross margin is near 80%.
Fiverr International
A second stellar growth stock you'll regret not adding to your portfolio is online-services marketplace Fiverr International (FVRR 2.29%). Despite near-term worries of a possible U.S. recession weakening the labor market, Fiverr has three key catalysts it brings to the table.
To start with, the labor market has been permanently shifted in the wake of the COVID-19 pandemic. While some people have returned to the office, more are choosing to work remotely than ever before. This means Fiverr's freelancer marketplace is perfectly positioned to take advantage of this structural change in the workforce.
Another reason Fiverr stands out is the way its freelancers market their work. Whereas pricing tasks on an hourly basis is commonplace at competing online-service marketplaces, Fiverr freelancers price their work as a package. The price transparency of Fiverr's platform is helping to push both spend per buyer and the aggregate number of buyers higher.
The third differentiating factor is Fiverr's take-rate -- i.e., the percentage of each deal negotiated on its platform that it gets to keep. Most competing freelancer marketplaces keep around 15% of the revenue tied to negotiated deals. Fiverr's take-rate continues to climb and hit 30.2% during the fourth quarter. Fiverr isn't scaring away buyers or freelancers, and a 30%-plus take-rate shows it'll be substantially more profitable than its peers.
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Intuitive Surgical
The third jaw-dropping growth stock you'll be kicking yourself for not buying on the Nasdaq bear market plunge is robotic-assisted surgical system developer Intuitive Surgical (ISRG 0.93%). Though COVID-19 has caused some optional surgical procedures to be pushed to a later date, Intuitive Surgical's dominance of the robotic-assisted surgical landscape, along with its operating model, sets this company up for long-term success.
As of the end of 2022, Intuitive Surgical had installed 7,544 of its da Vinci surgical systems in hospitals and surgical centers worldwide. While this might sound like a pedestrian figure, it's far more than its competitors. For a two-decade stretch, da Vinci was one of the only soft-tissue assistive surgical systems available.
What's more, it takes a considerable amount of time to train surgeons to use da Vinci, and it's pricey to purchase these systems -- $500,000 to $2,500,000 per system. The tangible expense and opportunity cost associated with purchasing a da Vinci surgical system makes it highly unlikely that hospitals or surgical centers will switch to a competing device.
However, the real lure is Intuitive Surgical's razor-and-blades operating model. The company's da Vinci operating system may be pricey, but it's intricate to build and generates only mediocre margins. But once Intuitive has clients locked into its surgical system, it generates copious amounts of high-margin revenue by selling instruments with each procedure and servicing its systems. As time passes, these higher-margin sales channels are becoming a larger percentage of total revenue.
Fastly
A fourth marvelous growth stock you'll regret not scooping up during the Nasdaq bear market swoon is edge computing company Fastly (FSLY 3.15%). In spite of ongoing losses, new leadership appears to have Fastly on the fast track to sustained double-digit sales growth and eventual profits.
Fastly is best known for its work as a content-delivery network. It's tasked with getting data from the edge of the cloud to end users as quickly and securely as possible. Both the rise of the metaverse and the hybrid work environment in the wake of the pandemic are catalysts that can increase the amount of data traversing Fastly's network. Since this is a usage-based network, more data movement equates to more revenue for Fastly.
Although its growth rate has slowed a bit, the vast majority of Fastly's key performance metrics remain rock solid. Its total customer count has grown by 500 over a seven-quarter stretch (21 months, ended Dec. 31, 2022), with average enterprise customer spend (over the last 12 months) increasing by 11% to $782 over that same span. More importantly, Fastly's dollar-based net expansion rate (DBNER) is climbing, once again, and hit 123% during the fourth quarter. A DBNER of 123% implies that existing clients spent 23% more during the fourth quarter than they did in the comparable quarter last year.
Lastly, new CEO Todd Nightingale should inspire confidence in shareholders. Nightingale was hired to tighten the belt at money-losing Fastly, further innovation, and keep the customer count needle moving in the right direction. Nightingale is, thus far, firing on all cylinders in his young tenure.
Baidu
The fifth jaw-dropping growth stock you'll regret not buying on the Nasdaq bear market dip is China's leading internet search provider Baidu (BIDU 1.65%). Though multiple headwinds have held Baidu back for the past three years, many of these hurdles have now been lifted.
For example, China's zero-COVID mitigation strategy resulted in unpredictable and stringent lockdowns that crippled supply chains for most sectors and industries. With China removing its stringent COVID-19 restrictions, the country's economy is free to thrive once again. Though it could take a few quarters for China's residents to build up immunity to COVID-19, moving beyond the zero-COVID strategy will benefit the country and Baidu.
What makes Baidu such a phenomenal stock to buy is its dominance of the Chinese internet search space. As of February, it accounted for approximately 56% of all search share in its home market. This makes it the go-to choice for advertisers wanting to target their message(s) and logically gives the company strong ad-pricing power.
But don't overlook AI as a major future growth driver for Baidu. In addition to the company's recently released AI-powered chatbot, known as Ernie Bot, Baidu AI cloud services and AI-based intelligent driving solutions are delivering double-digit sales growth in the company's nonmarketing sales channel.
With economic activity in China ramping back up, Baidu stock remains reasonably cheap at 13 times Wall Street's forward-year consensus earnings.
