The Nasdaq Composite has been mired in a bear market now for more than a year. Tech stocks have faced a reckoning following their pandemic boom when many soared on the assumption that their rapid growth rates would continue. But that didn't happen. Meanwhile, the surge in interest rates has pushed investors away from growth stocks, further exacerbating the sell-off.
While the Nasdaq has bounced off its lows at the end of last year, there's no telling when the bear market will end as the Fed is expected to raise interest rates again, and inflation remains elevated. However, savvy investors know that bear markets offer great buying opportunities.
Let's take a look at two stocks in particular that seem ripe for buying now.
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1. Expedia
The travel sector has continued to remain robust in the face of the bear market and recessionary threats. With COVID-19 travel restrictions finally removed, Americans and others have been eager to make up for lost time and have been spending on going places.
That's been a boon for travel operators like Expedia (EXPE 0.33%) as the online travel agency has now surpassed pre-pandemic demand levels. In fact, the company just said that summer flight searches are up 25% from this time last year.
Expedia, which owns a number of travel sites, including Hotels.com, Hotwire, Orbitz, Travelocity, and others, is coming off a fourth-quarter 2022 report that showcased record results, with revenue for the quarter up 15% to $2.6 billion and gross bookings rising 17% to $20.5 billion.
The company has changed its business model to focus on unifying its brands and providing a comprehensive service to travelers rather than just trying to maximize bookings. It's also invested in its app and a new loyalty program, which seem to be driving repeat bookings.
As a result, the stock looks well-positioned for steady growth over the long term, and it should also benefit from trends like remote work, which have helped drive travel demand to new records.
Best of all, Expedia stock is cheap at a trailing price-to-earnings ratio of 13.5, meaning the stock only needs to deliver modest growth to be a winner from here.
2. Etsy
Etsy (ETSY 0.49%) is an excellent example of a pandemic winner whose stock has since collapsed as growth ground to a halt. Plus, the company had to take a $1 billion write-down on its acquisitions of Depop and Elo7 in 2021, admitting it overpaid for those companies as part of its strategy to expand beyond the core Etsy.com marketplace.
The stock is now down 65% from its peak in late 2021, offering a buying opportunity for a stock that still has a promising long-term growth opportunity.
Etsy's recent results might scare away investors as the company posted 9% revenue growth last year. And gross merchandise sales, or the total value of goods sold on its platform, were down 1.3% as it faced difficult comparisons with 2021.
Still, investors should expect its growth rate to reaccelerate as it's clearly established itself as the leader in handmade and vintage goods sold online. Its marketplace benefits from competitive advantages like network effects. Both buyers and sellers are drawn to the site since it's the largest marketplace for goods like gifts, jewelry, home decor, and apparel.
Etsy is also investing in improving search and discovery on its platform, and making communication between buyers and sellers easier.
Unlike other e-commerce platforms, Etsy is also solidly profitable, posting generally accepted accounting principles (GAAP) net income of $109.5 million in Q4 on revenue of $807 million, giving it a profit margin of 13%, and that's during a year in which the company has struggled.
Looking ahead, the company is expected to return to bottom-line growth this year with analysts calling for earnings per share of $2.64, meaning the stock trades at a forward price-to-earnings multiple of 39, a very reasonable valuation for a unique e-commerce stock that still has a large addressable market to penetrate.
Etsy stock may not rebound until the bear market ends, but there's a lot of upside potential for this growth stock at the current price.
