Regardless of whether you're a new or tenured investor, the past 15 months have proved challenging. Last year, each of the three major U.S. stock indexes entered a bear market, with the growth-oriented Nasdaq Composite (^IXIC 1.75%) being the caboose. The Nasdaq Composite ended 2022 lower by 33%.
While steep losses can cause investors to run for the hills, bear markets are, historically, the ideal time to consider putting money to work. No matter how long or steep the declines have been in the major indexes throughout history, they've always eventually given way to new highs. In other words, big drops in the Nasdaq Composite are an open invitation for long-term investors to pounce.
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This is an especially attractive time to put money to work in innovative growth stocks that are now trading at a discount. What follow are five sensational growth stocks you'll regret not buying on the Nasdaq bear market dip.
PayPal Holdings
The first awe-inspiring growth stock you'll regret not scooping up when you had the chance during the Nasdaq bear market decline is fintech company PayPal Holdings (PYPL 1.84%). Although PayPal's stock has been walloped by inflationary fears, the company finds itself on the leading edge of a rapidly growing digital payment wave.
Based on estimates from Adroit Market Research, the worldwide fintech market is expected to grow by 20.5% on a compound annual basis by 2030. In nominal dollars, we're talking about fintech revenue soaring from $111 billion in 2020 to $700 billion by 2030 -- and PayPal is in the pole position.
Even with U.S. gross domestic product retracting in the first half of 2022, PayPal still managed to grow total payment volume (TPV) traversing its networks (PayPal and Venmo) by 13%, excluding currency movements.
But it's not just TPV growth that signals PayPal is poised for continued success. The increased engagement of its active accounts is an even bigger indicator. Between the end of 2020 and the end of 2022, the average number of digital transactions completed by active accounts over the trailing-12-month period surged from 40.9 to 51.4. Since PayPal is a usage-driven network, more transactions should equate to higher gross profit.
Additionally, PayPal is being mindful of its shareholders while sustaining a double-digit growth rate. CEO Dan Schulman outlined plans to save at least $1.3 billion in operating expenses in 2023 and announced a share buyback of up to $15 billion last year.
PubMatic
A second magnificent growth stock that's begging to be bought as the Nasdaq plunges is small-cap adtech stock PubMatic (PUBM 3.56%). In spite of short-term ad spending weakness, PubMatic is perfectly positioned to take advantage of an ongoing shift to digital advertising.
PubMatic is a sell-side platform (SSP) in the programmatic ad space. In plainer terms, it provides a platform to help publishing companies sell their digital display space. It's tasked with getting the most per ad for its publishers while also providing a relevant content experience for end users. With ad dollars pouring into the digital ad arena, PubMatic finds itself one of the few remaining major SSPs following a wave of consolidation.
Through 2025, global digital ad spending is expected to grow by 14% on a compound annual basis. But considering that PubMatic generates the bulk of its revenue from connected-TV and mobile programmatic ad spending, which are, respectively, expected to grow by 27% and 20% on a compound annual basis through middecade, PubMatic's organic growth rate shouldn't have any trouble topping the industry average. Not surprisingly, PubMatic continues to pick up market share within the sell-side digital ad industry.
Perhaps most important, PubMatic's management team made the (in hindsight) wise decision to build out its own cloud-based infrastructure. Not having to rely on a third-party platform will allow PubMatic to keep more of its revenue as it scales, which'll ultimately boost the company's operating margin.
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NextEra Energy
The third sensational growth stock you'll regret not adding during the Nasdaq bear market drop is none other than electric utility NextEra Energy (NEE 1.19%). Though electric utilities are traditionally slow-growing businesses, Wall Street's forecast calls for NextEra to grow its adjusted earnings by an average of 11% over the next five years. That's most definitely a growth stock within the utility sector.
NextEra's not-so-secret recipe for success is its renewable energy portfolio. Out of the company's 65 gigawatts (GW) of capacity, 30 GW come from renewables. This includes 22 GW from wind power and 5 GW from solar, both of which are No. 1 globally. While investments in green energy projects aren't cheap, they've helped dramatically lower electricity generation costs and are boosting adjusted earnings growth well above that of its peers.
NextEra isn't done expanding its clean energy portfolio, either. Based on signed contracts and company expectations, as of January 25, 2023, between 32.7 GW and 41.8 GW of new green energy projects are forecast to be built between the beginning of 2023 and the end of 2026.
On top of its world-leading renewables portfolio, NextEra Energy also benefits from the predictability of its regulated utility operations. Regulated utilities avoid the volatility associated with wholesale electricity pricing. Further, utilities tend to be monopolies or duopolies in the areas they service. This all but ensures predictable operating cash flow in any economic environment.
Exelixis
A fourth awe-inspiring growth stock you'll regret not snagging during the Nasdaq bear market fall is biotech stock Exelixis (EXEL 2.36%). Despite a recent late-stage failure for lead cancer drug Cabometyx, Exelixis is staring down a promising future.
Currently, Cabometyx is approved to treat first- and second-line renal cell carcinoma, as well as previously treated, advanced hepatocellular carcinoma. These indications alone are enough to push Cabometyx above $1 billion in annual sales. But Exelixis isn't done. It's conducting in the neighborhood of six dozen clinical studies for Cabometyx as a monotherapy or combination treatment. While some of these studies will fail, even a handful of successes can expand the drug's label and potentially grow it to north of $2 billion in annual revenue.
The success of Cabometyx is providing the company with abundant cash flow that it's been using to fund internal research, conduct ongoing clinical trials, and forge collaborative drug-development partnerships. Exelixis's most promising therapies include zanzalintinib, a next-generation oral tyrosine kinase inhibitor, and XB002, an antibody-drug conjugate targeting tissue factor on tumor cells.
Even with all of this research and development ongoing, Exelixis still closed out 2022 with $2.07 billion in cash, cash equivalents, and restricted cash equivalents and investments. With a veritable war chest at its disposal, management recently authorized a share repurchase program of up to $550 million.
Nio
The fifth sensational growth stock you'll regret not buying on the Nasdaq bear market dip is China-based electric-vehicle (EV) manufacturer Nio (NIO 2.38%). While losses for most EV makers are likely to continue, a key headwind for Nio has begun to abate.
The biggest hurdle for Nio has been China's zero-COVID strategy. For three years, China attempted to curtail the spread of COVID-19 infection through stringent provincial lockdowns. However, following protests this past December, the zero-COVID strategy was abandoned. Although it'll take a few quarters for China's residents to build up some degree of immunity to the virus that causes COVID-19, a reopened Chinese economy should resolve the supply constraints that hampered EV makers like Nio.
What makes Nio particularly attractive to opportunistic long-term investors is its innovation. The company's ET7 and ET5 sedans, which hit showrooms last year, are accounting for the majority of Nio's monthly deliveries and offer a purported long-drive range of 621 miles (1,000 kilometers) with the top-tier battery upgrade.
Nio's out-of-the-box thinking should also come in handy when it comes to increasing long-term operating margin and keeping early buyers loyal to the brand. The battery-as-a-service (BaaS) subscription, introduced in August 2020, provides a discount on the purchase price of a Nio EV, as well as the ability for buyers to charge, swap, and upgrade their batteries in the future. For Nio, BaaS generates high-margin, recurring revenue.
Nio has a real shot to gobble up a sizable percentage of China's EV-based auto market share in the years to come.
