Investing on Wall Street can sometimes be an adventure. Since the start of 2021, the iconic Dow Jones Industrial Average, benchmark S&P 500, and growth-driven Nasdaq Composite (^IXIC 2.02%) rocketed to new closing highs, subsequently plummeted into a bear market, and have now launched into a new bull market, at least by one definition -- a greater than 20% rally following a bear market decline.
In particular, the innovation-fueled Nasdaq Composite has been especially strong, with the index up 35% year to date, as of July 25.
Image source: Getty Images.
Yet even with this amazing rally, the Nasdaq still sits roughly 12% below its all-time high. In other words, bargains can still be found for those willing to look for them -- especially among growth stocks.
What follows are four unsurpassed growth stocks you'll regret not buying in the wake of the Nasdaq bear market dip.
Walt Disney
The first one-of-a-kind growth stock that you'll be kicking yourself for not buying in the wake of the Nasdaq bear market decline is media company Walt Disney (DIS -0.04%). Though it's not traditionally viewed as a growth stock, Wall Street's forecast for Disney calls for average annual earnings growth of 19% over the next five years. That certainly vaults the House of Mouse into growth stock territory.
On a macro basis, Walt Disney should benefit from a steady dose of normalcy following the worst of the COVID-19 pandemic. With its global theme parks reopened and China ending its controversial zero-COVID mitigation strategy this past December, there's a pathway for a sustained ramp-up in theme park and film entertainment revenue.
But the content is the real key when it comes to Disney. While there are plenty of global theme parks, movies in theaters, and shows to watch on television, no media company offers the depth of characters or the storytelling that Disney brings to the table. Its characters are absolutely irreplaceable, which puts the company in a class of its own.
To add to this point, Walt Disney's unique status within the media and entertainment industry affords it phenomenal pricing power. For example, admission tickets to Disneyland in Southern California have grown at 10 times the U.S. rate of inflation since Disneyland opened in 1955. Likewise, the company has had little pushback raising the monthly subscription price of its multiple streaming services.
Although collective investor sentiment toward Walt Disney is poor at the moment, a forward price-to-earnings ratio of 19, along with sustained competitive edges and a double-digit earnings growth rate, sure looks like a recipe for long-term happiness.
PubMatic
A second unsurpassed growth stock that's begging to be bought in the wake of the Nasdaq bear market drop is adtech stock PubMatic (PUBM 1.75%). Even though recessionary fears have weighed on advertiser spending in the near term, PubMatic finds itself perfectly positioned to take advantage of the fastest-growing trend within the ad arena.
To start with, ad-driven businesses benefit from a simple numbers game. Despite recessions being a normal part of the economic cycle, all 12 recessions after World War II have lasted just two to 18 months. By comparison, most economic expansions go on for years, which means PubMatic is spending far more time expanding than playing defense.
What makes PubMatic special is its focus on digital advertising. It's a sell-side provider (SSP) that helps publishing companies sell their display space using its cloud-based programmatic ad infrastructure. Given the amount of consolidation that has taken place among SSPs, PubMatic is one of the few trusted names left that's meaningfully growing its market share.
The areas PubMatic is focused on represent sustained annual double-digit growth opportunities through the midpoint of the decade, if not well beyond. In particular, the company's connected TV programmatic ad growth has come in well ahead of the industry average.
The cherry on top is that PubMatic designed and built its cloud-based infrastructure. Since it chose not to rely on a third-party provider for its platform, it's able to keep more of its revenue as it scales. This should result in an above-average operating margin, relative to its peers.
Image source: Getty Images.
Fastly
The third unique growth stock you'll regret not adding following the Nasdaq bear market plunge and subsequent bounce back is edge computing company Fastly (FSLY 4.43%). Although Wall Street's tolerance of money-losing growth stocks has been paper-thin since the 2022 bear market, Fastly's management is taking all the right steps to put the company in the profit column sooner rather than later.
Fastly is best known for providing content delivery and security solutions designed to move information from the edge of the cloud to end users as quickly and securely as possible. While businesses of all sizes were moving their data online and into the cloud prior to the pandemic, the pace of this shift has accelerated in a big way over the past three years. For a usage-based business like Fastly, it means a steady uptick in demand for its services and solutions.
Though it's not been a straight-line expansion for Fastly, the company's key performance indicators remain promising. Its total customer count has grown by 405 to 3,100 over the trailing-two-year period, through March 31, while its dollar-based net expansion rate (DBNER) has hovered between 118% and 126% for the past eight reported quarters. The company's DBNER shows that existing customers are spending between 18% and 26% more year over year. In short, as its clients grow, so does their reliance on Fastly's edge-cloud content delivery and security solutions.
Don't overlook the importance of having a time-tested leader as CEO. Todd Nightingale took over the CEO role for Fastly on Sept. 1, 2022, and he's wasted no time focusing on cost reductions and operating efficiency improvements. Whereas Fastly's operating losses once pummeled its stock, Nightingale appears to have the company on track for profitability perhaps as soon as next year.
With a $25 billion total addressable market (as of 2023) and its adjusted gross margin climbing, Fastly looks poised to deliver for its patient shareholders.
Teladoc Health
A fourth unsurpassed growth stock you'll regret not buying in the wake of the Nasdaq bear market dip is telemedicine giant Teladoc Health (TDOC -2.40%). Despite Teladoc grossly overpaying for the acquisition of applied health signals company Livongo Health in 2020, there's a clear path for the company to thrive over the long run.
Keeping with the macro-themed catalysts, healthcare stocks tend to be highly defensive. As much as we'd like to not become ill when it's financially inconvenient, we don't get that choice. Regardless of how well or poorly the U.S. economy or stock market perform, demand for healthcare services remains relatively constant. That's a positive for a company like Teladoc Health.
But what really sets Teladoc apart is the way its virtual visit services and platforms are transforming the way personalized care is administered. Virtual visits tend to be more convenient for patients, and can be especially helpful for physicians who need to keep closer tabs on their chronically ill patients. Ultimately, Teladoc Health's services should lead to improved patient outcomes and lower out-of-pocket costs for health insurers -- a win for all parties involved.
Additionally, the company's membership programs are witnessing steady growth, including its Chronic Care Program and BetterHelp. Chronic Care enrollment, which is primarily focused on people with diabetes, hit an all-time high of 1.07 million, while the number of paying BetterHelp users jumped 17% year over year to 476,000, as of the June-ended quarter.
Best of all, Teladoc has moved past the three large write-downs taken in 2022 and is making progress with regard to tightening its belt. If there are further reductions to stock-based compensation, it may be able to turn the corner to profitability far sooner than anticipated.
