When examined over 20 or more years, Wall Street has effectively been a guaranteed moneymaker. But over shorter timelines, the directional movements of the major indexes can be unpredictable.
For instance, over the past two years, we've witnessed the growth-dependent Nasdaq Composite (^IXIC 2.02%) soar to new highs above 16,000, and subsequently plummet into a bear market that came close to breaking below 10,000 on an intraday basis. Although the Nasdaq has rocketed higher through the first seven months and change of 2023, it still sits 14% below its all-time closing high, set in November 2021.
Image source: Getty Images.
History is quite clear that every correction and bear market is eventually placed into the back seat by a bull market rally. For opportunistic investors with a long-term mindset, it means every notable downdraft in equities represents a buying opportunity. With the Nasdaq Composite having a ways to go to reach a new all-time high, it means bargains are still available -- especially among growth stocks.
What follows are four unforgettable growth stocks you'll regret not buying in the wake of the Nasdaq bear market dip.
Visa
The first exceptional growth stock that investors can confidently buy with the Nasdaq Composite still working its way back from the 2022 bear market is industry-leading payment processor Visa (V -0.23%). Despite recessionary fears weighing on payment companies in the short run, Visa's long list of competitive advantages has made its shares a surefire buy on any pullbacks.
Before diving into company specifics, you should understand that Visa has a numbers game working to its advantage. Even though financial stocks like Visa are cyclical, and therefore prone to weakness during economic downturns, the length of recessions is quite short -- two to 18 months, post-World War II. By comparison, periods of expansion are usually measured in multiple years. Short-term economic worries have always been the perfect time to grab shares of Visa.
What makes Visa one of the top buys in the payment-processing space is its market share. Based on the 2021 annual filings from the four major payment processors in the U.S., Visa accounted for a 52.6% share of credit card network purchase volume. It was also the only one of the four major payment processors to see its market share meaningfully rise following the Great Recession (2007-2009). Between the steady cash flow generated in the U.S. and its undeniable opportunity in underbanked regions abroad, Visa possess sustained double-digit growth potential.
But what might be most interesting about Visa is what the company isn't doing. Though it would likely have no trouble entering the lending arena, management is solely focused on payment facilitation. This strategic choice is especially helpful during economic downturns. Whereas lenders have to set aside capital to cover loan losses, Visa has no direct impact from delinquencies and loan losses.
At 24 times forward-year consensus earnings, Visa's shares are the cheapest they've been in five years.
CrowdStrike Holdings
A second unforgettable growth stock you'll regret not scooping up following the Nasdaq bear market swoon is cybersecurity company CrowdStrike Holdings (CRWD 2.03%). Although CrowdStrike's valuation has been a tough pill for some investors to swallow, the company also possesses the competitive edges needed to grow its market share and produce vastly superior margins and earnings growth, relative to its peers.
Falcon is what makes CrowdStrike "tick." It's the company's cloud-native, artificial intelligence (AI)-driven cybersecurity platform that oversees trillions of events each week. The incorporation of machine learning allows Falcon to effectively grow smarter at its task of protecting end users over time. Even though Falcon is far from the cheapest cybersecurity solution available, CrowdStrike's retention rate has consistently hovered around 98%.
Another factor working in CrowdStrike's favor is add-on sales. Growing its subscriber count from 450 to north of 23,000 in six years is great. But seeing the percentage of its clients utilizing five or more cloud module subscriptions increase to 62% in the most recent quarter from a single-digit percentage six years ago is what's powering its adjusted subscription operating margin higher.
If you need another reason to buy into the CrowdStrike growth story, consider that cybersecurity solutions are a practical necessity. With businesses moving their data online and into the cloud at a breakneck pace following the pandemic, there's a need for data protection in any economic environment.
With CrowdStrike expected to more than triple its earnings per share (EPS) between fiscal 2023 and fiscal 2027 (the company's fiscal year ends Jan. 31), shares are actually much cheaper than investors may realize.
Image source: Getty Images.
BioMarin Pharmaceutical
The third unique growth stock you'll regret not buying with the Nasdaq bouncing back from its bear market lows is biotech stock BioMarin Pharmaceutical (BMRN -1.53%). Though healthcare stocks have underperformed the broader market this year, the puzzle pieces are falling in place for BioMarin to outperform.
The clear-as-day catalyst for BioMarin is the growth of Voxzogo, a drug used to increase linear growth in children aged 5 and older with achondroplasia. Global sales for Voxzogo have nearly quadrupled to $201.2 million through the first six months of 2023.
In October, the company will learn the fate of its supplemental new drug application that could expand Voxzogo's use case to children under the age of 5. This leading dwarfism therapy has the potential to peak at around $1 billion in annual sales.
Investors should also be excited about BioMarin's long-awaited gene therapy drug for severe hemophilia A finally getting the green light from the U.S. Food and Drug Administration (FDA) in late June. Roctavian is a one-time infusion that comes with a staggering list price of $2.9 million. There are approximately 2,500 people in the U.S. living with severe hemophilia A that'll be eligible for this treatment.
This leads to the next key point: BioMarin's focus on rare diseases. Although clinical trials that target smaller pools of patients are risky, there can be a big payoff for a successful study. FDA-approved rare-disease drugs usually face little or no competition and deal with minimal (if any) pushback from health insurers when it comes to list price.
The final catalyst for BioMarin is its valuation. The consensus $1.02 in EPS Wall Street is looking for in 2023 is expected to grow to a hearty $4.62 in EPS by 2026. It's one of the fastest-growing big drug companies on Wall Street.
Block
The fourth unforgettable growth stock you'll regret not buying in the wake of the Nasdaq bear market dip is Block (SQ 2.32%), the fintech company previously known as Square. While a crypto winter has cooled off interest in Block's Bitcoin exchange, other facets of the company's business look to be firing on all cylinders.
Block's foundation continues to be its oldest operating segment, the Square ecosystem. This is the segment that provides point-of-sale solutions, data analytics, and financial solutions to help merchants grow their business. The $54.2 billion in gross payment volume (GPV) registered in the June-ended quarter extrapolates out to nearly $217 billion in annual GPV. It's a far cry from the $6.5 billion in GPV reported in 2012 and demonstrates just how powerful of a growth story digital payments can be.
What's noteworthy about the Square ecosystem's GPV is that it's increasingly coming from larger businesses. The second quarter saw sellers with at least $500,000 in annualized GPV account for 40% of total GPV. That's up five percentage points from the comparable period two years ago. Larger sellers should lead to more transactions, which is ideal for a fee-based operating segment like the Square ecosystem.
However, Block's future is very much dependent on growth in Cash App. In the past five and a half years, Cash App's monthly active user count has catapulted from around 7 million to 54 million, as of June 2023. Since the cost to acquire new Cash App users is dwarfed by the gross profit Block generates from each active Cash App user, it's no surprise that Cash App is already producing more gross profit than the Square ecosystem.
Lastly, to stay consistent with the previous unforgettable stocks on this list, Block is historically inexpensive. Whereas it's averaged a multiple of 109 times forward earnings and 191 times operating cash flow over the past five years, shares can be purchased right now for 25 times both forward earnings and consensus cash flow per share in 2024. That's a deal for an industry-leading fintech company.
