Over long periods, Wall Street has demonstrated that it's a wealth-building machine. But over shorter timelines, it's also proven to be unpredictable and quite volatile. Over the previous four years, Wall Street's major stock indexes have alternated between bear and bull markets in successive years. These swings have been especially noticeable for the growth stock-driven Nasdaq Composite (^IXIC 2.02%).
During the 2022 bear market, the Nasdaq Composite shed a third of its value. But since the start of 2023, it's been nothing but green pastures for growth stocks, with the Nasdaq Composite gaining a blistering 54% and reaching an all-time high. There's absolutely no question that Wall Street and the Nasdaq are in the midst of a new bull market.
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But just because the Nasdaq Composite has soared, it doesn't mean amazing deals can't be found. With the "Magnificent Seven" accounting for an outsized percentage of the Nasdaq's ascent, deals remain for opportunistic investors willing to seek them out.
What follows are four extraordinary growth stocks you'll regret not buying in the new Nasdaq bull market.
PayPal Holdings
The first phenomenal growth stock that could have investors kicking themselves for not taking the plunge -- even with the Nasdaq hitting new highs -- is fintech leader PayPal Holdings (PYPL 2.90%). Despite concerns about increased competition in the digital payments space, PayPal's operating results suggest it maintains a competitive edge.
Before digging into the specifics, understand that fintech should be a sustained double-digit growth opportunity throughout the remainder of the decade, if not well beyond. The adoption rate for digital payments is still ramping up, which should produce a hearty growth runway for PayPal.
What's really stood out about PayPal has been the sheer volume of payments traversing its network, which includes Venmo. Last year, total payment volume surged 12% to $1.53 trillion on a currency-neutral basis.
More importantly, active accounts are completing a greater number of transactions over time. When 2020 came to a close, active PayPal accounts averaged just shy of 41 transactions over the trailing-12-month (TTM) period. As of the close of 2023, payment transactions per active account had risen to 58.7 on a TTM basis.
PayPal is predominantly a fee-driven business. If transactions per active accounts continues to climb, PayPal's gross profit should rise, too.
Investors would also be wise not to overlook the importance of new CEO Alex Chriss's plans to improve upon existing product offerings and launch new services, all while keeping the company's costs under control. Prior to joining PayPal in late September, Chriss was one of the leading figures at Intuit's Small Business division. He has a keen understanding of what smaller businesses want, as well as how to keep costs in check.
The cherry on top is that PayPal shares can be scooped up for a little north of 11 times forward-year earnings, which is historically cheap for this fintech innovator.
Fiverr International
A second extraordinary growth stock you'll regret not adding to your portfolio with the Nasdaq Composite decisively entering a bull market is online-services marketplace Fiverr International (FVRR 3.74%). In spite of persistent concerns that artificial intelligence (AI) could hamper its freelancer-fueled operating model, Fiverr's abundance of competitive advantages suggests it's nothing short of a bargain.
On a macro basis, Fiverr has benefited handsomely from a shift in the labor market following the worst of the COVID-19 pandemic. While some people have returned to the office, a considerably higher percentage of workers are now remote. This is excellent news for a company that aims to connect freelancers with businesses that need their services.
Fiverr's online marketplace is another reason for its success. Whereas many of its competitors allow freelancers to list their services at an hourly rate, Fiverr freelancers are pricing their jobs as completed tasks. This provides unparalleled price transparency, which has steadily increased spending per buyer on the platform.
To add to this, Fiverr's investments in AI have driven gross merchandise value higher. While the returns have been modest, thus far, AI looks to be a help, not a hindrance, to this top-notch gig economy stock.
However, the single greatest reason to trust in Fiverr, from an investment standpoint, is the company's take rate. The "take rate" describes the percentage of each deal negotiated on its platform, including fees, it gets to keep. While most of its peers have take rates in the mid-to-high teens, Fiverr's expanded to 31.8% in the December-ended quarter. It's taking a bigger piece of the pie and seeing active buyers spend more each quarter. This is a recipe that should generate a superior operating margin within its industry.
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BioMarin Pharmaceutical
The third marvelous growth stock that's begging to be bought in the young Nasdaq bull market is specialty biotech company BioMarin Pharmaceutical (BMRN -1.53%). Though BioMarin's TTM price-to-earnings (P/E) ratio of nearly 100 is bound to scare some value investors away, a consensus annualized earnings growth rate of 43% over the next five years should be music to growth investors' ears.
To start with, BioMarin enjoys the benefits of being in the highly defensive healthcare sector. Regardless of what's happening with the U.S. or global economy, patients taking brand-name drugs developed by BioMarin will continue to need those therapies in any climate. This means the company's cash flow is always predictable and transparent.
What tends to differentiate BioMarin Pharmaceutical from other drug developers is its focus on ultrarare-disease drugs. Brand-name treatments that are focused on small groups of patients can be risky, but also rewarding. In addition to tackling an ailment that has few or no treatment options, ultrarare-disease drugs have limited competition and face minimal pushback on their list prices from health insurers.
BioMarin's biggest growth opportunity at the moment lies with dwarfism drug Voxzogo. Increased uptake, strong pricing power, and potential label expansion opportunities for Voxzogo have the ability to eventually propel annual sales to north of $1 billion. For context, Voxzogo sales rose by 178% in 2023 to about $470 million.
To round things out, BioMarin Pharmaceutical is well capitalized and fully capable of continuing to successfully develop rare-disease drugs internally. It closed out 2023 with $1.68 billion in cash, cash equivalents, and various short-and-long-term investments. New drug launches, label expansions, and pricing power have the potential to sustain sales growth of 10% or more throughout the decade.
Alphabet
The fourth extraordinary growth stock you'll regret not buying in the new Nasdaq bull market is none other than Magnificent Seven member Alphabet (GOOGL 10.22%) (GOOG 9.96%). In spite of a challenging advertising environment, Alphabet makes for a genius buy.
Although recessions are known for wreaking havoc on ad-driven businesses, these impacts tend to be short lived. While only three of 12 U.S. recessions since the end of World War II have lasted at least 12 months, there have been two periods of growth that reached at least 10 years over the same span. Patient investors tend to prosper in ad-focused companies.
Alphabet's primary cash-flow driver for the moment is its world-leading internet search engine, Google. In February, Google accounted for nearly 92% of global internet search share. In fact, it's been nine years since Google last held less than a 90% monthly share of worldwide internet search. Being a practical monopoly in internet search means Google can command exceptional ad-pricing power.
But what shareholders are likely to be most excited about is growth from Alphabet's ancillary operations. For instance, Google Cloud has grown into the world's No. 3 cloud infrastructure service provider by spending, according to tech analysis firm Canalys. More importantly, Google Cloud generates considerably juicier margins than advertising, and this segment delivered its first profitable year in 2023.
Don't sleep on YouTube, either. YouTube is the second-most visited social site on the planet, with approximately 2.5 billion monthly active users.
One of the fastest-growing innovations within YouTube is short-form videos known as "Shorts." Since being introduced in 2021, the average number of daily views of Shorts has grown from 6.5 billion to north of 50 billion in early 2023. Whether it's additional ad revenue or premium subscriptions, Shorts are a cash-flow driver for YouTube and its parent company.
Lastly, Alphabet stock is historically inexpensive. Among the Magnificent Seven stocks that have lifted the Nasdaq to new heights, it's the cheapest relative to both forward P/E ratio and multiple to cash flow.
