2 Colossal Growth Stocks to Buy in the Bull Market

If you're investing in stocks for decades, you'll find that you endure both bull and bear markets throughout the course of your investing journey. However, if you're focusing on buying businesses rather than share prices, you can be more selective about the types of companies you choose while maintaining a long-term horizon that outlasts any short-term turbulence.

And when you're investing in a stock for anywhere from five years to 10 years or more, even a couple of years of market doldrums shouldn't deter you from adding to great businesses. Here are two colossal growth stocks that look like tempting buys in the new bull market, and well beyond.

1. Pinterest

Pinterest (PINS -0.72%) has struggled through a series of financial reports after its heightened period of growth during the peak of the COVID-19 pandemic. While some investors have feared that a meaningful forward trajectory for the business might be a thing of the past, I have maintained that the potential of this platform could still lend a solid runway to growth ahead over the long run.

While Pinterest isn't reporting the kind of growth figures it was during the earlier days of the pandemic, or even shortly prior to the pandemic, this is a company at a more mature stage in its business cycle than it was a few years ago. Companies are also being somewhat more constrained with digital ad spending in the current environment. The global economy is still turbulent, too, and affecting capital expenditures for businesses of all sizes across a range of industries.

All that being said, Pinterest's revenue and users are favorably on the upswing again, and the business seems to be getting back to consistent profitability. The company ended 2023 with 498 million global monthly active users. That was an 11% increase from its monthly active user account at the end of the 2022, and an 8% increase compared to the end of 2020.

In 2023, Pinterest brought in total revenue of $3 billion, a 9% year-over-year increase. The company reported a net loss for the full year, but closed out the final three months of 2023 with a profit of $201 million according to generally accepted accounting principles (GAAP). And adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) totaled $683 million for the 12-month period, a year-over-year improvement of 55%.

Pinterest is an ad platform, even though to users the visually appealing website is simply a free place to gain inspiration for just about any topic through images and videos called "pins." The platform has significant potential to capitalize on the flow of ad spend over the next five to 10 years, both through its own initiatives and through partnerships like the one it launched with Amazon last year to allow third-party ads on its platform for the first time. Pinterest introduced a new series of ad initiatives in 2023, including lower-funnel tools like mobile deep linking and direct links.

The lower funnel refers to the stage where a user is already looking for products from a specific brand, and they need to be converted to make that actual purchase. A mobile deep link is when a user clicks on a link in an app or website and is instantly directed to a particular page on a merchant-specific app, while a direct link lets the user navigate straight to the merchant's site with a single click when they see a pin for a product or service they like.

In the company's 2023 earnings call, management said the percentage of revenue from advertisers that had adopted at least three of its lower-funnel tools like direct links or mobile deep linking jumped from 2% at the start of last year to 23% by the close of the year. At last count, 80% of Pinterest's lower-funnel revenue was derived from its direct links program, no small feat considering the company only launched this initiative in the third quarter of last year. One merchant that advertises with Pinterest, the popular Gen Z brand Urban Outfitters, noted a 132% surge in outbound clicks and a 57% decline in cost per click once it leveraged a direct links campaign through Pinterest.

Because users are already browsing Pinterest with some kind of intent, whether for inspiration around a certain category or for a purchase, this creates a golden opportunity to convert that user into a spending customer with one or more merchants who advertise on the platform. The digital ad space is booming, and Pinterest is increasingly proving it has its own role to play in this industry. Long-term investors might find that to be a worthy buying proposition for this growth stock.

2. Etsy

Etsy (ETSY 1.59%) is dealing with headwinds from changes in consumer discretionary spending. That is a market dynamic that the company can't control and for which predicting when a shift will occur is challenging at best.

However, that doesn't mean the business has lost its valuable growth opportunity within the broader e-commerce space. Etsy's overall focus on products that are vintage, specialty, handmade, or otherwise unique has created a specific segment for the business within this extremely lucrative space.

Currently, year-over-year growth comparisons are underwhelming. However, taking a step back and looking at the current state of Etsy's business compared to where it was a few years ago may help create a far clearer picture of how the company is actually performing.

In 2023, Etsy reported $13 billion in gross merchandise sales (GMS) and revenue of $2.8 billion. While that GMS figure was down about 1.2% from 2022, revenue was up 7.1%. The company also brought in net income of $308 million for the 12-month period, compared to a net loss of $694 million in 2022.

Now, let's compare those three figures to Etsy's 2019 financials. That GMS figure is up 165% on a four-year basis, while revenue is up 236% from the full-year 2019. As for the profitability front, net income rose 221% from four years ago in 2019. Getting back to Etsy's 2023 performance, it also generated free cash flow of $561 million and operating cash flow of $706 million over the trailing 12 months, which is nothing to scoff at.

The Etsy marketplace still accounts for the vast majority of Etsy's revenue and profits. Not only are buyers shopping more regularly on the platform, but they're also spending more. The flagship Etsy platform ended 2023 with 92 million active buyers, a 101% increase from four years ago. And trailing-12-month GMS per active buyer rose to $126 at the end of 2023, up 22% from four years ago.

Now, 48% of buyers on Etsy.com are repeat buyers, compared to 41% in 2019. Repeat buyers were up 126% at the end of 2023 compared to the end of 2019. The platform boasted 7.1 million habitual buyers at the close of 2023, a whopping 184% increase on a four-year basis. A habitual buyer is a shopper who makes at least six or more purchases on the platform over a 12-month period totaling more than $200.

The market has discounted this stock, with shares trading down by around 20% since the start of 2024 alone. At the time of this writing, that gives Etsy a price-to-sales (P/S) valuation of approximately 3.3. Given the underlying strength the business is demonstrating during a difficult period, now could be a good time to scoop up shares on the dip if you're planning to hold onto them for the next several years at least.