Wall Street has seen a fair amount of volatility since this decade began. Since 2020, all three major stock indexes have traded off bear and bull markets in successive years, with the growth-driven Nasdaq Composite (^IXIC 1.51%) taking the brunt of this volatility.
After losing 33% of its value during the 2022 bear market, the Nasdaq Composite powered its way to a new all-time closing high on April 11, 2024. By achieving yet another fresh record close, the Nasdaq illustrated that it's firmly in a bull market -- albeit a relatively young one.
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The great thing about bull markets is that amazing deals can always be found. Even though a select group of megacap stocks have lifted the Nasdaq Composite to new heights, bargains can still be located among growth stocks.
What follows are four superior growth stocks you'll regret not buying in the new Nasdaq bull market.
The first magnificent growth stock you'll be kicking yourself for not buying with the Nasdaq Composite stretching its legs in the early stages of a bull market is social media company Pinterest (PINS 0.05%). Although its monthly active user (MAU) count retraced as life returned to some semblance of normal following the worst of the COVID-19 pandemic, Pinterest has demonstrated that it has the tools and intangibles needed to thrive over long periods.
To start with, Pinterest's MAUs have been steadily climbing when examined over multiyear stretches. Though its MAU figure soared during the early stages of the pandemic and declined after vaccines became available, the company ended 2023 with 498 million MAUs -- a new record. Having nearly a half-billion unique monthly visitors is bound to increase the company's ad-pricing power with businesses.
What's arguably even more important than its rising MAU count is that Pinterest has never struggled to monetize its user base. Even amid a challenging advertising environment throughout 2023, Pinterest saw a 1% uptick in global average revenue per user (ARPU), along with a 15% ARPU increase in Europe. There's plenty of runway to expand these ARPU figures in the years to come.
Something else that makes Pinterest special is its operating model. Whereas most social media platforms rely heavily on data-tracking tools to provide actionable information that advertisers can use to target consumers, Pinterest's entire platform is based on the idea of users freely and willingly sharing the things, services, and places that interest them. It's a veritable gold mine of data that can be used by merchants to target users with their message(s). No matter what app developers do with their data-tracking tools, Pinterest will be primed for success.
Shares of Pinterest can be purchased right now for 19 times forward earnings, which is a plain-as-day bargain considering that the Wall Street consensus projects an annualized earnings growth rate of 23.3% through 2028.
AutoZone
A second superior growth stock that's begging to be bought by opportunistic investors with the Nasdaq recently tipping the scales at a new high is auto-parts supplier AutoZone (AZO 0.52%). Though the auto industry is cyclical, and select money-based metrics suggest the U.S. economy could fall into a recession, AutoZone, like Pinterest, has the competitive edges needed to deliver for its shareholders.
The most obvious catalyst for AutoZone is that consumers are keeping their vehicles longer than ever before. A report released in May 2023 by S&P Global Mobility found that the average age of cars and light trucks on U.S. roadways, based on more than 284 million vehicle registrations, was 12.5 years. While newer vehicles are made to last longer, the aging of America's cars and trucks makes it likelier that auto-parts suppliers will be relied on to keep these vehicles in tip-top shape.
AutoZone's revamping of its supply chain is another reason the company has been (excuse the pun) firing on all cylinders. It's in the process of building out 200 mega hubs, each of which will contain as many as 110,000 stock keeping units (SKUs). The purpose of these centrally located hubs is to ensure that its outlet stores and consumers will always have easy access to the parts they need.
Perhaps no company has a more successful share repurchase program than AutoZone. Since its board initiated a buyback program in 1998, the company has spent $35.54 billion buying back almost 154.7 million shares of its stock. It's closing in on having reduced its outstanding share count by 90%, which has provided a big lift to earnings per share (EPS).
Forecast annualized earnings growth of nearly 12% through 2028 makes AutoZone stock a phenomenal deal at less than 18 times forward earnings.
Image source: Getty Images.
Okta
The third top-notch growth stock you'll wish you added to your portfolio with the Nasdaq Composite in a fresh bull market is cybersecurity company Okta (OKTA 2.29%). Despite the negative press Okta received following a data breach last year, it's ideally positioned to boost its bottom line and reward its long-term investors.
The great thing about cybersecurity as a whole is that it's evolved into a basic necessity service. Businesses that have an online or cloud-based presence, regardless of size, need to protect their data, and that of their customers, against robots and hackers that simply don't take time off. Over time, companies have increasingly turned to third-party providers.
Okta's cloud-native platform specializes in identity verification solutions. Based in the cloud and reliant on artificial intelligence (AI) and machine learning, Okta's Identity Cloud is designed to observe events and become more efficient over time at recognizing and responding to potential threats. While there's still work to be done on improving its platform, the addressable market for Identity Cloud was estimated by Okta in November 2022 as being worth $80 billion.
One of the biggest keys to Okta's long-term success is its acquisition of Auth0, which closed two years ago. Despite higher-than-anticipated integration costs associated with this deal, Auth0 gives Okta a beefier presence in the consumer identity space -- an addressable market worth an estimated $30 billion -- and will help it expand into overseas markets. International growth is how Okta can sustain a double-digit growth rate throughout this decade.
Although Okta's forward price-to-earnings ratio of 34 might appear lofty, Wall Street's consensus forecast calls for 25% annualized earnings growth over the next five years, making this stock a steal.
Block
A fourth superior growth stock you'll regret not buying in the new Nasdaq bull market is none other than fintech titan Block (SQ 5.18%). Even with the digital payment landscape growing more competitive, Block has two foundational segments that can help it significantly boost its bottom line.
For more than a decade, the company's Square ecosystem has served as its bread-and-butter source of cash flow. This is the segment of Block's operations that provides point-of-sale solutions, loans, and data analytics to merchants. Since 2012, the annual gross purchase volume (GPV) moving through the Square ecosystem has catapulted from $6.5 billion to almost $210 billion in 2023.
But it's not just the aggregate increase in the Square ecosystem's GPV that's important. What matters far more is that it's attracting larger businesses over time. For instance, 40% of the $53.5 billion in fourth-quarter GPV can be traced back to businesses with over $500,000 in annualized GPV. This is up from 37% in the comparable period in 2021. This is great news for a platform that's fueled by fees from gross transactions and larger tickets.
However, the biggest growth driver for Block is likely to be digital payment platform Cash App. As I pointed out earlier this month, Cash App's MAU count has risen from 7 million at the end of 2017 to 56 million at the close of 2023. Over the past couple of years, the cost to acquire new Cash App users has been dwarfed by the gross profit per user Block collects from Cash App MAUs. In short, there's an incentive to aggressively invest in initiatives that'll increase the use of Cash App.
Wall Street anticipates Block can grow its earnings per share by an annualized rate of 58% through 2028. This makes its forward earnings multiple of 17 an outright bargain.
