Last year, investors were reminded in a not-so-subtle way that stocks can fall just as easily as they can rise. After an almost unstoppable march higher in 2021, all three major US stock indexes plunged in a bear market last year. The growth-focused Nasdaq Composite (^IXIC 0.95%) was hit hardest with a peak-to-trough drop of 38%.
Although large declines can be unsettling, especially for new investors, bear markets have consistently proven to be safe buying opportunities for the patient. No matter how poorly the Nasdaq Composite has performed in the past during a correction, crash, or bear market, each downturn has eventually (key word!) been put on the backseat by a bull market rally.
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The current bear market is a particularly ideal time to shop for game-changing companies that have been beaten down by pessimism. The following are five truly exceptional ones growth stocks you will regret not buying in the Nasdaq bear market.
Alphabet
The first unique growth stock begging to be bought as the Nasdaq crashes is FAANG stock Alphabet (GOOGLE 1.90%) (GOOG 1.56%). Alphabet is the parent company of internet search engine Google, streaming platform YouTube and autonomous vehicle company Waymo, among other subsidiaries.
Alphabet’s foundation remains rock solid thanks to Google. Over the past four years, Google’s global share of Internet search has fluctuated between 91% and 93%, based on data from GlobalStats. This veritable monopoly should have exceptional ad pricing power during prolonged economic expansions and will clearly be the best choice for advertisers looking to target their message.
But it might just be what Alphabet is doing with all the operating cash flow from Google that’s most exciting. At least some of that capital is being invested in Google Cloud, which has grown into the world’s third-largest provider of cloud infrastructure services by market share. Although Google Cloud is currently a money-losing segment, margins associated with cloud services are usually much higher than ad margins. Given that the company’s cloud spending is still in its early stages, it wouldn’t be a surprise to see Google Cloud eventually become Alphabet’s top cash flow driver.
Alphabet is also making waves with YouTube, which is now the second most visited social media site globally. YouTube Shorts – short-form videos lasting less than 60 seconds – amass 30 billion views daily worldwide from June 2022 and the company is working on ways to improve monetization from this tool.
With so many growth opportunities, Alphabet is an absolute steal at under $100 per stock.
Fiverr International
Another outstanding growth stock you’ll kick yourself for not buying during the Nasdaq bear market decline is the online services marketplace Fiverr International (FVRR 7.07%). Although several signs suggest that the US will enter a recession within the next 12 months, patient investors are getting a deal with Fiverr.
An aspect that allows Fiverr to stand out from other online freelancer marketplaces is how the tasks are presented. Most sites list freelancer jobs at an hourly rate. On Fiverr, freelancers provide their services as a packaged deal. This price transparency seems to have won over buyers, where both consumption per buyer and the total number of buyers is steadily increasing, even as the US economy weakened in the first half of 2022.
In addition, Fiverr’s take-rate unmatched among online service marketplaces. Take-rate is the percentage of revenue from each deal negotiated on its platform that Fiverr gets to keep. During the September-ending quarter, Fiverr’s take rate hit 30%. It has been able to grow its freelancer and buyer base at a rate almost double that of its competitors, which should ultimately translate into superior revenue growth.
Fiverr should be a clear winner in the long run as businesses embrace a post-pandemic hybrid work environment.
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Upstart Holdings
The third outstanding growth stock you’ll regret not scooping up during the Nasdaq bear market is a cloud-based lending platform Upstart Holdings (SETUP 10.44%). Despite rapidly rising interest rates putting a damper on its near-term growth prospects, Upstart’s innovative platform has the potential to turn the struggling lending industry upside down.
For decades, the loan appraisal process has generally been slow and expensive. Upstart aims to change this by trusting artificial intelligence (AI) and machine learning to quickly analyze loans. During the third quarter a record 75% of the loans are processed by Upstart was approved and fully automated. For their 83 lender partners, this means serious cost savings.
Perhaps more importantly, Upstart’s AI-powered platform expands the lending pool to people who would normally have no chance of approval with the traditional vetting process. Although Upstart approvals have lower average credit scores than the traditional process, delinquency rates between the two have been similar. This means that Upstart can bring new customers to banks and credit unions without degrading the quality of their loan portfolios.
What’s more, Upstart has only recently begun branching into verticals with outstanding borrowing potential. For years, its AI lending platform was used almost exclusively for personal loans. Last year it started getting wet with car loans and small business loans. On a combined basis, auto and small business loans account for $1.43 trillion in annual borrowing, which is close to 10 times the annual origination value of personal loans ($146 billion).
Palantir Technologies
A fourth signature growth stock that you’ll regret not grabbing during the Nasdaq bear market swoon is data-mining specialist Palantir Technologies (PLTR 4.28%). Although companies with premium valuations have been hit by Wall Street, Palantir appears to have paid its dues.
As I have saidWhat helps Palantir stand out is the simple fact that no other company can replicate what it does at scale. Its AI-powered Gotham platform helps government agencies with mission planning and data collection. Meanwhile, the company’s Foundry platform works with large enterprises to help them streamline their operations by making sense of big data.
For years, Gotham has been Palantir’s primary growth driver. The company’s public revenue recently exceeded $1 billion on a trailing 12-month (TTM) basis, with the contracts signed by Gotham often running for four or five years. But there is certainly a ceiling above this segment. While a steadily increasing US defense budget is music to Palantir’s ears, Gotham can never be used by certain governments (eg China).
Looks like years Støberi has a path to becoming Palantir’s core platform. At the end of the third quarter, Palantir’s commercial customer count (calculated on a TTM basis) had nearly doubled to 228 from 115. Not surprisingly, US commercial revenue growth has topped triple digits in four of the past five quarters. We’re only seeing the tip of the iceberg from what was to become Palantir’s star drive segment.
Airbnb
The fifth outstanding growth stock you’ll regret not buying on the Nasdaq bear market dip is the stay-and-hosting platform Airbnb (ABNB 5.96%). While the pandemic was a giant headwind for Airbnb, the worst seems to be over.
Airbnb long ago proved that its stay-and-host online marketplace was not a fad. Since 2016, we have seen the number of bookings (which includes booked nights and experiences) grow from 52 million to a annual running speed of approximately 400 million in 2022. Remember, this is with just over 4 million global hosts. As more hosts join the platform, Airbnb should be able to maintain a double-digit growth rate.
But what has been even more impressive than the overall increase in total bookings is strength during prolonged stay (28 days or longer). Just as Fiverr is benefiting from the hybrid work model in the wake of the pandemic, Airbnb is seeing strength as remote workers flock to new locations. Long-term stays can be a sustainable, high-margin growth channel for Airbnb.
Finally, look for the company’s Experience division to become an increasingly important part of its revenue mix. Currently, Experiences include partnerships with local experts who lead travelers on adventures. However, I expect this segment to eventually expand its universe of partnerships (e.g., food and transportation) so that it can swallow a larger portion of the $8 trillion spent on travel each year.
