Unless you’re a short seller, 2022 may not have been a banner year. From November 2021 to the first week of January, all three major US stock indexes have reached their respective all-time highs. No one has fared worse than the tech-centric Nasdaq Composite (^IXIC -0.52%)which has withstood a peak-to-trough drop of as much as 38%.
While it is perfectly normal for investors’ resolve to be tested in bear markets, it is important to recognize that these significant declines present unique opportunities for patient investors to purchase incredible companies at a discount. That’s because every double-digit decline in major U.S. stock indexes, including the Nasdaq Composite, has ultimately been erased by a bull market.
The 2022 bear market is an especially good time to pick up growth stocks at bargain prices. Here are five awesome growth stocks you’ll regret not buying during the Nasdaq bear market decline.
The first surprising growth stock investors will kick themselves for not buying during the Nasdaq bear market is an adtech company Trading desk (TTD -0.30%). While ad spending tends to be one of the first things to hit in a downturn in the US and global economy, The Trade Desk has proven the value of its technology and positioning in digital advertising.
Trade Desk is what’s known as a demand-side provider, which is a fancy way of saying that it helps advertisers create digital advertising campaigns using a cloud platform. As advertisers shift their focus from print and billboard messaging to a variety of digital channels, The Trade Desk is well-positioned to capitalize on the lion’s share of ad spend growth during the decade.
This is especially true for connected TV (KTV) space. Given the choice, most consumers will choose the cheaper, ad-supported option. Trade Desk empowers advertisers through mountains of artificial intelligence (AI) and targeted analytics, and relies on partnerships to give CTV-centric advertisers the best chance for success. Also, since KTV ad channels are not dominated by one entity, the market is more conducive to competitive pricing. This should make programmatic advertising through KTV an even more attractive proposition.
Given that The Trade Desk is highly profitable and sitting on more than $1.3 billion in cash, cash equivalents and short-term investments, with no debt, it looks like a screaming buy after its latest write-off.
The second bullish stock you’ll regret not buying as the Nasdaq tumbles is fintech stocks Block (SQ -0.84%), the company formerly known as Square. Even if Bitcoin Losing three-quarters of its value, the company’s cryptocurrency trading operations have taken a nosedive, so long-term investors have a lot to be excited about.
For starters, the company’s Square Ecosystem remains the main driver of its gross profit. This is an operating segment that provides merchants with point-of-sale devices, loans and analytics to help them grow their businesses. In a very difficult third quarter, Square Ecosystem recognized $50 billion in gross payment volume (GPV). To give some context, Square had a total of $6.5 billion in GPV in 2012. It now has an annual GPV of $200 billion.
But the sheer dollar amount of GPV isn’t the most impressive thing. Rather, about 40% of the GPV in the most recent quarter was generated by companies with an annualized GPV of $500,000 or more. In other words, larger companies use the Square ecosystem. As this segment is a paid segment, more business from larger companies would equate to sustainably higher gross margins.
Slightly weaker Bitcoin trading revenue aside, digital peer-to-peer payment platform Cash App is also firing on all cylinders. Cash App is now up to 49 million active users and the gross profit per user is many times higher than the cost of acquiring each new user. As digital payments are still in their infancy, it looks like the Cash App will become Block’s leading cash flow generator sooner rather than later.
The third awesome growth stock you’ll regret not seeing in the Nasdaq bear market is a cybersecurity company. CrowdStrike Holdings (CRWD -0.60%). Despite being hit hard by rising stocks with premium valuations in 2022, end-user cybersecurity stock CrowdStrike has proven its premium is well-deserved.
As I pointed out recently, cybersecurity stocks are gaining a macro advantage because they have become a basic necessity service. It doesn’t matter how bad investor sentiment is or how the US economy is doing, hackers and bots are always looking to steal sensitive data. This leads to a baseline of demand for cybersecurity stocks.
However, CrowdStrike is no ordinary cyber security company. It is a leading provider of end-user security solutions. Falcon’s security platform was built in the cloud and relies on AI and machine learning to get smarter over time by recognizing potential threats. Although already high, CrowdStrike’s gross retention rate has exceeded 98%, demonstrating the value of its services.
Perhaps even more impressive has been CrowdStrike’s ability to encourage existing customers to purchase new cloud module subscriptions. When fiscal year 2017 ended, less than 10% of the 450 customers had purchased four or more cloud module subscriptions. By mid-2023, 59% of nearly 19,700 customers have purchased at least five cloud module subscriptions. Upsells are the not-so-secret sauce responsible for driving CrowdStrike’s Adjusted Subscription Gross Margin to nearly 80%.
Planet 13 Holdings
The fourth phenomenal growth stock you’ll regret not buying during the Nasdaq bear market is US marijuana. Planet 13 Holdings (PLNH.F 4.72%). Even without the progress of cannabis reform on Capitol Hill, Planet 13 has ample opportunity to make its long-suffering shareholders much richer.
Perhaps the main reason to buy Planet 13 shares is their difference. This is not your multi-state operator (MSO) trying to open dozens of dispensaries in 10-20 states where marijuana is legal. Rather, Planet 13 only operates three dispensaries in two states. However, two of these dispensaries are unlike anything cannabis enthusiasts have ever seen.
Located just west of the Strip, the Las Vegas SuperStore is a 112,000-square-foot location with an unmatched selection of products and accessories, a coffee shop and a consumer-facing fulfillment center. Meanwhile, the Orange County SuperStore in Santa Ana, California, just 15 minutes from Disneyland, occupies 55,000 square feet (30% of which is dedicated to retail). These dispensaries focus on the experience as much as selling potty products. It’s a business model that hasn’t been duplicated in the cannabis space.
Planet 13’s expansion also includes the creation of neighborhood concept stores in Florida’s legal medical marijuana market. By the end of 2023, half a dozen dispensaries (each totaling 4,750 square feet) should be open in the highly profitable Sunshine State. This Florida expansion, along with its unique SuperStore concept, should help Planet 13 achieve repeat profitability as early as next year.
The fifth awesome growth stock you’ll regret not buying during the Nasdaq bear market is China-based Internet Search Key. Baidu (BIDU -3.75%). Despite China’s zero-covid strategy wreaking havoc on near-term economic growth prospects, Baidu’s core and ancillary segments offer plenty of promise for long-term investors.
Like Block, Baidu’s core business is set to return. In this case, I’m talking about its leading Internet search engine. Baidu accounted for just 60% of the total search market share in China in October, according to data provided by GlobalStats. That’s 44 percentage points more than the next closest competitor. Importantly, Baidu is the logical choice for advertisers looking to reach consumers in China.
But perhaps even more impressive are its supporting action segments. Baidu’s AI Cloud and AI Intelligent Driving units helped boost non-marketing revenue by 25% year-over-year in the third quarter. Cloud growth is still in its very early stages, while Apollo Go is the world’s most popular autonomous driving activity.
While there are additional regulatory uncertainties surrounding investing in Chinese stocks, those potential headwinds appear to be more than offset by Baidu’s stock trading at just 10 times Wall Street’s projected earnings for 2023.