Last year, investors were reminded in a not-so-subtle way that stocks can go down just as easily as they can rise. Following a nearly unstoppable march higher in 2021, all three major U.S. stock indexes plummeted into a bear market last year. The growth-focused Nasdaq Composite (^IXIC 0.95%) was hit hardest, with a peak-to-trough decline of 38%.
While big declines can be unnerving, especially for new investors, bear markets have consistently proved to be surefire buying opportunities for the patient. No matter how poorly the Nasdaq Composite has previously performed during a correction, crash, or bear market, every downturn has eventually (key word!) been put into the back seat by a bull market rally.
The current bear market is a particularly ideal time to go shopping for game-changing businesses that have been beaten down by pessimism. What follows are five truly one-of-a-kind growth stocks you’ll regret not buying on the Nasdaq bear market dip.
The first unique growth stock that’s begging to be bought as the Nasdaq plunges is FAANG stock Alphabet (GOOGL 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 continues to be rock solid thanks to Google. Over the past four years, Google’s global share of internet search has vacillated between 91% and 93%, based on data by GlobalStats. This veritable monopoly should have exceptional ad-pricing power during long-winded economic expansions and is clearly going to be the top choice for advertisers looking to target their message.
But it might just be what Alphabet is doing with all the operating cash flow generated from Google that’s most exciting. At least some of this capital is being invested in Google Cloud, which has grown into the world’s third-largest cloud infrastructure service provider by market share. Although Google Cloud is a money-losing segment for the time being, margins associated with cloud services are usually much higher than advertising margins. Given that enterprise cloud spending is still in its early innings, 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 — are amassing 30 billion views daily worldwide, as of June 2022, and the company is working on ways to improve monetization from this tool.
With so many growth avenues, Alphabet is an absolute steal at under $100 per share.
Another one-of-a-kind growth stock you’ll be kicking yourself for not buying during the Nasdaq bear market decline is online-services marketplace Fiverr International (FVRR 7.07%). Even though numerous signs suggest the U.S. will enter a recession within the next 12 months, patient investors are getting a deal with Fiverr.
One aspect that allows Fiverr to stand out from other online freelancer marketplaces is how tasks are presented. Most sites list freelancer jobs at an hourly rate. On Fiverr, freelancers provide their services as a packaged deal. This pricing transparency seems to have won over buyers, with both spend per buyer and the aggregate number of buyers steadily increasing, even as the U.S. economy weakened in the first half of 2022.
Additionally, Fiverr’s take-rate is unmatched among online-service marketplaces. The take-rate is the percentage of revenue from each deal negotiated on its platform that Fiverr gets to keep. During the September-ended quarter, Fiverr’s take-rate hit 30%. It’s been able to grow its freelancer and buyer base with a take-rate that’s nearly twice the level of its competitors, which should ultimately translate into superior profit growth.
Fiverr should be a clear-cut long-term winner as businesses embrace a post-pandemic hybrid-work environment.
The third one-of-a-kind growth stock you’ll regret not scooping up during the Nasdaq bear market is cloud-based lending platform Upstart Holdings (UPST 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 stodgy lending industry on its head.
For decades, the loan-vetting process has been generally slow and costly. Upstart aims to change this by relying on artificial intelligence (AI) and machine learning to quickly analyze loans. During the third quarter, a record 75% of loans processed by Upstart were approved and entirely automated. For its 83 partnered lenders, this means serious cost savings.
Perhaps even more important, Upstart’s AI-driven platform is expanding the lending pool to people who’d normally have no chance of approval with the traditional vetting process. Though Upstart approvals sport lower average credit scores than the traditional process, delinquency rates between the two have been similar. This implies that Upstart can bring new customers to banks and credit unions without worsening the quality of their loan portfolios.
What’s more, Upstart has only recently begun branching out into verticals with eye-popping loan origination potential. For years, its AI lending platform was used almost exclusively for personal loans. Last year, it began getting its feet wet with auto loans and small business loans. On a combined basis, auto loans and small business loans account for $1.43 trillion in annual loan originations, which is close to 10 times the annual origination value of personal loans ($146 billion).
A fourth distinctive 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 clobbered by Wall Street, Palantir looks to have paid its penance.
As I’ve said, what 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-gathering. Meanwhile, the company’s Foundry platform works with large businesses 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 government revenue recently surpassed $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, admittedly, a ceiling to this segment. While a steadily increasing U.S. defense budget is music to Palantir’s ears, Gotham can never be used by certain governments (e.g., China).
Looking out years, Foundry has a pathway to become Palantir’s core platform. Through the end of the third quarter, Palantir’s commercial customer count (calculated on a TTM basis) nearly doubled to 228 from 115. Not surprisingly, U.S. commercial revenue growth has topped triple digits in four of the past five quarters. We’re seeing just the tip of the iceberg from what should become Palantir’s star operating segment.
The fifth one-of-a-kind growth stock you’ll regret not buying on the Nasdaq bear market dip is stay-and-hosting platform Airbnb (ABNB 5.96%). While the pandemic was a gigantic headwind for Airbnb, the worst looks to be over.
Airbnb proved long ago that its stay-and-hosting online marketplace wasn’t a fad. Since 2016, we’ve seen the number of bookings (which includes nights and experiences booked) grow from 52 million to an annual run-rate of approximately 400 million in 2022. Mind you, this is with just over 4 million global hosts. As more hosts join the platform, Airbnb should be able to sustain a double-digit growth rate.
But what’s been even more impressive than the aggregate increase in total bookings is the strength in long-term stays (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 sustainably high-margin growth channel for Airbnb.
Lastly, look for the company’s Experiences division to become an increasingly important part of its revenue mix. For the time being, Experiences encompasses partnerships with local experts who lead travelers on adventures. However, I’d expect this segment to eventually expand its universe of partnerships (e.g., food and transportation) so it can gobble up a bigger portion of the $8 trillion spent on travel each year.