Although it can be an unpleasant realization, stock market corrections are a normal part of investing on Wall Street. There have been 39 double-digit percentage declines in the S&P 500 since the beginning of 1950, with the latest occurring last year. In 2022, the three biggest U.S. stock indexes fell into a bear market, with the growth stock-driven Nasdaq Composite (NASDAQINDEX: ^IXIC) taking the brunt of the abuse (a 33% decline).
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On the other hand, it’s even more important to recognize that every previous correction, crash, and bear market throughout history was eventually pushed to the side by a bull market. Though we’ll never know how long a bear market will last, we do know that high-quality businesses collectively help lift the value of the three major U.S. stock indexes over time. In other words, every bear market, including in the Nasdaq Composite, is a buying opportunity.
It’s a particularly smart time to go shopping for growth stocks that were hit hard last year. What follows are five colossal growth stocks you’ll regret not buying on the Nasdaq bear market dip.
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Upstart Holdings
The first supercharged growth stock with monumental potential for long-term investors is fintech company Upstart Holdings (NASDAQ: UPST). Though the lending environment couldn’t be less favorable at the moment, with the Federal Reserve increasing interest rates at the fastest clip in four decades, Upstart offers well-defined competitive advantages that can allow it to become an industry-changer.
The key to Upstart’s lending platform is that it relies on artificial intelligence (AI). Instead of using the decades’-old method of vetting loan applications, Upstart leans on machine-learning technology and previous applications to make approval/denial decisions on various types of loans. During the challenging fourth quarter, 82% of approved loan applications on its platform were fully automated. This means quick answers for loan applicants and cost savings for the company’s 92 lending partners.
But it’s not just that Upstart is saving lending institutions money. Historically, Upstart’s approvals are going to applicants with lower average credit scores than the traditional vetting process. However, the delinquency rate between Upstart and the old process has been similar. The takeaway is that Upstart can expand the lending pool for banks and credit unions without added risk.
Furthermore, Upstart is just getting its feet wet in the loan arena. It’s primarily focused on personal loans, which is a market with $162 billion in origination value. However, it’s begun moving into auto loans, which is a $780 billion addressable market. Inclusive of mortgages and small business loans, Upstart can eventually penetrate a market with around $5 trillion in annual loan originations.
Baidu
A second awe-inspiring growth stock you’ll regret not picking up during the Nasdaq bear market swoon is China-based internet search giant Baidu (NASDAQ: BIDU). Despite China stocks having far more headwinds than U.S.-based companies, some of these red flags have recently disappeared.
Perhaps the most prevailing issue for China stocks over the past three years has been the country’s response to the COVID-19 pandemic. China’s zero-COVID strategy led to stringent, unpredictable lockdowns that hurt supply chains and consumer/enterprise demand. But following protests in December, Chinese regulators reopened the economy. While this move could lead to some struggles as China’s residents build up immunity to the SARS-CoV-2 virus that causes COVID-19, it’ll be a long-term positive for China’s economy.
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The biggest advantage of China reopening is that it’ll allow Baidu’s core cash-flow driver, its internet search engine, to shine. Baidu accounted for just shy of half of all internet search market share in the world’s No. 2 economy in March. This makes Baidu the logical choice for advertisers wanting to target consumers, and it should provide the company with ample ad-pricing power.
Baidu is also expanding its focus well beyond search. Big investments in AI are paying off for Baidu’s cloud segment and autonomous vehicle operations (Apollo Go). Baidu’s AI-driven, non-marketing division has consistently outpaced its other segments in the growth department.
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Walt Disney
If the glass slipper fits, wear it! Thanks to its double-digit expected earnings growth rate over the next five years, media giant Walt Disney (NYSE: DIS) is a colossal growth stock investors can confidently buy on the Nasdaq bear market dip.
The best thing Disney has going for it is the fact that its operating model can’t be replicated. Sure, there are other theme parks to visit and movies to watch. But when it comes to characters, engagement, and emotional connection, Walt Disney can’t be matched by any other business. Disney’s top-tier marketing and its stories are what allow the company to raise its prices on its products and services with ease.
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Beyond just its theme parks and film division, investors are eyeing progress with Disney’s streaming services. In just over three years following its launch, Disney+ has amassed nearly 162 million subscribers. It should be noted that Disney increased prices for its streaming services and lost just 2.4 million net subs. That’s the power of the Disney brand in action, which brings its streaming division one step closer to becoming recurringly profitable, hopefully by no later than the second-half of fiscal 2024.
Additionally, Walt Disney investors should be excited about the return of Bob Iger to the CEO chair. Iger has overseen a number of transformative acquisitions for the company, including Pixar, Marvel Entertainment, and Lucasfilm. While another acquisition isn’t a guarantee, Disney’s growth potential has reached for the stars when Iger is steering the ship.
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Green Thumb Industries
A fourth top-tier growth stock that you’ll regret not purchasing as the Nasdaq plunges is U.S. marijuana stock Green Thumb Industries (OTC: GTBIF). Even though pot stocks have been a buzzkill thanks to Congress being unable to pass cannabis reform measures, enough catalysts exist at the state level for multistate operators (MSOs) like Green Thumb to succeed.
As of the start of December, Green Thumb had 77 operating dispensaries nationwide and a presence in 15 states. While some of these states are high-dollar markets (e.g., Florida, Colorado, and California), Green Thumb has been focused on establishing a presence in limited-license states, such as Illinois, Pennsylvania, and Virginia. Markets where license issuance is limited help ensure that MSOs have a fair shot to build up their brands and garner a following of loyal customers.
What allows Green Thumb to stand out from other MSOs is how the company generates its revenue. Though dried cannabis flower is its single largest revenue category by weighting, derivative pot products account for well over half of total sales. Derivatives include things like edibles, dabs, beverages, and vapes, to name a few. Derivative cannabis products are pricier than dried cannabis flower, and they, more importantly, sport considerably higher margins.
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Despite reporting a generally accepted accounting principles (GAAP) loss during Q4 and breaking its nine-quarter streak of GAAP profits, it’s important to note that Green Thumb has been profitable on a full-year GAAP basis for two years. Most MSOs don’t even have a single quarter of GAAP profits under their belt yet, let alone multiple years. With its ideal revenue mix, Green Thumb Industries should be back in the profit column in no time.
Fastly
The fifth colossal growth stock you’ll regret not buying during the Nasdaq bear market dip is edge-computing company Fastly (NYSE: FSLY). Following wider-than-expected losses throughout 2021 and the first-half of 2022, Fastly’s consistent sales growth and new leadership have the company back on track.
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Fastly is best known for its role as a content delivery network (CDN). Its job as a CDN is to move data from the edge of the cloud to end users as quickly and securely as possible. Since this is a usage-based task, more data being transmitted equates to more gross profit potential for the company. Between March 31, 2021 and Dec. 31, 2022, Fastly’s global network capacity nearly doubled to 252 terabytes per second, while average enterprise customer spend over the last 12 months jumped by 11%.
What’s even more important for Fastly is that it’s seen both its aggregate number of customers and dollar-based net expansion rate (DBNER) continue to climb. While adding 500 customers since March 31, 2021 is meaningful, the 118% to 123% DBNER reported in all four quarters of 2022 demonstrate that existing clients are spending between 18% and 23% more on a year-over-year basis. Retaining customers and having them spend successively more is a recipe that should allow Fastly to become profitable within the next two years.
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Todd Nightingale, who took over as CEO at Fastly at the beginning of September 2022, is also inspiring confidence. Nightingale was previously the executive vice president of Cisco Systems‘ enterprise networking and cloud business, which means he has firsthand knowledge of the cost oversight needed to make Fastly profitable, all while sustaining the company’s long-term growth potential.
