This year has served as a stark reminder that the stock market doesn’t move in a straight line — even though 2021 made you believe it did. The first half of 2022 saw the benchmark S&P500 produce its worst yield in more than half a century.
But things were even worse for growth-oriented companies Nasdaq Compound (^IXIC -0.90%)which has lost up to 34% of its value since its peak and pushed decisively into a bear market.
At first glance, there’s no denying that bear markets can be worrisome. The speed of the lower moves during these times of heightened volatility certainly has the potential to make investors doubt their resolve to stay. However, bear markets are also a real opportunity for wealth creation. Indeed, every double-digit percentage drop in major indices, including the Nasdaq Composite, was eventually recouped (and more) by a bull market rally.
Now seems like the perfect time for patient investors to consider buying the innovative growth stocks that have been hit hard by the 2022 bear market. Below are five sensational growth stocks you’ll regret not having. bought during the Nasdaq bear market decline.
Extraordinary early growth stock investors will kick themselves if they miss the Nasdaq bear market decline is a cloud-based lending platform Assets received (UPST -5.74%). Although rapidly rising interest rates and a weakening U.S. economy are bound to slow down the number of short-term Upstart loan application processes, the company brings clear competitive advantages to the table that should translate by great long-term victories.
For example, Upstart’s loan verification platform is powered by artificial intelligence (AI). Relying on predictive technology has enabled Upstart to process and approve nearly three-quarters of all online loan applications. This saves the company’s approximately six dozen lending partners time and money.
What’s been particularly interesting about Upstart is that its AI-powered lending platform has led to more applicants getting approved. On average, loans approved by Upstart have a lower credit score than the traditional loan verification process. But in terms of loan delinquency, Upstart approvals have delinquency rates similar to people introduced to the normal loan verification process. In other words, Upstart can expand the loan pool for banks and credit unions without increasing their credit risk profile.
It is also a company that is just beginning to spread its wings into considerably larger addressable markets. Until recently, Upstart focused primarily on personal loans. But with the company now verifying and processing auto loans and small business loans, its addressable market, based on loan originations, has grown tenfold.
A second phenomenal growth stock you’ll regret not picking up as the Nasdaq plunges into a bear market is the developer of robotic-assisted surgical systems Intuitive surgery (ISRG -1.59%). Despite very short-term concerns about postponing elective surgical procedures to a later date, Intuitive Surgical’s dominant market share and operating model make it an obvious buy on weakness.
By the end of the June quarter, Intuitive Surgical had installed 7,135 of its da Vinci Surgical Systems worldwide. While that might not seem like a big number, it’s way more than its competitors by far.
To add to that point, each da Vinci machine costs between $0.5 million and $2.5 million. Coupled with the intangible cost of training surgeons to use the da Vinci Surgical System, this means that hospitals and surgical centers are highly unlikely to switch to a competitor once the purchase is made.
Intuitive Surgical also benefits from its razor and blade operating model, which should help the company’s operating margins increase over time. During the 2000s, the company generated most of its revenue from the sale of its expensive but mediocre margin, da Vinci (the “razor”) systems. However, the bulk of revenue now comes from the sale of high-margin instruments with each procedure, as well as the maintenance of these systems (the “blades”). As da Vinci’s installed base grows, so does Intuitive Surgical’s higher margin sales channels.
The third sensational growth stock just begging to be bought during the Nasdaq bear market decline is the social media stock pinterest (PINS -2.77%). Although ad spending may prove difficult until the US economy recovers, Pinterest looks poised to excel in the long run.
Ideally, Wall Street and investors would like to see Pinterest’s monthly active user (MAU) count increase every quarter. However, the COVID-19 pandemic has disrupted the company’s MAUs over the past two years. But what’s really important to note is that the average revenue per user (ARPU) continued to increase by a double-digit percentage.
Even with MAUs down 21 million to 433 million in the quarter ended June, global ARPU increased 17%, with particularly strong growth in international markets. This demonstrates that advertisers are willing to pay extra to reach Pinterest users, even with a high level of economic uncertainty.
Pinterest is also relatively safe from app developers modifying their data-tracking software. While most advertising companies rely on data tracking solutions to help merchants target their users, Pinterest’s entire operating model relies on its MAUs voluntarily sharing things, places and services. that interest them. This makes it easy for advertisers to target users and could eventually help Pinterest become a serious e-commerce player.
Green Thumb Industries
The fourth incredible growth stock you’ll regret not buying as the Nasdaq Composite plummets is marijuana stock Green Thumb Industries (GTBIF -0.18%). Although Capitol Hill has not passed the cannabis reform measures, the legalization of marijuana at the state level provides more than enough opportunities for multi-state operators (MSOs) like Green Thumb to flourish. .
By early September, Green Thumb had 77 operating dispensaries and a presence in 15 legalized states. While a number of these states are high-dollar markets (e.g., California and Florida), what’s notable about Green Thumb’s expansion has been its focus on limited license markets, such as Illinois, Ohio and Virginia. Limited licensing states deliberately limit the number of dispensary licenses that can be issued in total, as well as to a single company. Operating in these states allows MSOs to grow their brands without fear of being overrun by pot stock with deeper pockets.
Additionally, Green Thumb’s earnings mix is arguably more favorable than any other marijuana stock. Well over half of the company’s sales come from jar merchandise, such as drinks, vapes, edibles, dabs, pre-rolls, and health/beauty products. These products command higher prices and significantly juicier margins than dried cannabis flower.
While most MSOs are always on the hunt for recurring profitability, Green Thumb Industries has achieved eight consecutive quarters of profits under generally accepted accounting principles (GAAP).
The fifth and final sensational growth stock you’ll regret not buying during the Nasdaq bear market decline is the fintech juggernaut PayPal Credits (PYPL -2.49%). Although historically high inflation is affecting the lowest income decile, digital payment growth is still in its infancy.
If you need proof that the global digital payments market can sustain double-digit growth, look no further than PayPal. Even with the Nasdaq and S&P 500 entering a bear market during the second quarter and US gross domestic product declining in the first two quarters of 2022, PayPal reported a 13% increase in total rate payment volume. exchange rate and saw its free cash flow jump 22% compared to the prior year period. Imagine how well PayPal will perform when the US economy is back in full swing.
What’s been most impressive about PayPal is the increased engagement among its active accounts. Since the end of 2020, the average number of transactions made over the past 12-month period by active accounts has increased from just under 41 to almost 49, as of June 30, 2022. Because it is is primarily a commission-based business, more transactions equals higher gross profit for PayPal.
And don’t discount PayPal’s innovativeness or acquisition potential either. Last year, it acquired Paidy, a Japan-based buy-it-now and pay-later software platform. Long periods of global economic expansion should allow Paidy and its new parent company, PayPal, to thrive.