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4 Unparalleled Growth Stocks You’ll Regret Not Buying in the Nasdaq’s New Bull Market
Short-term unpredictability has been the name of the game on Wall Street since the beginning of this decade. In the first four years of the decade, all three major stock indexes swung between bear and bull markets in successive years, with no index enduring wilder swings than the innovation-fueled market. Nasdaq Composite (NASDAQINDEX: ^IXIC).
During the 2022 bear market, the Nasdaq lost a third of its value. But since the green flag was raised in 2023, the Nasdaq Composite has risen 61% and reached several record highs. There is absolutely no doubt that this growth-focused index is clearly on a bull market, although quite young.
Image source: Getty Images.
While some investors may be apprehensive about putting their money to work on Wall Street with the Nasdaq Composite at an all-time high, history shows that every stock market correction and every bear market throughout history in the major indexes has ultimately be eliminated by an uptrend. market recovery. This means that any time can be an opportune time to put your money to work on Wall Street if you are a long-term investor.
Furthermore, value can be found – even among growth stocks. Investors simply need to be willing to look for these hidden treasures.
Below are four unparalleled growth stocks you’ll regret not buying in the Nasdaq’s new bull market.
Amazon
The first exceptional growth stock investor who can confidently add to their portfolios even as the Nasdaq hits new highs is the e-commerce leader Amazon (NASDAQ:AMZN). Although select predictive indicators and cash-based metrics signal an increased risk of a U.S. recession, Amazon’s most important operating segments are perfectly positioned to prosper.
Although Amazon is best known for its online marketplace, which generated about 37.6% of U.S. online retail sales in 2023, the company generates most of its operating cash flow and revenue from segments that are not necessarily focused on for the consumer.
Nothing is more important to Amazon’s future than the continued growth of Amazon Web Services (AWS), the world’s leading cloud infrastructure services platform, with an estimated 31% share by the end of 2023, according to the company. Canalys technical analysis.
Although AWS recently surpassed $100 billion in annual sales, enterprise cloud spending is still early in its anticipated growth. AWS regularly accounts for 50% to 100% of Amazon’s operating revenue and is the segment that fuels its cash flow growth.
Advertising and subscription services are also vital to Amazon. Advertising has not grown less than 20% year over year in more than two years. Meanwhile, the company has strong subscription pricing power with Prime. In exchange for simple perks like free two-day shipping on most items in its online marketplace, it encourages more than 200 million subscribers around the world to stay within its ecosystem of products and services.
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Amazon also remains historically cheap. Shares can be purchased now for about 12 times consensus 2025 cash flow. This represents a steep discount to the 23 to 37 times year-end cash flow multiple that investors voluntarily paid to buy shares throughout the 2010s.
DocuSign
A second unparalleled growth stock you’ll regret not buying on the Nasdaq in a young bull market is the e-signature company DocuSign (NASDAQ: DOCU).
In recent months, there has been speculation that DocuSign could be acquired and taken private. But CEO Allan Thygesen said in an interview with CNBC last week that his company intends to remain public. While short-term investors betting on an acquisition may not be thrilled with these comments, long-term investors should rejoice.
One reason to be excited about DocuSign remaining public is its moat in electronic signatures. According to Datanyze, DocuSign represents more than 67% of the e-signature market. While e-signature growth has slowed somewhat following the worst of the pandemic and with interest rates rising (i.e. fewer loans and mortgages are being underwritten), a long-term double-digit growth trajectory for the global electronic signatures market. software market.
Another reason to trust DocuSign is the company’s balance sheet. During the quarter ending in January (DocuSign’s fiscal year ends January 31), it repaid all of its outstanding convertible debt. The roughly $1.2 billion in cash, cash and cash equivalents and restricted investments the company had heading into fiscal 2025 give it the flexibility to innovate internally as well as grow inorganically.
For example, just three weeks ago, the company announced its $165 million all-cash acquisition of Lexion, an artificial intelligence-powered contract management software company. Incorporating contract management into its suite of existing services has the potential to increase DocuSign’s growth rate and expand its sales channels.
And its forward price-to-earnings (P/E) ratio of 16 is a bargain for a growth stock with a well-defined moat.
Image source: Getty Images.
Green Thumb Industries
A third unparalleled growth stock you’ll kick yourself for not buying during the new Nasdaq bull market is multistate cannabis operator (MSO) Green Thumb Industries (OTC: GTBIF).
The big buzz for marijuana stocks is that a long-awaited cannabis rescheduling appears to (finally) be at hand. Last week, the U.S. Drug Enforcement Administration published its formal proposal that would move cannabis from a Schedule I controlled substance to a less stringent Schedule III controlled substance.
While moving cannabis to Schedule III would not legalize it for recreational purposes, it would no longer subject businesses that touch cannabis, including MSOs, to Section 280E of the U.S. tax code. Section 280E only allows businesses that handle Schedule I and II controlled substances to deduct the cost of goods sold. If and when this measure becomes official, MSOs like Green Thumb will owe much less federal taxes, which should translate into faster profit growth.
What separates Green Thumb from a sea of other MSOs is its product mix. During the first quarter, it generated 57% of its sales from derivatives, which include vapes, edibles, pre-rolls, concentrates, beverages, and health and beauty products. Derivatives are priced higher and have substantially better margins than traditional dried cannabis flowers. This product mix played a key role in making Green Thumb profitable.
Green Thumb Industries also has a presence in many of the top-selling cannabis states, including California, Florida and Illinois. It has 93 operating dispensaries in 14 states, and its pocket is full of retail licenses that can be used to further expand its dispensary presence in major markets.
Visa
A fourth unparalleled growth stock you’ll regret not buying in the new Nasdaq bull market is payments processor Visa (NYSE:V). While it’s subject to the same cyclical headwinds that make some investors skeptical of Amazon, Visa’s clear competitive advantages make it a surefire buy for those with a long investment horizon.
For example, Visa benefits from disproportionately long periods of economic growth. Although recessions are a normal and inevitable part of the economic cycle, they tend to be short-lived. By comparison, most economic expansions last several years. For Visa, it means long periods in which consumers and businesses increase their spending.
To add to this point, Visa’s management team purposely avoided becoming a lender. By being fully focused on facilitating transactions, the company does not need to worry about possible loan defaults and losses when economic crises take shape. Not having to set aside capital to cover these potential losses is a huge advantage in the financial sector.
As with the other companies on this list, Visa’s growth path extends years into the future, if not decades. In addition to being the leader in the US in terms of purchase volume on the credit card network, it has the opportunity to expand its payments infrastructure in chronically underbanked regions of the world, such as the Middle East, Africa and Southeast Asia . Cross-border volume increased 16% in the quarter ended March.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Amazon and Visa. The Motley Fool has positions on and recommends Amazon, DocuSign, Green Thumb Industries and Visa. The motley fool has a disclosure policy.
4 Unparalleled Growth Stocks You’ll Regret Not Buying in the Nasdaq’s New Bull Market was originally published by The Motley Fool