The start of 2022 has been tumultuous for new and established investors. Both the iconic Dow Jones Industrial Average and widely followed S&P500 officially plunged into correction territory with declines exceeding double digits. But for techies Nasdaq Compound ( ^IXIC -1.34% ), the decline was even more pronounced. Between mid-November and mid-March, the famous index lost 22% of its value and briefly entered a bear market.
While steep declines in major stock indices can be scary in the short term, they have historically proven to be the perfect time to put your money to work. Indeed, every notable decline in the market, including the Nasdaq Composite, was eventually erased by a bullish rally.
Below are four battered growth stocks you’ll likely regret not buying during the Nasdaq’s bear market decline.
One of the smartest buys investors can make during the Nasdaq pullback is cybersecurity stock CrowdStrike Holdings ( CRWD 0.54% ). Shares of the company have fallen 26% since the Nasdaq hit an all-time high in November.
The beauty of cybersecurity actions is that they have become a service of prime necessity. With businesses moving their data online and into the cloud at an accelerated pace since the pandemic began, the responsibility to protect that data from hackers and bots increasingly falls on third-party vendors like CrowdStrike.
What makes CrowdStrike the cybersecurity company to own is its cloud-native security platform, known as Falcon. Falcon monitors approximately 1 trillion events per day and relies on artificial intelligence (AI) to keep end users safe. Because it’s built in the cloud and powered by AI, Falcon can identify and respond to end-user threats faster and more efficiently than virtually any on-premises security solution.
Over the past five years, CrowdStrike’s subscriber base has grown from 450 to 16,325, representing a compound annual growth rate of 105.1%. Equally important, its existing customers are consistently spending more. In five years, the percentage of customers with four or more cloud module subscriptions has grown from less than 10% to 69%. That’s why CrowdStrike’s subscription-adjusted gross margin is nearly 80%.
Another battered high-growth stock you’ll regret not buying on the dip is a programmatic ad tech company PubMatic ( PUBM -5.04% ). Shares of PubMatic are down more than 30% since November and nearly 65% since hitting a record high in March 2021.
PubMatic’s sustainable growth engine is the steady shift of advertising spend from print to various digital formats. PubMatic’s cloud infrastructure oversees the sale of digital advertising space for its customers (i.e. publishers). Interestingly, this doesn’t always mean placing the most expensive ad in a display space. Instead, PubMatic’s machine learning algorithms will aim to place relevant advertisements in front of users. This satisfies advertisers and can ultimately increase long-term ad pricing power for PubMatic’s customers over the long term.
Although global digital ad spend is expected to grow just over 10% on an annual basis through 2024, PubMatic has grown considerably faster. Last year, the company’s organic growth rate was 49% and was driven by programmatic ads on mobile, video and connected television (CTV). In fact, CTV’s advertising revenue increased more than sixfold in the fourth quarter from the year-ago period.
With PubMatic profitable on a recurring basis and predicting nearly 25% sales growth in 2022 and 2023, it’s the ideal stock to buy after a sharp drop in the Nasdaq.
A third downed growth stock just begging to be bought on this decline is the fintech giant PayPal Credits (PYPL -1.62% ). PayPal’s stock has fallen 62% since July 2021.
As with CrowdStrike and PubMatic, PayPal has a clear growth opportunity on its doorstep. In this case, I’m talking about digital payments. Even with competition in the digital payments space heating up, PayPal recorded $1.25 trillion in total payment volume (TPV) in 2021 and expects TPV to climb to $1.5 trillion. dollars or more in 2022.
Perhaps the most impressive aspect of PayPal is the growing number of payments from existing users. In 2020, there were less than 41 transactions per active account. Last year, that figure exceeded 45 per active account (over 19 billion transactions covering 426 million active users). These numbers show how fast the payments landscape is going digital.
PayPal’s abundant cash flow has also enabled the company to roll out new products and services. The company started allowing users to buy, hold and sell cryptocurrencies in 2020 and is tinkering with the launch of a stock trading platform in the United States. He also used his mountain of cash to acquire solutions company buy now, pay later Paidy last September as well.
With just a hair over 20 times Wall Street’s earnings forecast for the year, PayPal is arguably the cheapest it’s ever been as a public company.
The fourth and final beat-up growth stock you’ll regret not buying down is the cloud-based lending platform Assets received ( UPST -4.33% ). Shares of the company have lost three-quarters of their value since October and are down nearly 55% since the Nasdaq Composite hit an all-time high.
Upstart fame is the company’s AI-powered lending platform. The traditional loan verification process can be time consuming and costly for both lending institutions and the party seeking a loan. Upstart’s AI-powered platform can give immediate responses (approval or denial) to around two-thirds of personal loan applicants. Additionally, because the platform is built on machine learning, people who might not otherwise be eligible for a loan through the traditional verification process are sometimes approved using the verification process. Upstart. In other words, it democratizes access to financial services without exposing credit institutions to a higher risk of non-payment.
Investors should also note that 94% of Q4 revenue comes from fees and services related to the lending institutions they go to. In short, there is no credit exposure or non-payment risk when it comes to Upstart. This means that a rising rate environment should not drive investors away from this rapidly growing company.
If you need another good reason to be excited about Upstart (aside from the fact that the company regularly crushes Wall Street earnings expectations), consider its acquisition of Prodigy Software in 2021. This buyout allows Upstart to get into AI-powered auto lending, which is a considerably larger addressable market than personal lending.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.