The Nasdaq Composite (NASDAQINDEX: ^IXIC) closed in correction territory on August 2 for the first time since early 2022. The decline was triggered by a disappointing jobs report that pointed to a weakening economy. However, the growth-oriented index has since recovered 4% and history suggests it could rise further in the months ahead.
The Nasdaq has undergone 11 corrections over the past 15 years, with the index returning a median of 25% in the 12 months following its first close in correction territory. That implies a 21% gain by August 2025. Of course, past performance is never a guarantee of future results, but Wall Street analysts are generally bullish on two Nasdaq stocks:
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Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has a median price target of $205 per share, which represents a 27% upside from the current price of $161.
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Atlassian (NASDAQ: TEAM) has a median price target of $209 per share, which represents a 25% upside from the current price of $167.
Here’s what investors need to know.
1. Alphabet
Alphabet’s Google is the world’s largest digital advertiser. The company is losing ground on the open internet, but its revenue share will still be larger than that of the number two Meta platforms by 5.5 percentage points this year, according to eMarketer. Alphabet’s dominance in web search (Google Search) and streaming media (YouTube) is the foundation of its successful advertising business. Those platforms allow the company to collect data and deliver relevant ads to consumers.
In addition to advertising, Alphabet has another major growth engine in cloud computing. Google accounted for 12% of public cloud spending in the second quarter. That figure is lower than the revenue share of Amazon (32%) and Microsoft (23%), but it still represents progress. Google accounted for 11% of public cloud spending in the same quarter last year. Investments in artificial intelligence tools like Gemini could help the company extend its market share gains in the future.
Alphabet reported solid financial results in the second quarter, beating estimates for both the top and bottom lines. Revenue rose 14% to $84.7 billion as growth in cloud computing sales accelerated. Meanwhile, profit under generally accepted accounting principles (GAAP) rose 31% to $1.89 per diluted share, thanks to disciplined cost control. Investors have good reason to believe the momentum will continue.
Analysts expect digital ad spending to grow 10% annually through 2028, and spending on public cloud services is expected to grow 19% annually over the same period. That puts Alphabet on track for double-digit revenue growth, and careful cost control should result in slightly faster profit growth.
Indeed, Wall Street expects earnings to grow 17% per year over the next three years. That estimate makes the current valuation of 23 times earnings reasonable. That figure translates to a PEG ratio of 1.3, a discount from the five-year average of 1.5. That number is also a discount from Microsoft’s and Meta Platforms’ PEG ratios of 2.6 and 1.5, respectively. As a result, investors should feel comfortable buying a small position in Alphabet shares today.
2. Atlassian
Atlassian provides software for work management, IT service management (ITSM), and enterprise planning. Together, the products help companies plan, track, and complete projects. The company is a recognized leader in DevOps platforms, software that supports collaboration between development and operations teams. Atlassian also has a strong presence in enterprise service management software.
What sets Atlassian apart is its ability to unify work management, ITSM, and enterprise planning tools on a common platform that connects technical teams (development and operations) with non-technical teams (finance, human resources, and marketing). Additionally, Atlassian relies heavily on word-of-mouth to attract new customers, allowing the company to spend more on product development than its competitors.
That strategy theoretically creates a flywheel, where compelling products naturally attract customers to Atlassian and aggressive investments in R&D continually add more value for customers. Atlassian’s most recent shareholder letter states: “This flywheel is a unique advantage, efficiently bringing in thousands of new customers of all sizes from around the world each quarter. It’s what enables us to be one of the most efficient [go-to-market] models in all software.”
Atlassian reported strong financial results in the fourth quarter of fiscal 2024 (ending June 2024). Revenue rose 20% to $1.1 billion and non-GAAP net income rose 16% to $0.66 per diluted share. However, the stock fell after the report of weak guidance. Management expects revenue to grow 16% in fiscal 2025, a modest slowdown from the 23% growth the company reported in fiscal 2024.
There was some good news, however. Management said, “We continue to expect total revenue to grow at a compound annual growth rate of greater than 20% over the next three years.” Additionally, Atlassian estimates that its $67 billion addressable market is growing at 13% annually, and the company sees a significant opportunity ($23 billion) to expand relationships with existing customers.
Wall Street expects adjusted earnings to grow 19% annually through fiscal 2027. That consensus makes the current valuation of 57 times adjusted earnings expensive. Atlassian is a good company with a strong competitive position, but I would keep this stock on my watchlist for now.
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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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former chief market development officer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Atlassian, Meta Platforms and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
History Says The Nasdaq Will Rise: 2 Growth Stocks To Buy Now, According To Wall Street was originally published by The Motley Fool
