What goes up can come down. Investors are now getting a taste of that saying.
The Nasdaq Composite Index began gaining momentum in the fourth quarter of 2022 that continued into last year and through the first half of 2024. However, with the index down 10% from its recent peak, the Nasdaq entered a correction late last week.
Should investors be worried? I don’t think so. Instead, I see the Nasdaq correction as a great buying opportunity. Here are three no-brainer stocks to buy on the pullback.
1. Alphabet
The bad news for Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is that the shares are down nearly 13% from their early July highs. The good news is that shares of parent company Google are still up nearly 20% this year. But the good news is that the best is yet to come for Alphabet.
Google Search remains Alphabet’s biggest growth engine. The company’s search revenue grew nearly $5.9 billion year over year (13.8%) in the second quarter of 2024. Fears that generative AI would pose an existential threat to Google Search appear misplaced. Google’s tests of its new AI Overviews indicate that usage and user satisfaction are increasing with the new functionality.
Google Cloud, once loss-making, brought in $1.2 billion in operating profit in Q2. It’s Alphabet’s fastest-growing segment, with revenue up 29% year-over-year to $10.3 billion. The artificial intelligence (AI) tailwind for Google Cloud won’t fade just because the Nasdaq has fallen. I agree with Alphabet CEO Sundar Pichai’s proclamation in the Q2 earnings call that the company is “in a strong position to [its] fate as technology [AI] continues to evolve.”
YouTube and Google subscriptions, platforms and devices provide additional growth drivers for Alphabet. And don’t forget the company’s famous “Other Bets.” I think Waymo alone could make Alphabet worth a lot more by the end of the decade as the robotaxi market explodes.
2. Meta-platforms
Meta platforms (NASDAQ: META) shares closed last week down nearly 10% from their recent highs. That drop doesn’t look too bad, though, as Meta’s stock price is up nearly 40% so far in 2024, nearly tripling in the past year.
More importantly, Meta’s underlying business is booming. Revenue rose 22% year-over-year in Q2 to $39.1 billion, while profit soared 73% to $13.5 billion. Critics who criticized Facebook as only for older folks may want to eat their words. Meta CFO Susan Li said on the Q2 earnings call, “We’ve seen healthy growth in young adult app adoption in the U.S. and Canada over the past few quarters.” Facebook Marketplace has been a key driver of that growth.
Meta is also getting better at monetizing its apps. The company has a particularly compelling growth opportunity in increasing its ad inventory on videos. It’s also improving the technology that determines which ads are shown to which users and when on both Facebook and Instagram.
AI plays a key role in these efforts. It should also drive growth for Meta in other ways. CEO Mark Zuckerberg, for example, thinks that AI-powered agents will be as ubiquitous to businesses in the future as websites are today.
3. Free Market
Free market (NASDAQ: MELI) is an outlier in this group. The stock is only about 2% below its highs reached earlier this year. The e-commerce and fintech stock rose last week while many Nasdaq stocks fell.
How did MercadoLibre buck the downward trend? The company reported stellar second-quarter results. Net sales rose 42% year-over-year to $5.1 billion. Profit more than doubled to $531 million. Adjusted free cash flow soared 368% to $678 million.
I believe MercadoLibre’s growth story has many more chapters to come. The company’s continuous innovation is a key reason for this. One example is that MercadoLibre is deploying 300 robots in its new distribution center in Texas, which supports its Mexican operations. These robots help reduce processing time by 20%.
MercadoLibre’s fintech business also continues to have huge growth potential. Its credit card business grew 146% year-on-year in Q2, with total payment volume more than tripling.
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Randi Zuckerberg, former chief marketer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, 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. Keith Speights has positions at Alphabet, MercadoLibre and Meta Platforms. The Motley Fool has positions at and recommends Alphabet, MercadoLibre and Meta Platforms. The Motley Fool has a disclosure policy.
Nasdaq Market Correction: 3 Stocks You Should Definitely Buy in a Pullback was originally published by The Motley Fool
