Wall Street has been a hotbed of volatility since the start of this decade. While it was a promising start to 2024, it was preceded by four consecutive years of major stock indexes alternating between bear and bull markets. No commonly followed index has been more volatile than the growth-oriented index Nasdaq Composite (NASDAQINDEX: ^IXIC).
In 2022, the index was stuck in a bear market, losing 33% of its value by the end of the year. But since the opening bell rang in 2023, this innovation-driven index has gained a cool 60% and set a new all-time high. There is absolutely no doubt that the Nasdaq is in a bull market, even though it is fairly new.
Despite the Nasdaq Composite rising to a new all-time high on May 15, bargains remain among growth stocks can can still be found. Opportunistic investors simply have to be willing to look for great deals.
What follows are four incomparable growth stocks you might regret not buying in the new Nasdaq bull market.
Metaplatforms
The first peerless growth stock begging to be bought as the relatively young Nasdaq bull market stretches its legs is the social media leader Metaplatforms (NASDAQ: META). While Meta’s forecast for higher capital expenditures has recently spooked Wall Street, the company has some well-defined competitive advantages that could easily wipe out these near-term headwinds.
To start with the obvious: Meta Platforms is the parent company of many of the most visited social sites worldwide. It owns Facebook (the most visited social site), along with Instagram, WhatsApp, Threads and Facebook Messenger.
Collectively, the family of apps attracted 3.24 billion daily active users during the first quarter and nearly 4 billion monthly active users in the quarter ended in December. Advertisers will struggle to find a social media platform with greater reach.
To add to the above, Meta benefits from disproportionately long periods of economic growth. Although advertising is highly cyclical and recessions are an inevitable aspect of the economic cycle, periods of expansion last significantly longer than contractions. In simpler terms, long-term investors in ad-driven businesses (Meta generates nearly 98% of its revenue from advertising) are often handsomely rewarded.
Another reason why current and future Meta investors shouldn’t be too concerned about CEO Mark Zuckerberg’s desire to spend money on artificial intelligence (AI), the metaverse, and augmented/virtual reality devices is the the company’s phenomenal war chest and cash flow. The company ended March with more than $58 billion in cash, cash equivalents and marketable securities, and generated approximately $19.2 billion in net cash from its operations. As a cash cow, Zuckerberg’s company has the luxury of investing in the future, even if the fruits of those investments will take years to materialize.
Finally, Meta Platforms stock is still a phenomenal buy. Shares can now be purchased for 13 times consensus 2025 cash flow, which represents a 12% discount to the average cash flow rate of the past five years.
Fiverr International
A second incomparable growth stock you’ll regret not adding to your portfolio as the Nasdaq pushes to new highs is the online services marketplace. Fiverr International (NYSE: FVRR). Despite concerns that AI would negatively impact business performance, several dynamics appear to be working in the company’s favor.
While Fiverr shares have returned more than 90% from their all-time highs, the macro environment couldn’t be more favorable to its long-term success. While some workers have returned to the office after the worst of the pandemic, more people than ever are working remotely. This significant increase in the number of mobile workers is just what the doctor ordered for Fiverr’s gig economy-driven platform for freelancers.
As I’ve noted in the past, Fiverr’s transparency is another major selling point. Rather than following in the footsteps of many of its peers and letting freelancers price their services on an hourly basis, Fiverr lets its freelancers offer a comprehensive price for their tasks. This transparency is likely the fuel that keeps spending per buyer higher.
But the secret sauce that makes Fiverr International a great investment is its take rate, that is, the percentage of revenue it gets to keep from negotiated deals on its platform, including fees. While most competitors have take rates in the mid to high teens, it ended March with a take rate of 32.3%, up 190 basis points from the comparable period in 2023. The company is holding more And generating increasingly higher spend per buyer.
The icing on the cake is that Fiverr has also unveiled a stock buyback program for up to $100 million. The share buybacks could accelerate the company’s adjusted earnings per share (EPS) growth by double digits.
BioMarin Pharmaceutical
The third unparalleled growth stock that you’ll probably be kicking yourself for not adding during the early innings of the new Nasdaq bull market is specialty biotech. BioMarin Pharmaceutical (NASDAQ:BMRN). Although the launch of Roctavian, a one-time gene therapy treatment for patients with hemophilia A, was marred by challenges (sales of the drug totaled just $800,000 in the first quarter), one bad apple won’t spoil BioMarin’s juicy portfolio. of new therapies.
Before we get into the product specifications, it’s important to recognize that BioMarin is focusing its efforts on drugs for ultra-rare diseases. Although there are risks associated with small groups of patients, the benefits are plentiful. In fact, such drugs approved by the Food and Drug Administration (FDA) often face little or no pushback from insurers regarding their high list prices, and they usually face minimal or non-existent competition.
Even as Roctavian stumbles out of the gate, the growth of the dwarfism drug Voxzogo has more than made up for this clumsy stuff. The label expansion capabilities broadened Voxzogo’s use case, boosting revenue 74% to nearly $153 million in the quarter ended March. Greater adoption and strong pricing power should give Voxzogo a legitimate shot at eventually surpassing $1 billion in annual revenue.
BioMarin management also recently made the decision to focus its efforts and capital on the most promising experimental therapies. By limiting clinical trials to three candidates, the company aims to reduce annual operating costs by up to $40 million.
With more than six FDA-approved drugs in its portfolio, BioMarin should be able to grow double-digit revenue and earnings per share through at least 2027. In fact, the Wall Street consensus calls for earnings per share to catapult from a reported $0.87 in 2023 to nearly $5 in 2027.
West Digital
A fourth incomparable growth stock you might regret not buying in the new Nasdaq bull market is a storage solutions specialist West Digital (NASDAQ: WDC). Despite some weak demand from the consumer segment (i.e., personal computer sales have remained weak), numerous other aspects of Western Digital’s business are operating at full capacity.
The first undeniable catalyst is the AI revolution. While artificial intelligence has caused concerns for some companies, it will increase demand for Western Digital. AI data centers with high computing power require increasingly large computing needs, which will in turn increase the demand for data center storage solutions.
Another thing to consider is that enterprise spending on cloud-based platforms is still in its infancy. As cloud spending increases, Western Digital’s data center storage products are coming into the picture. Not surprisingly, the company’s cloud segment was the biggest growth driver in the fiscal third quarter (ended March 29), with year-over-year revenue growth of 29%!
Pricing energy and utilities should also work to the company’s advantage. While hard drives have long been a staple of data centers, Western Digital’s NAND flash memory solutions support faster transfer speeds and consume less power. As NAND flash memory adoption increases, the company’s pricing power should improve.
The final piece of the puzzle is that Western Digital’s bottom line will take a major turnaround. After the company reported a loss of $3.59 per share in fiscal 2023, Wall Street expects positive earnings per share of almost $8 next year. This is a company that should benefit from growth in cloud and AI for years to come.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Sean Williams holds positions at Fiverr International, Meta Platforms and Western Digital. The Motley Fool holds positions in and recommends Fiverr International and Meta Platforms. The Motley Fool recommends BioMarin Pharmaceutical. The Motley Fool has a disclosure policy.
4 Unparalleled Growth Stocks You’ll Regret Not Buying in the New Nasdaq Bull Market Originally published by The Motley Fool
