It's been a difficult year for Wall Street and investors. Over the past four and a half months, the benchmark S&P 500 and iconic Dow Jones Industrial Average both officially entered correction territory with declines of at least 10%.
Meanwhile, things have been much worse for the growth-stock-focused Nasdaq Composite (NASDAQINDEX: ^IXIC), which fell nearly 30% on a peak-to-trough basis between its all-time high in mid-November and its recent low. This places the Nasdaq squarely in a bear market.
Although the velocity of downside moves during a bear market can be unsettling, history has shown over and over that these declines are the ideal time for opportunistic investors to pounce. Every notable drop in the major indexes -- that includes the Nasdaq Composite -- has eventually been wiped away by a bull market rally.
At the moment, some of the most eye-popping bargains can be found among growth stocks. What follows are four phenomenal growth stocks you'll regret not buying on this Nasdaq bear market dip.
There seem to be two key concerns Wall Street has with the once high-flying Pinterest. First, the company's monthly active users (MAU) have declined by 45 million over the past year. User growth is typically viewed as a key engagement metric for social media stocks. And second, there's worry about how Apple's iOS privacy changes could affect companies reliant on ad revenue, such as Pinterest.
But as I opined in March, neither of these issues are of concern to Pinterest.
The company's MAU decline can be explained by vaccination rates ticking up and people returning to some semblance of normal (and spending less time online). What's far more important is that Pinterest has had no trouble monetizing its 433 million MAUs. Despite a 9% year-over-year MAU decline, global average revenue per user jumped 28%! This is plain-as-day evidence that merchants are willing to pay up to reach Pinterest's users.
What's more, Pinterest's entire platform is based on the idea of users publicly sharing the things, places, and services that interest them. Its MAUs are giving merchants all the tools they need for targeted advertising, which makes Apple's iOS privacy changes a moot point.
Another incredible growth stock with a rich history of delivering for its shareholders is payment-processing leader Visa (NYSE: V).
The reason shares of Visa are around 20% below their 52-week high has to do with the growing likelihood of a recession hitting the U.S. and/or global markets. That's generally bad news for a cyclical company dependent on consumer and enterprise spending. However, this worry overlooks Visa's numerous competitive advantages.
To begin with, being cyclical isn't a bad thing. Although recessions are inevitable, they usually only last for a couple of quarters. By comparison, periods of expansion are often measured in years. Thus, Visa is a company that allows patient investors to benefit from the natural expansion of the U.S. and global economy over time.
It's also a company that doesn't lend. Strictly sticking to payment processing means the company doesn't have to worry about loan delinquencies/losses during recessions. Not having to set aside capital for losses is a key reason Visa's profit margin is consistently above 50%.
One last point: Visa holds the majority share (54%) of credit card network purchase volume in the U.S., the largest market for consumption in the world. It's a no-brainer buy on any significant weakness.
With inflation soaring and the Federal Reserve stomping on the proverbial brakes via interest rate hikes, there's the concern that a U.S. recession would lead to a notable pullback in enterprise ad spending. That wouldn't be ideal for a sell-side platform that helps publishing companies sell their digital display space.
But as with the other companies on this list, the worries surrounding PubMatic's near-term future look entirely overblown. As an example, even with first-quarter U.S. gross domestic product retracing 1.4%, PubMatic's revenue jumped 25% from the prior-year period. As businesses shift their advertising dollars from print to digital, PubMatic has a really good shot at doubling the global digital ad growth rate of a little over 10% per year.
Something else worth noting about PubMatic is that the company designed and built its cloud-based infrastructure. Not having to rely on third parties in the programmatic ad space is a huge advantage that'll allow PubMatic to recognize greater efficiencies as it scales. Or, in simpler terms, it should boast higher margins as its revenue climbs.
With a sustained growth rate of around 25% and a forward-year price-to-earnings ratio of just 22, PubMatic looks like a screaming bargain.
As with the other companies on this list, the prospect of a recession looms large. A significant portion of Alphabet's business -- Alphabet is the parent company of internet search engine Google and streaming platform YouTube -- relies on advertising. As noted, merchants tend to scale back their advertising when the economy contracts.
However, Alphabet isn't your run-of-the-mill ad company. For example, Google has consistently controlled between 91% and 93% of global internet search for the past two years. With a veritable monopoly on search, Alphabet's Google is able to command impressive ad-pricing power. Not surprisingly, this is a segment that almost always grows by a double-digit percentage.
But Alphabet is about more than just Google these days. YouTube has become one of the most visited social sites on the planet and is responsible for more than 10% of Alphabet's revenue. Meanwhile, Google Cloud is the No. 3 global cloud infrastructure service provider, based on spending. Google Cloud has sustained a 45% (or greater) sales growth rate and should be a significant margin driver for Alphabet by mid-decade, at the latest.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Sean Williams has positions in Alphabet (A shares), Pinterest, and PubMatic, Inc. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), Apple, Pinterest, PubMatic, Inc., and Visa. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.