After enduring its worst first half of the year since 1970, the stock market is showing signs of life. The Nasdaq Composite, S&P 500, and Dow Jones Industrial Index are all up this month — 4.8%, 3.6%, and 3.2%, respectively.
The Nasdaq 100, which includes only the biggest names in the Nasdaq (and excludes financial companies), is also up 5.1% in July. So what stocks are screaming buys to follow, especially now that the selling has paused? Here are three Nasdaq 100 companies poised for a bull run.
The first Nasdaq 100 stock to buy is Adobe (NASDAQ: ADBE). Founded in 1982, Adobe has become a key pillar of the digital economy. Its cloud-based applications and platforms are vital tools for creating today’s marketing campaigns, educational materials, and publications.
In its most recent quarter (the three months ended June 3), Adobe reported $4.4 billion in revenue with adjusted earnings per share of $3.35. Both figures were slightly better than analyst estimates.
Looking ahead, Adobe should continue to profit from the rapid expansion of the creator economy. The company’s Creative Cloud product is designed to appeal to marketing professionals, influencers, and amateur creatives alike. Adobe estimates the total addressable market for Creative Cloud should grow to $41 billion in 2023 and then $63 billion in 2024.
Wall Street expects Adobe to grow revenue just shy of 12% this fiscal year to a total of $17.7 billion. Analysts expect Adobe to surpass the $20 billion revenue milestone next year.
Even with its solid fundamentals, Adobe fell along with the broader tech market in the first half of 2022. Shares are down 33% year to date. I view that as a gift, and I’m happy to load up on Adobe shares now — before the stock recoups those losses.
The second Nasdaq 100 name to buy is Airbnb (NASDAQ: ABNB). The company operates an online platform that connects travelers with property owners. The concept is simple, but what sets Airbnb apart is its scale.
Airbnb has over four million hosts, spread over nearly every country on Earth. Last quarter alone, guests booked over 100 million nights and experiences on Airbnb, resulting in a gross booking value (GBV) of $17.2 billion. Meanwhile, the company generated $1.5 billion of revenue, up 70% year over year.
Airbnb is clearly riding a wave of pent-up demand after nearly two years of pandemic-related travel restrictions. Nevertheless, the company has other, more long-lasting trends working in its favor too. Close to half (48%) of all gross nights booked on its platform were for stays of seven days or more. A full 21% were for stays of 28 days or longer. In other words, Airbnb isn’t just a vacation rental site: It’s an essential part of the digital nomad lifestyle.
And Wall Street is taking notice. Full-year 2022 earnings per share (EPS) estimates are going up. They now stand at $1.87, up from $1.33 three months ago. While the stock’s valuation is quite high with a price-to-earnings ratio of almost 90 and a price-to-sales ratio (P/S) of just under 10, the latter is near its all-time low.
For me, Airbnb is a long-term buy-and-hold stock, and I’m happy to load up on more at current levels.
3. Zoom Video Communications
My third and final Nasdaq 100 pick is Zoom Video Communications (NASDAQ: ZM). Like Adobe and Airbnb, Zoom is a company empowering the virtual workforce. Today’s service-sector employees prefer flexible working arrangements, meaning they need tools that empower remote work and its resulting flexibility. And Zoom is nothing if not a staple of this movement.
When you think of pandemic lockdowns, Zoom’s ubiquitous video conference technology might be the first thing to cross your mind — for better or worse. Millions of users have become familiar with it for work, school, parties, weddings, and so much more.
In that process, Zoom has also become a fairly large company with a market cap of $30 billion as of this writing. In the trailing 12-month period, it generated $4.2 billion of revenue, $1.1 billion of EBITDA, and $1.5 billion of free cash flow. Analysts expect it to grow revenue 10% to 12% over the next two years.
What’s more, the company could become a takeover target. Many companies likely covet its video conference technology, which so many people came to learn inside and out during the pandemic. And with the stock more than 80% off its all-time high, it’s possible a deep-pocketed tech company could acquire Zoom simply for its brand-name status.
Even if such a deal doesn’t materialize, management has $5.7 billion of cash on hand to invest in ongoing initiatives, such as its Zoom Contact Center and Zoom Phone. Both offerings provide Zoom with an opportunity to build on its existing brand and provide customers with integrated communications solutions.
The company’s fundamentals are sound, its product is well known, and it is riding the widespread remote-work trend. That’s why it’s a name worth buying hand over fist.
Jake Lerch has positions in Adobe Inc. and Airbnb, Inc. The Motley Fool has positions in and recommends Adobe Inc., Airbnb, Inc., and Zoom Video Communications. The Motley Fool recommends the following options: long January 2024 $420 calls on Adobe Inc. and short January 2024 $430 calls on Adobe Inc. The Motley Fool has a disclosure policy.