This year has offered a not-so-subtle reminder to Wall Street and the investing community that stocks don’t move upward in a straight line. Since hitting their all-time closing highs, the widely followed Dow Jones Industrial Average, benchmark S&P 500, and growth stock-fueled Nasdaq Composite (NASDAQINDEX: ^IXIC) have respectively tumbled by 17%, 22%, and 33%. These moves squarely put the S&P 500 and Nasdaq in a bear market.
There’s no question that the velocity and unpredictability of downward moves during a bear market can weigh on investors’ psyche. However, it’s important to note that every notable decline in the major U.S. indexes, including the Nasdaq Composite, has eventually been cleared away by a bull market. This makes corrections and bear markets the opportune time to put your money to work.
With the Nasdaq tumbling, a number of innovative growth stocks now look like incredible deals. What follows are four remarkable growth stocks you’ll regret not buying on the dip.
The first exceptionally innovative company investors can confidently buy during the Nasdaq bear market decline is fintech stock Block (NYSE: SQ), the company formerly known as Square. Although cryptocurrency weakness could hurt Bitcoin trading revenue in the near term, and high inflation is bad news for low-income consumers, there are more than enough long-term catalysts for Block to deliver jaw-dropping growth.
For more than a decade, the company’s foundation has been its seller ecosystem, commonly referred to as the “Square ecosystem.” This is the segment that provides point-of-sale solutions, loans, and analytics to businesses to help them succeed. In 2012, just $6.5 billion in gross payment volume (GPV) was processed by the Square ecosystem. But based on the $39.5 billion in GPV in during the first quarter of 2022, the Square ecosystem is on pace for $158 billion in annual GPV.
What’s particularly interesting about the seller ecosystem is that it’s attracting bigger businesses that have higher annualized GPVs. Since this is predominantly a fee-driven operating segment, bigger business should lead to higher gross profit.
The other key for Block is digital peer-to-peer payment platform Cash App. In the four years between the end of 2017 and end of 2021, the number of monthly transacting users on Cash App soared from 7 million to north of 44 million. With the recent acquisition of buy now, pay later company Afterpay, Block has the ability to create a closed-loop payment network with its Square ecosystem.
A second remarkable growth stock that you’ll be kicking yourself if you don’t buy on this Nasdaq bear market decline is travel and hosting company Airbnb (NASDAQ: ABNB). Even with recession fears rising and inflation biting consumers’ wallets hard in the short term, Airbnb has “industry disruptor” written all over it.
To begin with, Airbnb is unquestionably a popular alternative to traditional hotels. The Airbnb marketplace provides abundant choice, with properties that often provide a lower cost and added privacy, compared to staying in a hotel in or near a major city. In 2016, the entire platform recognized 52 million total nights and experiences booked. In just the first quarter of 2022, Airbnb practically doubled this figure, with 102.1 million nights and experiences booked.
Arguably the most exciting thing about Airbnb is that long-term stays are its fastest-growing category. A “long-term stay” is defined as a booking of 28 or more days. In the wake of the pandemic, we’ve witnessed workforces becoming more mobile. These remote workers seem to be Airbnb’s key to sustainably growing its hosting marketplace.
Additionally, the company wants a larger piece of the $8 trillion travel industry pie. Airbnb’s “experiences” segment is working with local experts to lead travelers on adventures, and is likely just scratching the surface with regard to its partnership potential.
Another sensational growth stock investors would be wise to scoop up on the Nasdaq bear market dip is robotic-assisted surgical system developer Intuitive Surgical (NASDAQ: ISRG).
One reason for investors to trust Intuitive Surgical over the long haul is its market dominance. When the first quarter came to a close, the company had 6,920 of its da Vinci surgical systems installed in hospitals and surgical centers worldwide. This number may not sound like a lot, but it’s many times higher than those of its closest competitors. What’s more, these systems are costly ($0.5 million to $2.5 million) and the training for them is time-consuming. In other words, da Vinci buyers tend to remain clients for a long time.
Intuitive Surgical’s razor-and-blades operating model is also designed to emphasize operating-margin growth over time. During the 2000s, most of the company’s sales originated from selling its pricey, but generally low-margin, da Vinci systems. Nowadays, instruments sold with each procedure and system servicing account for the lion’s share of total sales. These are higher-margin operating segments. As the company’s installed base of systems grows, profits should increase at an even faster pace.
There’s also a long runway for da Vinci to become a standard of care in the operating room. While it’s already a leader in urology and gynecology procedures, there’s plenty of room for expansion in colorectal, thoracic, and general soft-tissue surgical procedures.
A fourth and final remarkable growth stock that you’ll regret not buying on the dip is cloud-based lending platform Upstart Holdings (NASDAQ: UPST). Even though Wall Street is leery of the unproven Upstart as interest rates rise and fears of a U.S. recession grow, there are multiple aspects of the company’s operating model that suggest it could thrive.
Perhaps the biggest differentiator for Upstart is its artificial intelligence (AI)-powered lending platform. Rather than relying on the same vetting process for loans that financial institutions have leaned on for decades, Upstart uses AI. This led to 74% of all loans on its platform being fully automated during the first quarter. Automation ultimately saves financial institutions time and money.
To build on this point, Upstart’s AI-fueled lending platform is opening up opportunities for previously underbanked people. Although the average credit score of Upstart’s approvals has been below the average credit score of approvals in the traditional vetting process, there’s been no discernible difference in delinquency rates. Even if interest rates continue to rise rapidly, this distinction makes it more likely that financial institutions will turn to Upstart for its AI-based loan-vetting platform.
As if this weren’t enough to get excited about, Upstart has also moved beyond the personal loan arena and into the auto loan origination market. The auto loan market was recently a $751 billion opportunity — or about 6.7 times more than the personal loan market Upstart has catered to since its inception.
Sean Williams has positions in Block and Intuitive Surgical. The Motley Fool has positions in and recommends Airbnb, Bitcoin, Block, Intuitive Surgical, and Upstart Holdings. The Motley Fool has a disclosure policy.