Since the trough of the Great Recession hit 13 years ago, the tech-dependent sector Nasdaq Compound (NASDAQ INDEX: ^IXIC) was virtually unstoppable. While the iconic Dow Jones Industrial Average and broad-based S&P500 delivered respective gains of 398% and 517% since the March 9, 2009 low, the Nasdaq Composite has run away with an overall increase of 909%!
But in the past four months, the enthusiasm surrounding high-growth stocks that propelled the Nasdaq higher for more than a decade has faded. As of March 8, the Nasdaq Composite was officially in a bear market, down 20.3% from its all-time closing high.
While these wild swings can be disconcerting, especially to new investors, history has conclusively shown that buying during these dips is a smart move for long-term investors. Indeed, every notable decline in the stock market is eventually erased by a bullish rally.
Below are three growth stocks you’ll likely regret not buying as the Nasdaq plunges into bear market territory.
The first growth stock you might blame yourself for not buying during the Nasdaq bear market is the cloud-based lending platform Assets received (NASDAQ: UPST).
Admittedly, Upstart has had a wild ride since the start of August. The shares nearly quadrupled to $400 in less than three months and have fallen as much as 80% since hitting a record high. While the upward move was, arguably, a bit large, this retracement does not take into account the transformative capacity of the company’s lending platform for lending institutions and consumers.
The traditional loan application verification process is costly and time consuming. But with Upstart, about two-thirds of all personal loan applicants get a response right away. Leveraging artificial intelligence (AI) and machine learning, Upstart is able to quickly screen applicants and save lenders time and money. Additionally, the company’s AI-powered platform enables a wider range of applicants to be approved, even those with low credit scores.
Upstart’s recent weakness is likely related to the expectation of higher interest rates. With inflation hitting a 40-year high in January, the Federal Reserve has no choice but to raise interest rates to curb inflation. The concern is that higher rates could reduce the number of loan applicants and slow Upstart’s rapid growth.
However, it is important to note that 94% of the company’s revenue in the fourth quarter was based on services or fees. The company has no credit exposure and therefore does not have to worry about loan losses or defaults. Plus, with the company’s platform saving lenders money, they’re even more likely to rely on Upstart as interest rates rise and the applicant pool grows. of loan is reduced a little.
Keep in mind that personal loans are just a starting point for Upstart. The acquisition of Prodigy Software in 2021 gives the company a path to tackle the auto lending market with its AI lending platform. Mortgage originations will likely be the next target after that.
With Upstart predicting to increase sales by 273% over the next five years, now is the perfect time to take advantage of this recent discount.
Another growth stock you’ll regret not buying with the Nasdaq bear market is the specialty furniture retailer Lovebag (NASDAQ: LOVE).
Generally speaking, furniture companies are very cyclical, slow growing and very dependent on foot traffic to their physical stores. Lovesac attempts to subvert this heavy industry in two unique ways.
First of all, Lovesac is changing the game with its furniture. Although the company was initially known for its ottoman-style chairs, “sactionals” now account for around 85% of total sales. Sactionals are modular sofas that can be rearranged dozens of ways to fit most living spaces. In addition to their functionality, there are around 200 coverage choices for buyers to choose from. This means that sactionals will match any theme or color scheme of a home. And perhaps best of all, the yarn used to make these blankets is derived entirely from recycled plastic water bottles. It’s function, choice and eco-friendly production rolled into one.
Lovesac’s second source of differentiation is the company’s omnichannel sales platform. While most furniture stores have been severely hampered by COVID-19 closures, Lovesac has been able to shift almost half of its annual sales online. The company also used pop-up showrooms and relied on showroom partnerships with branded retailers to reduce its physical rental costs. The fact is, Lovesac’s overhead is significantly lower than other furniture stores, which has resulted in higher margins and recurring profits.
Despite Wall Street’s expectations being dashed over the past two years, Lovesac shares are down nearly 60% from their all-time high. With the company expected to maintain double-digit sales growth for years to come and shares valued at just 19 times Wall Street consensus earnings for next year, now is the time for opportunistic investors. to jump.
The third growth stock you’ll regret not recovering with the Nasdaq in bearish territory is the radio frequency systems provider Qorvo (NASDAQ: QRVO).
The big theme that is expected to significantly increase Qorvo’s revenue and bottom line is the ongoing deployment of 5G wireless infrastructure. It’s been about a decade since wireless download speeds improved dramatically. The introduction of 5G download speeds is expected to prompt consumers and businesses to undertake a multi-year device replacement cycle.
Qorvo supplies a number of key components used in next-generation smartphones with 5G capability. This includes AppleQorvo’s iPhone, which accounted for around 30% of Qorvo’s sales in 2021. In fact, Apple’s recently introduced iPhone SE with 5G capability is another opportunity for Qorvo’s chips to find a home.
Simply put, the more 5G-enabled smartphones produced, the more likely Qorvo’s solutions will find their way into those devices. According to IDC, smartphone shipments in the United States are expected to grow from 89.5 million units in 2021 to more than 153 million by the middle of the decade.
Although smartphone solutions make up the bulk of Qorvo’s revenue, it’s not the company’s only source of growth. For example, it provides wireless connectivity solutions used in next-generation vehicles. As new vehicles rely more on technology and driver assistance features, companies like Qorvo will be in greater demand.
Qorvo represents one of those rare instances where a growth stock can also be a value stock. Despite low double-digit sales growth, investors can buy the company’s shares for less than 10 times Wall Street’s forecast earnings for fiscal 2023. That’s incredibly cheap for a company so closely tied to growth. next-generation smartphones.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.