It has been quite the journey for the investment community since this decade began. After 4 consecutive years of the principal stock indexes trading off bear and bull markets, optimists now look to be in clear control.
These swings have been especially pronounced within the expansion stock-fueled Nasdaq Composite (NASDAQINDEX: ^IXIC). Following the shortage of 33% of its value throughout the 2022 bear market, the Nasdaq Composite has soared 57% for the rationale that starting of 2023 and firmly entered a modern bull market.
Nonetheless, a majority of the Nasdaq’s gains have come courtesy of the “Magnificent Seven,” which means bargains can still be found amongst growth stocks. Long-term-minded investors simply have to be willing to hunt them out.
What follows are 4 exceptional growth stocks you might regret not buying within the brand recent Nasdaq bull market.
Visa
The first high-octane growth stock that’s historically been a genius buy during any pullback, and is an incredibly attractive stock to own throughout the young Nasdaq bull market, is payment processor Visa (NYSE: V).
As a multiyear shareholder of leading payment facilitator Visa, the one bad thing I can say about this company is that it’s cyclical. Downturns throughout the U.S. economy are normal and inevitable. When the next recession arises, consumer and enterprise spending may very well be expected to say no, which could hamper Visa’s ability to collect fees from merchants.
The other side to this coin is that the U.S. economy spends a considerably longer period expanding than it does contracting. While there have been two periods of growth that surpassed 10 years for the rationale that end of World War II, not one in all the 12 recessions over the past 78 years have surpassed 18 months in length. Visa is in pole position to learn from lengthy periods of economic expansion.
It’s a company benefiting from growth opportunities in developed and emerging markets, as well. As an example, it’s the overwhelming market share leader in bank card network purchase volume throughout the U.S. (a very powerful marketplace for consumption globally). It also has adequate capital and a substantial runway to organically expand its payment infrastructure into underbanked emerging markets (e.g., Southeastern Asia, Africa, and the Middle East), or to buy its way into higher-growth regions, corresponding to it did in 2016 when it acquired Visa Europe. Cross-border volume surged by 16% from the prior-year period throughout the December-ended quarter.
As I’ve previously identified, management’s decision to shun lending is a key reason Visa’s profit margin has remained above 50%. Although a number of of its payment-processing peers act as lenders, doing so exposes these corporations to potential credit delinquencies and loan losses when recessions crop up. Visa doesn’t must worry about setting capital aside because it isn’t a lender.
Visa’s forward price-to-earnings (P/E) ratio of 24.7 represents a 15% discount to its trailing-five-year forward-earnings multiple.
PubMatic
A second exceptional growth stock you might be kicking yourself for not adding to your portfolio with the Nasdaq stretching its proverbial legs in a modern bull market is adtech company PubMatic (NASDAQ: PUBM). PubMatic’s cloud-based programmatic ad platform helps publishing corporations sell their digital display space.
Very similar to Visa, the health of the U.S. economy tends to be the biggest headwind for promoting corporations like PubMatic. Businesses aren’t shy about paring back their ad budgets at the first sign of trouble. But as noted, the U.S. economy spends far more time growing than slowing. That is nice news for opportunistic long-term investors in ad-driven stocks.
This must be a superb 12 months for ad corporations due to U.S. elections. Based on estimates from GroupM, political ad spending is anticipated to rise by 31% in 2024 to $15.9 billion from the prior election cycle in 2020. Since more ad dollars than ever have shifted to digital channels, which is what PubMatic focuses on, the company is ideally positioned to learn from this uptick in political ad spend.
One other excuse investors can expect PubMatic to outperform throughout the years to return back is as a consequence of management’s (in hindsight) good move to construct out its own cloud-based programmatic ad platform. Though it might have been quicker and cheaper to rely on a third-party provider, the choice to develop its own infrastructure means it’ll be keeping more of its revenue as its business scales. Long story short, it should end in a superior operating margin.
Despite being a small-cap company, PubMatic is swimming in money. It closed out 2023 with $175.3 million in money with no debt, and it repurchased greater than $59 million value of its common stock last 12 months. If and when a recession does take shape, PubMatic’s balance sheet is ready.
Warner Bros. Discovery
The third magnificent growth stock that’s begging to be bought with the Nasdaq throughout the early stages of a bull market is media titan Warner Bros. Discovery (NASDAQ: WBD). Though its sales growth doesn’t meet the on a regular basis definition of a “growth stock,” Wall Street’s expected annualized earnings growth of 20% for the company through 2028 definitely puts this legacy media giant on the map.
To not sound like a broken record, nonetheless the economy matters. A weaker climate for ad spending has weighed heavily on Warner Bros. Discovery’s legacy TV segment. Further, its pivot to streaming has led to sizable operating losses for the company’s direct-to-consumer (DTC) operations.
Thankfully, PubMatic just isn’t the one company set to learn from a big uptick in political ad spending this 12 months. While cord-cutting has proved difficult for legacy media corporations, the election cycle should provide a nice boost to Warner Bros. Discovery’s sales and bottom line in 2024.
What’s arguably more needed is that the company’s DTC division sports substantial pricing power. The ability to lift monthly prices on subscribers, coupled with mindful reductions to selling, general, and administrative expenses, is Warner Bros. Discovery’s recipe to eventually reach recurring profitability for its DTC segment. Despite raising subscription prices, global streaming subscribers and average revenue per user grew modestly last 12 months, inclusive of acquisitions.
Don’t overlook this company’s ability to generate free money flow (FCF), either. Although the creator’s strike did materially reduce expenses last 12 months, Warner Bros. recognized an 86% year-over-year increase in reported FCF. Generating a great deal of money from its operations should help the company tackle its debt load.
Warner Bros. Discovery’s stock and operating performance won’t activate a dime. Nonetheless, the puzzle pieces are in place for investors to generate big-time returns over the long run.
AstraZeneca
The fourth exceptional growth stock you might regret not buying within the brand recent Nasdaq bull market is none apart from pharmaceutical juggernaut AstraZeneca (NASDAQ: AZN).
The huge headwind drug developers must contend with is the finite period of sales exclusivity for his or her novel therapies. Generic drugmakers are seemingly in any respect times waiting throughout the wings to pounce when patent exclusivity runs out on top-selling drugs. While AstraZeneca struggled with the patent cliff in decade’s past, the company’s vast novel drug portfolio is now firing on all cylinders.
Specifically, three operating segments have AstraZeneca humming along like a well-oiled machine: oncology, cardiovascular, renal, and metabolism (CVRM), and rare disease, which delivered respective currency-neutral sales growth last 12 months of 20%, 18%, and 12%.
AstraZeneca’s cancer-drug division has 4 blockbuster therapies which might be benefiting from improved cancer-screening diagnostics, strong pricing power, and label expansion opportunities. Particularly, sales of monoclonal antibody Imfinzi skyrocketed by 55% on a constant-currency basis to $4.24 billion last 12 months.
In CVRM, next-generation type 2 diabetes therapy Farxiga has done plenty of the heavy lifting. Sales jumped by 39% on a currency-neutral basis in 2023 to $5.96 billion. In the strategy, Farxiga unseated non-small-cell lung carcinoma drug Tagrisso as AstraZeneca’s top-selling drug.
Finally, rare disease therapies have been a shiny spot. When AstraZeneca acquired Alexion Pharmaceuticals in July 2021, it got its hands on blockbuster ultrarare-disease drug Soliris and its next-gen substitute Ultomiris. Because Alexion developed an alternative to Soliris, AstraZeneca may have the choice to carry onto more of its money flow without fear of generic competition.
A forward P/E ratio of 13.5 seems greater than fair for a rock-solid drugmaker that is anticipated to grow its earnings by an annual average of 13.2% through 2028.
Where to take a position $1,000 immediately
When our analyst team has a stock tip, it’d probably pay to listen. In any case, the newsletter they’ve run for twenty years, Motley Idiot Stock Advisor, has greater than tripled the market.*
They simply revealed what they consider are the 10 best stocks for investors to buy immediately… and Visa made the list — but there are 9 other stocks you is perhaps overlooking.
*Stock Advisor returns as of April 8, 2024
Sean Williams has positions in PubMatic, Visa, and Warner Bros. Discovery. The Motley Idiot has positions in and recommends PubMatic, Visa, and Warner Bros. Discovery. The Motley Idiot recommends AstraZeneca Plc. The Motley Idiot has a disclosure policy.
4 Exceptional Growth Stocks You might Regret Not Buying throughout the Recent Nasdaq Bull Market was originally published by The Motley Idiot