If the past three-plus years has taught investors anything, it's that Wall Street can be fickle. Wall Street has vacillated between bull and bear markets, with the growth-focused Nasdaq Composite(NASDAQINDEX: ^IXIC) being whipsawed more than any other major index.
During the 2022 bear market, the innovation-fueled Nasdaq shed up to 38% of its value and ended the year lower by 33%. Through the first eight months and change of 2023, the Nasdaq Composite is higher by nearly 32%.
Image source: Getty Images.
While some investors might view the Nasdaq Composite still trading more than 14% below its record-closing high in November 2021 as a failure, long-term investors will see it as an opportunity. Since the major indexes have historically increased in value over time, double-digit percentage declines represent the perfect opportunity for investors to pounce -- especially when it comes to beaten-down growth stocks.
What follows are four magnificent growth stocks you'll regret not buying in the wake of the Nasdaq bear market dip.
Walt Disney
The first unrivaled growth stock that's begging to be bought with the Nasdaq Composite still well below its all-time high is media giantWalt Disney(NYSE: DIS). Although Disney is contending with tangible headwinds, including the Hollywood writers strike and sizable losses from its streaming division, it has the puzzle pieces in place to potentially double its profits by 2027.
Perhaps most important, Walt Disney is successfully putting the challenges caused by the COVID-19 pandemic in the back seat. China abandoning its stringent COVID-19 mitigation measures means the company's global theme parks are back to being cash machines.
To build on this point, no other media company has the cast of characters or storytelling ability that Disney possesses. While there are other theme parks to attend and movies/shows to watch, the lure of Disney is unmatched by other entertainment providers.
The irreplaceability of Disney's storytelling is what gives the company such incredible pricing power. For instance, the cost of an admission ticket at Disneyland in Southern California has risen more than 10,000% since the park opened in 1955, which compares to a little over 1,000% for the U.S. inflation rate over the same timeline.
Pricing will be the key to moving the company's streaming division to recurring profits. For the second time in less than a year, Disney is poised to increase the monthly cost on its Disney+ streaming service. The brand value that Disney brings to the table should help the company hang on to the bulk of these subscribers, even with notable price increases on the way.
Lastly, the company has Bob Iger back in the CEO chair. Iger has had numerous successful tenures with Walt Disney, and was instrumental in a handful of key acquisitions, including Pixar, Marvel, and Lucasfilm. Look for Iger's dealmaking prowess to benefit patient shareholders.
Exelixis
A second magnificent growth stock you'll be kicking yourself for not buying following the Nasdaq bear market swoon is biotech stockExelixis(NASDAQ: EXEL). Even though the company's lead cancer drug, Cabometyx, has endured a few unsuccessful late-stage clinical trials, both the sales and profit arrows for the company are clearly pointing higher.
Based on existing approvals -- first- and second-line renal cell carcinoma and second-line advanced hepatocellular carcinoma -- Cabometyx is knocking it out of the proverbial park. The roughly $403 million in net product sales from Cabometyx in the June-ended quarter puts it on pace for $1.6 billion in annualized revenue. Exelixis notes that both volume and price are heading higher for its key therapeutic.
What's even more important is that Cabometyx looks to have a path to more than $2 billion in annual sales. Exelixis is examining its lead drug in dozens of indications as a monotherapy or combination treatment. Only a handful of successes would be needed to expand Cabometyx's label to the point where it easily surpasses $2 billion in annual product sales.
Furthermore, the company settled litigation with generic-drug manufacturer Teva Pharmaceutical Industries in July that'll protect Cabometyx from an influx of generics until the start of 2031. Exelixis has more than seven years to ride the phenomenal cash flow that Cabometyx generates.
The cherry on the sundae is that Exelixis is also investing aggressively in internally developed drugs, as well as collaborations/licensed therapies. This past week, Exelixis and Insilico Medicine entered into a global licensing agreement for ISM3091, a small molecule inhibitor of USP1, which is targeted at BRCA-mutated tumors.
Exelixis is sitting on a mountain of cash, and management has shown they're not afraid to put it to work to expand the company's product portfolio.
Image source: Getty Images.
Qorvo
The third class-of-its-own growth stock you'll regret not scooping up following the Nasdaq bear market decline is semiconductor solutions specialistQorvo(NASDAQ: QRVO). Despite having its bottom line squeezed in the short run by a slowdown in smartphone sales, Qorvo is a company that's perfectly positioned to thrive over the long term in a handful of steadily growing industries.
The biggest catalyst for Qorvo remains the 5G revolution. Even though the global smartphone replacement cycle has slowed from an initial surge in 2021, ongoing smartphone innovation, along with 5G coverage expansion worldwide, should allow annual smartphone shipments to steadily grow over the next three to five years. Qorvo generates approximately two-thirds of its sales from its cellular segment.
I'd be remiss if I didn't also mention that Qorvo has a tight-knit relationship with Apple, whose iPhone absolutely dominates U.S. smartphone market share. Supplying products to Apple's iPhone has its benefits, and should play a key role in Qorvo more than doubling its earnings per share between fiscal 2024 and fiscal 2027 (Qorvo's fiscal year ends at the end of March or early April).
Don't overlook the role Qorvo is playing in next-generation automobiles, either. As newer vehicles become more reliant on technology, Qorvo is stepping up by providing connectivity and power management solutions. The ongoing push toward hybrid and electric vehicles further solidifies a growing need for the automotive solutions Qorvo provides.
The valuation also makes a lot of sense. At worst, investors are paying about 19 times earnings in fiscal 2024 to own shares of Qorvo. If the company can hit Wall Street's consensus by fiscal 2027, it'll be trading for less than 9 times earnings. That's a screaming bargain!
Palo Alto Networks
A fourth magnificent growth stock you'll regret not buying in the wake of the Nasdaq bear market dip is none other than cybersecurity stockPalo Alto Networks(NASDAQ: PANW). Though Palo Alto's premium valuation may look like a tough sell in an uncertain economic environment, the company's well-defined competitive advantages make it clear that every cent of its premium is deserved.
The key to Palo Alto's success has been the company's ongoing shift toward cloud-based, software-as-a-service (SaaS) subscriptions. Although it continues to sell physical firewall products -- 77% of its fiscal 2023 sales (Palo Alto's fiscal year ended July 31) came from SaaS subscriptions -- cloud-based SaaS offers undeniable benefits.
For starters, a SaaS-driven subscription model should do a better job of smoothing out the revenue lumpiness often associated with physical security products. Also, subscribers tend to be likelier to stick around than purchasers of physical firewall products, which should help Palo Alto's revenue and client retention. But most importantly, cloud-based SaaS is superior to on-premises security solutions at recognizing and responding to potential threats. Palo Alto made this move to be more competitive with its peers, and it's clearly paying off.
The company's next-generation security platform is also landing big deals. On a year-over-year basis, the number of deals leading to greater than $20 million in annual recurring revenue grew by 43%. That's an easy way to handily outpace the expectations of Wall Street analysts every quarter.
Additionally, CEO Nikesh Arora deserves credit for orchestrating a steady diet of bolt-on acquisitions. These bite-sized deals have expanded Palo Alto's product ecosystem and served as a jumping-off point to reach more mid-sized businesses.
If you need one more solid reason to buy Palo Alto Networks' stock, consider this: Cybersecurity is pretty much a basic necessity service. Since hackers and robots don't take a vacation, there's a constant need to protect sensitive information. Expect Palo Alto's addressable market to only grow from here.
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Sean Williams has positions in Exelixis, Qorvo, and Teva Pharmaceutical Industries. The Motley Fool has positions in and recommends Apple, Palo Alto Networks, Qorvo, and Walt Disney. The Motley Fool recommends Exelixis. The Motley Fool has a disclosure policy.
