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Nasdaq bear market: 4 remarkable growth stocks you’ll regret not buying on the downside

This year has offered a not-so-subtle reminder to Wall Street and the investing community that stocks don’t move in a straight line. Since hitting their all-time highs, the highly-followed Dow Jones Industrial Averagereference S&P500and growth fueled by equities Nasdaq Compound (^IXIC 1.43%) dropped by 17%, 22% and 33% respectively. These moves put the S&P 500 and the Nasdaq squarely in a bear market.

There is no doubt that the speed and unpredictability of downward moves during a bear market can weigh on the psyche of investors. However, it is important to note that every notable decline in major US indices, including the Nasdaq Composite, was eventually erased by a bull market. This makes corrections and bear markets the perfect time to put your money to work.

Image source: Getty Images.

With the Nasdaq falling, a number of innovative growth stocks now look like incredible deals. Below are four standout growth stocks you’ll regret not buying on the downside.

To block

The first exceptionally innovative company that investors can buy with confidence during the Nasdaq bear market decline is a fintech stock To block (SQ 1.74%), the company formerly known as Square. Although cryptocurrency weakness may hurt Bitcoin short-term trading incomes, and high inflation is bad news for low-income consumers, there are more than enough long-term catalysts for Block to generate jaw-dropping growth.

For more than a decade, the foundation of the company has been its ecosystem of sellers, commonly referred to as the “Square ecosystem”. It is the segment that provides point of sale solutions, loans and analytics to businesses to help them succeed. In 2012, only $6.5 billion in gross payment volume (GPV) was processed by the Square ecosystem. But based on the $39.5 billion in GPV in the first quarter of 2022, the Square ecosystem is on track to hit $158 billion in annual GPV.

What’s particularly interesting about the seller ecosystem is that it attracts larger companies that have higher annualized GPVs. Since this is primarily a fee-based operating segment, more business should result in a higher gross margin.

The other key for Block is the peer-to-peer digital payment platform Cash App. In the four years between the end of 2017 and the end of 2021, the number of monthly users transacting on Cash App grew from 7 million to over 44 million. With the recent acquisition of Buy Now, Pay Later, Afterpay, Block has the ability to create a closed-loop payment network with its Square ecosystem.

Airbnb

A second noteworthy growth stock you’ll give yourself if you don’t buy on this Nasdaq bear market decline is the travel and hospitality company Airbnb (ABNB 6.68%). Even with rising recession fears and inflation biting consumer wallets hard in the near term, Airbnb has “industry disruptor” written all over it.

For starters, Airbnb is unquestionably a popular alternative to traditional hotels. The Airbnb marketplace offers abundant choice, with properties that often offer lower cost and increased privacy, compared to staying at a hotel in or near a major city. In 2016, the platform as a whole accounted for 52 million overnight stays and experiences booked. In the first quarter of 2022 alone, Airbnb nearly doubled that number, with 102.1 million nights and experiences booked.

Arguably the most exciting thing about Airbnb is that extended stays are its fastest growing category. A “long-term stay” is defined as a reservation of 28 days or more. In the wake of the pandemic, we have seen the workforce become more mobile. These remote workers appear to be Airbnb’s key to sustainably growing its lodging market.

Plus, the company wants a bigger slice of the $8 trillion travel industry pie. Airbnb’s “experiences” segment works with local experts to guide travelers on adventures, and is likely only scratching the surface when it comes to its partnership potential.

A surgeon in an operating room using forceps to hold a $1 bill.

Image source: Getty Images.

Intuitive surgery

Another developer of robot-assisted surgical systems is another sensation that growth stock investors would do well to grab when the Nasdaq bear market dips. Intuitive surgery (ISRG 0.72%).

One of the reasons investors trust Intuitive Surgical over the long term is its market dominance. By the end of the first quarter, the company had installed 6,920 of its da Vinci Surgical Systems in hospitals and surgical centers around the world. This number may not seem like a lot, but it is many times that of its closest competitors. In addition, these systems are expensive ($0.5-2.5 million) and time-consuming to train. In other words, da Vinci buyers tend to stay customers 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 came from the sale of its expensive, but generally low-margin da Vinci systems. Today, instruments sold with every system procedure and maintenance 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 are expected to grow at an even faster rate.

There is also a long way for da Vinci to become a standard of care in the operating room. Although it is already a leader in urology and gynecology procedures, there is plenty of room for expansion into colorectal, thoracic and general soft tissue surgical procedures.

Assets received

A fourth and final noteworthy growth title you’ll regret not buying down is the cloud-based lending platform Assets received (UPST 9.54%). Even though Wall Street is wary of the unproven Upstart as interest rates rise and fears of a U.S. recession grow, many aspects of the company’s operating model suggest it could thrive.

Perhaps the biggest differentiator for Upstart is its artificial intelligence (AI)-based lending platform. Rather than relying on the same loan verification process that financial institutions have relied on for decades, Upstart uses AI. This led to the full automation of 74% of all loans on its platform in the first quarter. Automation ultimately saves financial institutions time and money.

To build on this, Upstart’s AI-powered lending platform is unlocking opportunities for previously underbanked people. Although Upstart’s average approval credit score was lower than the average approval credit score in the traditional verification process, there was 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-powered loan verification platform.

As if that weren’t enough to generate excitement, Upstart has also moved beyond the realm of personal loans and into the car loan origination market. The auto loan market recently represented a $751 billion opportunity, about 6.7 times larger than the personal loan market Upstart has responded to since its inception.