It’s been a wild ride for investors since the start of this decade. In each of the first four years, all three major stock indexes have moved between bear and bull markets, boosting growth Nasdaq Composite (NASDAQINDEX: ^IXIC) withstand the wildest fluctuations.
Despite losing 33% of its value during 2022’s bear market, the innovation-driven Nasdaq Composite is up 49% since the start of 2023, making it clear that it is in a new, albeit young, bull market.
The great thing about bull markets is that there are always amazing deals to be discovered. Whether the Nasdaq Composite is reaching new heights or, in this case, is down 5% from its record closing high, opportunistic investors willing to invest can still find growth stocks at a discount.
Here are four dominant growth stocks you’ll regret not buying in the new Nasdaq bull market.
Intel
The first sensational growth stock waiting to be bought in this relatively young Nasdaq bull market is a stalwart semiconductor producer Intel (NASDAQ:INTC).
Although Intel doesn’t fit the traditional definition of a growth stock – revenue is expected to be relatively flat year-over-year – earnings per share (EPS) are expected to more than quadruple from a reported $1.05 in 2023 to an estimated $4. $44 by 2027. A projected compound annual earnings growth rate of 43.4% over the next four years certainly qualifies Intel as a growth stock.
Admittedly, Intel is facing significant headwinds. modern micro devices has shrunk its central processing unit (CPU) market share. Sales of personal computers (PCs) did not recover as quickly as expected after sales surged in the early stages of the pandemic. And Intel’s Foundry Services segment is losing more money than initially forecast.
Despite these concerns, Intel retains the lion’s share of the PC and data center CPU market. Even after ceding some of its shares to AMD, its CPU base remains a key cash flow driver, providing Intel with ample capital to reinvest in high-growth initiatives.
Speaking of high-growth initiatives, Intel recently unveiled its Gaudi 3 graphics processing unit (GPU), which will be on par with it NvidiaH100 GPU from H100 in data centers with high computing power. As long as AI GPUs remain in short supply, there will likely be a strong market for Intel’s Gaudi 3 chip.
Finally, Intel is in the process of building its foundry operations from the ground up. While this isn’t a cheap or quick rise, Intel has a plan to become the world’s second-largest chipmaker by the turn of the decade. Patient investors should be richly rewarded.
BioMarin Pharmaceutical
A second dominant growth stock that you’ll regret not keeping a tight grip on the Nasdaq Composite in a bull market is the rare disease drug developer BioMarin Pharmaceutical (NASDAQ:BMRN).
If you’re looking for a reason why Wall Street is currently lagging behind on BioMarin, weak sales of Roctavian, a first-of-its-kind gene therapy drug for hemophilia A patients, is the answer. “Reimbursement and market access challenges,” as BioMarin describes them, resulted in first-quarter revenue of just $0.8 million.
However, subpar performance of a therapy does not affect the basket of successful ultra-rare disease drugs that BioMarin has brought to market or may have in the pipeline.
BioMarin’s superstar remains its dwarfism drug Voxzogo, which posted 74% year-over-year sales growth in the March quarter and now has annual sales of more than $610 million. At this rate, it should have no trouble eventually becoming a blockbuster therapy capable of generating $1 billion or more in annual sales.
In terms of its pipeline, BioMarin has narrowed down its most promising candidates to BMN-333 for multiple growth disorders, BMN-349 for AATD-associated liver diseases and BMN-351 for Duchenne muscular dystrophy. By limiting the research focus to three candidates, BioMarin will save up to $40 million in annual operating costs and free the company to focus on its top pipeline candidates.
Another reason to trust BioMarin is its focus on rare indications. Although targeting small groups of patients carries risks, success often leads to exceptional pricing power and little or no competition. For investors, this means predictable operating cash flow year after year.
BioMarin’s earnings per share are forecast to more than quintuple to $4.51 by 2027, a compound annual earnings growth rate of nearly 51%!
SentinelOne
The third prolific growth stock you’ll regret buying when the Nasdaq Composite turns higher is the emerging endpoint cybersecurity company SentinelOne (NYSE:S).
The biggest downside for SentinelOne is that it didn’t crush Wall Street’s consensus forecasts for its fiscal first quarter (which ended in late April). In March, the company gave guidance for first-quarter revenue of $812 million to $818 million, compared with a consensus estimate of $818 million. However, the company’s median forecast is for year-over-year growth of 31%.
The beauty of cybersecurity is that it is no longer an optional service. Companies with an online or cloud-based presence are increasingly turning to third-party providers like SentinelOne to protect their and their customers’ data. For subscription-based platforms, this means predictable and transparent operational cash flow.
While most of SentinelOne’s key performance indicators (KPIs) are moving in the right direction, two companies that stand out are those that give the company annual recurring revenue (ARR) of $100,000 or more and adjusted gross margin. With respect to the former, the Company ended fiscal year 2024 (ended January 31, 2024) with 1,133 customers generating at least $100,000 in ARR, an increase of 30% year-over-year. This shows that SentinelOne has no problems landing larger fish.
Equally important, the company’s adjusted gross margin increased three percentage points to 78% in the fourth fiscal quarter. Juicy margins like these, coupled with continued revenue growth of around 30%, should propel SentinelOne into the recurring profit column within the next year.
After a loss of $0.28 per share in fiscal 2024, Wall Street expects SentinelOne to generate earnings per share of over $1 by fiscal 2028.
PayPal holdings
A fourth dominant growth stock you’ll regret not buying in the new Nasdaq bull market is none other than the fintech leader PayPal holdings (NASDAQ:PYPL).
PayPal’s clear concern is that competition in the digital payments space is intensifying and putting pressure on the company’s gross margin. Investors appear unwilling to offer PayPal a large premium while the company’s gross margins are under pressure. However, it would be a mistake to keep our distance from this leader in the fintech space.
There is plenty of room for multiple winners in the digital payments space. According to a report published last year by the Boston Consulting Group (BCG), global fintech revenue could increase sixfold between 2022 and 2030, reaching $1.5 trillion. Even if BCG’s estimate is only close to range, this represents a pie large enough that the PayPal network (primarily PayPal and Venmo) can coexist with some other major players.
Despite these challenges, most of PayPal’s KPIs are moving in the right direction. Specifically, the total payment volume (TPV) passing through its network increased by 12% to $1.53 trillion in 2023. Even in the most difficult times, PayPal has had no problems maintaining double-digit TPV growth. If the US economy is running at full speed, a TPV expansion of 20% per year is not out of the question.
Perhaps even more important is the undeniable fact that PayPal’s active user engagement is steadily increasing. From the end of 2020 to the end of 2023, the average number of transactions completed by active accounts increased from just under 41 to almost 59 in the last 12-month period. As long as active account usage continues to increase, PayPal’s gross profit should increase.
Newly appointed CEO Alex Chriss also has a flair for cutting costs and expanding margins. Look for PayPal to tighten its belt and buy back its shares to noticeably increase its earnings per share.
Opportunistic long-term investors can purchase PayPal shares for 12 times expected earnings. That’s a bargain for a company whose earnings per share are expected to grow nearly 12% annually over the next five years.
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Sean Williams has held positions at Intel and PayPal. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia and PayPal. The Motley Fool recommends BioMarin Pharmaceutical and Intel and recommends the following options: long January 2025 calls above $45 on Intel, short June 2024 calls above $67.50 on PayPal, and short May 2024 calls above $47 Intel. The Motley Fool has a disclosure policy.
4 Dominant Growth Stocks You Didn’t Buy in the New Nasdaq Bull Market was originally published by The Motley Fool