It’s been a momentous year for Wall Street and investors. This year produced the worst first-half performance for offshore S&P500 in 52 years. Meanwhile, the growth Nasdaq Compound (^IXIC 2.73%), which is responsible for the rise of the stock market after the coronavirus crash, has lost more than 30% of its value from peak to peak. The S&P 500 and the Nasdaq plunged firmly into bearish territory.
While bear market declines are unpredictable and the speed of bearish moves can test investors’ resolve, history conclusively shows that buying these declines is a stroke of genius. Indeed, major US indices, including the Nasdaq Composite, eventually recoup all losses associated with corrections and bear markets.
This seems like a particularly good time to buy innovative growth stocks that have been disproportionately taken down by the Nasdaq bear market. What follows are three remarkable growth stocks that have the tools and intangibles to double your money by 2026, if not sooner.
The first game-changing growth stock with triple-digit return potential by 2026 is none other than the fintech giant PayPal Credits (PYPL 4.09%).
PayPal has certainly faced its fair share of headwinds in 2022. Historically high inflation, which reached 9.1% in June 2022, threatens to hit the bottom decile and reduce digital transactions on its platforms. The company also faces back-to-back quarters of declining US gross domestic product (GDP). Although the recession has not been officially declared, most investors vaguely believe that a two-quarter decline in US GDP represents a “recession”. The “R” word means that consumer and business spending could fall in the short term.
Despite these challenges, PayPal continued to show double-digit growth in total payment volume percentage on a constant currency basis (i.e. if we ignore currency movements). The mere fact that US GDP has shrunk in the first six months of 2022, but PayPal continues to increase the dollar amount of transactions on its platform by a low double-digit percentage speaks volumes about the potential long-term digital payments.
Moreover, active user engagement seems to go against macroeconomic trends. During the quarter ended June, active customers averaged 48.7 transactions over the last 12 months (ttm) period. This compares to 40.9 transactions per active account on the ttm at the end of 2020. Since PayPal is a paid platform, increased usage means higher gross profit in the future of the business.
PayPal also uses acquisitions as a tool to grow. Last year’s $2.7 billion takeover of Japanese service Buy Now, Pay Later (BNPL) Paidy is a perfect example of the expansion of tools available to merchants to grow their e-commerce business. Although Paidy could experience short-term misfires if global growth slows, BNPL is well positioned to become a go-to for online merchants.
At 20 times Wall Street’s earnings-per-share (EPS) forecast in 2023, PayPal looks like a screaming bargain.
A second standout growth stock that ticks all the boxes needed to double your money in four years or less after the Nasdaq bear market is the biotech stock. Novavax (NVAX 3.72%).
For Novavax, inflation and macroeconomic issues are not the big concern. On the contrary, Wall Street worried about its subsequent entry into the United States and other developed markets with its COVID-19 vaccine, NVX-CoV2373. With the proverbial low-hanging fruit gone, analysts are unsure how much of the COVID-19 vaccine market Novavax can carve out. However, these concerns seem exaggerated for various reasons.
For starters, Novavax has efficiency on its side. In two clinical trials conducted last year, the company’s COVID-19 vaccine produced vaccine efficacies (VE) of 89.7% (UK) and 90.4% (US and Mexico), respectively, in the adults. Earlier this year, he announced an 80% EV in teens. It is one of only three COVID-19 vaccine developers to hit the elusive 90% VE mark in clinical trials, which is why the U.S. Food and Drug Administration (FDA) recently granted the emergency use authorization (EUA) of NVX-CoV2373 in the United States.
Perhaps most importantly, the company’s EUA validation by the FDA affirms that its drug development platform works. In theory, Novavax can use its platform to target very specific variants of COVID-19, or perhaps produce a combination vaccine targeting influenza and COVID-19 in a single injection.
If that wasn’t enough, Novavax is swimming in the money. It ended the first quarter with $1.57 billion in cash and cash equivalents (note this writing is done ahead of Novavax’s August 8, 2022 earnings release). This gives the company the flexibility to conduct additional clinical studies or perhaps even make acquisitions that could advance its pipeline.
With a Wall Street forecast of around $35 combined EPS in 2022 and 2023, Novavax, which trades at around $60/share, should be bought aggressively by growth and value investors.
The third remarkable growth stock that can double your money by 2026 is the social media newcomer pinterest (PINS 1.71%).
There’s no doubt that Wall Street analysts are concerned about the performance of advertising-driven companies in today’s economic landscape. A “technical recession” coupled with historically high inflation is often a recipe for companies to cut ad spending. Over the past few quarters, Pinterest has certainly risen to these challenges. But that only tells part of the story.
Although many investors tend to focus on Pinterest’s lower monthly active user (MAU) count since it peaked in March 2021, they are missing two key points about its active user metrics. First, if you pan out and look at MAU growth over five years instead of just five quarters, you’ll see that the company’s user base has steadily grown.
Second, and far more importantly, whether Pinterest’s MAUs rise or fall in the short term, it has had no trouble monetizing its user base with merchants. Despite a year-over-year decline of MAU 21 million to 433 million for the quarter ended June, Pinterest saw its average revenue per user (ARPU) increase 17% globally, 20% in Europe and 80% in its “Rest of World” category. Pinterest is still in the early innings of monetizing its user base, which leaves plenty of ARPU growth to come.
The company has also faced questions about how the privacy changes enacted by Apple could have an impact on its advertising activity. Starting with iOS 14, Apple started giving its users the option to opt out of data trackers when downloading apps. While this could potentially be bad news for most ad-based businesses, Pinterest is a different breed of social media stock.
Pinterest’s entire business model relies on its users freely and voluntarily sharing the things, places, and services that interest them. It effectively conveys relevant information to merchants on a silver platter that they can use to target potential buyers. It’s also a perfect continuation of how Pinterest can become a top e-commerce platform by the end of the decade.
It is a profitable, cash-rich business (approximately $2.66 billion in cash, cash equivalents and marketable securities) that should have no difficulty sustaining a double-digit growth rate over the next next four years.