This has been a year to remember seemingly all the wrong ways for Wall Street and investors. This year produced the worst first-half return for the broad-based S&P 500 in 52 years. Meanwhile, the growth-driven Nasdaq Composite (^IXIC 0.00%), which is responsible for leading the stock market higher following the coronavirus crash, shed more than 30% of its value on a peak-to-trough basis. Both the S&P 500 and Nasdaq dipped firmly into bear market territory.
While bear market declines are unpredictable, and the velocity of downside moves can test the resolve of investors, history conclusively shows that buying these dips is a genius move. That’s because the major US indexes, including the Nasdaq Composite, eventually recover all losses associated with corrections and bear markets.
This looks like an especially good time to buy innovative growth stocks that were disproportionately beaten down by the Nasdaq bear market. What follows are three remarkable growth stocks that have the tools and intangibles necessary 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 fintech behemoth PayPal Holdings (PYPL -1.85%).
PayPal has certainly faced its fair share of headwinds in 2022. Historically high inflation, which hit 9.1% in June 2022, threatens to hit the lowest-earning decile the hardest and reduce digital transactions on its platforms. The company is also contending with back-to-back quarters of US gross domestic product (GDP) declining. Although it’s not officially been declared a recession, most investors loosely believe a two-quarter decline in US GDP represents a “recession.” The “R” word means consumer and enterprise spending could fall in the near-term.
In spite of these challenges, PayPal has continued to deliver double-digit percentage total payment volume growth on a constant-currency basis (ie, if we ignore currency movements). The simple fact that US GDP has declined through the first six months of 2022, yet PayPal keeps growing the dollar amount transacting on its platform by a low-double-digit percentage speaks volumes about the long-term potential of digital payments.
what’s more active user engagement appears to be bucking macroeconomic trends. In the June-ended quarter, active customers were averaging 48.7 transactions over the trailing-12-month (ttm) period. That compares to 40.9 transactions per active account over the ttm at the end of 2020. Since PayPal is a fee-driven platform, increased usage spells higher gross profit in the company’s future.
PayPal is using acquisitions as a tool to further itself, as well. Last year’s $2.7 billion buyout of Japan’s buy now, pay later (BNPL) service Paidy is a perfect example of expanding the tools merchants have available to grow their e-commerce business. Although Paidy could see near-term hiccups if global growth slows, BNPL is well-positioned to become a staple for online merchants.
At 20 times Wall Street’s forecast earnings per share (EPS) in 2023, PayPal looks to be a screaming bargain.
A second remarkable growth stock that checks all the boxes necessary to double your money in four years or less following the Nasdaq bear market is biotech stock Novavax (NVAX -29.64%).
For Novavax, inflation and macroeconomic issues are not the big concern. Rather, Wall Street has been worried about its later entrance into the US and other developed markets with its COVID-19 vaccine, NVX-CoV2373. With the proverbial low-hanging fruit gone, there is uncertainty from analysts as to how much share of the COVID-19 vaccine market Novavax can carve out. However, these concerns appear overblown for a variety of reasons.
To begin with, Novavax has efficacy on its side. In two clinical trials conducted last year, the company’s COVID-19 vaccine produced respective vaccine efficacies (VEs) of 89.7% (UK) and 90.4% (US and Mexico) in adults. Earlier this year, it announced an 80% VE in adolescents. It’s one of only three COVID-19 vaccine developers to hit the elusive 90% VE mark in clinical trials, which is why the US Food and Drug Administration (FDA) recently granted NVX-CoV2373 emergency-use authorization (EUA) in the US
Perhaps more importantly, the company’s EUA validation from 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 shot.
Were this not enough, Novavax is swimming in cash. It ended the first quarter with $1.57 billion in cash and cash equivalents (note, this write-up is being done prior to Novavax’s earnings release on Aug. 8, 2022). This gives the company the flexibility to conduct additional clinical studies or perhaps even make acquisitions that would further its pipeline.
With a forecast from Wall Street that calls for approximately $35 in combined EPS in 2022 and 2023, Novavax, which trades at roughly $60/share, is priced to be bought aggressively by growth and value investors.
The third remarkable growth stock that can double your money by 2026 is social media up-and-comer Pinterest (PINS -1.57%).
There’s little question that Wall Street analysts are worried about how advertising-driven businesses are going to perform in the current economic landscape. A “technical recession” coupled with historically high inflation is often a recipe for businesses to scale back their ad spending. In recent quarters, Pinterest has certainly been contending with these challenges. But this only tells part of the story.
Although a lot of investors tend to focus on Pinterest’s lower monthly active user (MAU) count since it peaked in March 2021, they’re missing two key points about its active user metrics. First, if you pan the lens out and examine MAU growth over five years instead of just five quarters, you’ll see that the company’s user base has been steadily climbing.
Second, and far more important, regardless of whether Pinterest’s MAUs are growing or declining in the short-term, it’s had no trouble monetizing its user base with merchants. Despite reporting a year-over-year decline of 21 million MAUs to 433 million for the June-ended quarter, Pinterest saw its average revenue per user increase (ARPU) by 17% globally, 20% in Europe, and 80% in its ” Rest of the 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 privacy changes enacted by Apple could impact its ad business. Beginning with iOS 14, Apple began giving its users the option of declining data-tracking tools when downloading apps. While this could be potentially bad news for most ad-based companies, Pinterest is a different breed of social media stocks.
Pinterest’s entire business model is based on its users freely and willingly sharing the things, places, and services that interest them. It indeed hands pertinent info to merchants on a silver platter that they can use to target potential shoppers. It’s also a perfect segue of how Pinterest can become a leading e-commerce platform by the end of the decade.
This is a profitable company with loads of cash (about $2.66 billion in cash, cash equivalents, and marketable securities) that shouldn’t have any problem sustaining a double-digit growth rate over the next four years.