Nasdaq Bear Market: 3 Brand-Name Stocks You’ll Regret Not Buying on the Dip

Ohi the blue-chip-heavy Dow Jones Industrial Average is down 11% from its record level, growth Nasdaq Compound is officially in a bear market, having fallen 27% from its previous high. But investors should remember that the markets have been there before.

Through many periods of high inflation, wars and economic cycles, stocks have returned around 10% per year for decades. An investment of $1,000 in the S&P500 50 years ago was worth $153,826 today with dividends reinvested. You would be a millionaire if you increased your investment along the way.

Adding growth stocks to your nest egg can make your money grow a little faster over time. Three Motley Fool contributors recently picked out three top stocks that could rebound strongly once the dust clears.

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Digital advertising is an obvious bet

John Ballard (Roku): There are certain trends in the economy that are certain to continue and make investments without the fuss. E-commerce may be one, but another is streaming entertainment. Streaming services led home entertainment growth last year, with in-market subscriptions reaching 1.3 billion globally. That’s a 14% increase from 2020.

One problem with the growing demand for streaming is the increase in the number of shows and streaming services. Whereas netflix and Amazon Prime has led the charge in streaming for the past decade, almost every major network now has a streaming service. This makes the market more competitive for Netflix, but it plays directly into the hands of the main TV hub, Roku (NASDAQ: ROKU).

Roku has become a household name in the home entertainment space due to its affordability. It partners with TV manufacturers to include its operating system at no cost to the consumer, and these Roku TV models are some of the cheapest TVs on the market. People can also purchase one of its playback devices that connects to their existing TV. Roku doesn’t care how you engage because it makes money from advertising, business transactions, and users signing up for third-party services.

Its dependence on the digital advertising market explains why the title has collapsed by 58% this year. Investors are worried about the drop in consumer spending in the economy and the possibility for brands to hold back on advertising spending. But demand for digital advertising will rebound once the economic environment improves. The traditional TV advertising market is worth $60 billion, but only 18% of ad dollars are spent on streaming services.

There’s a big lead ahead of Roku, and the short-term uncertainty with the economy provides a great opportunity for long-term investors to buy the stock at a deep discount.

Airbnb’s stock could be ready to take off

Parkev Tatevossian (Airbnb): Fortunately for potential investors, Airbnb (NASDAQ: ABNB) has been overtaken by the massive market sell-off in recent months. The stock is down 44% from its peak. And when measured by its price/free cash flow and price/sales ratios, the stock is almost cheaper than it has ever been. Meanwhile, the underlying business has excellent prospects.

Chart of ABNB Price to Free Cash Flow

ABNB Price to Free Cash Flow Data by YCharts

In its most recent quarter, which ended March 31, Airbnb posted revenue of $1.5 billion. It was 70% more than last year. People delayed their vacation travel plans at the start of the pandemic. As a result, Airbnb’s revenue fell 30% in 2020. Worldwide, spending on hotels and resorts plummeted from $1.5 trillion in 2019 to $610 billion in 2020. Fortunately, with widespread vaccinations, the trend is reversed.

Overall spending on hotels and resorts rebounded to $950 billion in 2021, and Airbnb’s revenue soared 77% in the same time. The company’s lean business model gives it the flexibility to respond quickly to increased demand. Unlike traditional hotel companies, which must devote large capital budgets to building new rooms, Airbnb can add capacity by onboarding new guests.

This way, when potential hosts observe an increasing demand, they will be enticed to join the platform and list properties for guests. This business model also gives Airbnb another advantage over hotels: it creates a unique mix of available accommodations. Whatever type of property you want to stay in, you’re more likely to find it on Airbnb. Airbnb has grown from $2.5 billion in sales in 2017 to $6 billion in sales in 2021. The rebound in travel is expected to lift Airbnb even higher. This is a beat stock that you might regret not buying on the downside.

Low price, big potential

Jennifer Saibil (Starbucks): Starbucks (NASDAQ:SBUX) has gone through many challenges over the past two years. Starting with the pandemic, which sent its cafes into a tailspin, it has now been met with management change, store restructuring, store renovations and union organizing. Even as restaurants opened and sales started to climb, some areas began new lockdowns.

Add inflation, supply chain issues, and global upheaval into the mix, and it’s a recipe for a sluggish stock price. It’s no shock that Starbucks stock price has fallen 33% this year. This may sound scary for investors. But Starbucks is a great company, and if you can look past the short-term pressure, it could be a great opportunity to buy on the downside.

Here are the reasons why Starbucks is a long-term choice: it operates more than 34,000 stores worldwide and still sees plenty of room to grow. During a recent conference call to discuss the company’s second quarter results for its fiscal year 2022, CEO Howard Schultz said the company is seeing “record demand” in the United States, and is reorganizing stores and opened new ones to meet this demand. It was nimble enough to switch to drive-thru and take-out when dining rooms were closed, and it’s moving with that demand, promoting its first digital technology to tap into that opportunity. For example, it launched a new membership program focused on mobile ordering, and it has several mobile-only ordering pilot stores. At this point, it would be very difficult for another coffee chain to pose real competition.

At the current price, Starbucks shares are trading at 21 times trailing 12-month earnings, which is cheap for a company boasting double-digit sales growth. Its dividend yields 2.5%, well above the S&P 500 average of 1.5%, and has been rising steadily for several years. Starbucks is an easy stock to buy before prices go up.

10 stocks we like better than Roku
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Jennifer Saibil holds positions at Airbnb, Inc. John Ballard holds positions at Amazon and Netflix. Parkev Tatevosian holds positions at Airbnb, Inc., Netflix and Starbucks. The Motley Fool holds positions and recommends Airbnb, Inc., Amazon, Netflix, Roku, and Starbucks. The Motley Fool recommends the following options: $85 short calls in July 2022 on Starbucks. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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