Nasdaq Bear Market: 3 Unstoppable Growth Stocks Down 35%+ You’ll Likely Regret Not Buying
The Nasdaq Composite Index fell more than 35% from its recent high, putting it in a strong bear market. Given the current economic uncertainty, it is unclear how low it could fall.
However, amidst all the current challenges, many companies continue to grow their businesses despite the uncertainty. With their stock prices falling, they are trading at much lower valuations. For this reason, investors could make big gains by taking advantage of the sell-off and holding out until the eventual rally.
Three battered companies with irresistible growth are equinix (EQIX -3.28%), Walgreens Boot Alliance (WBA -1.22%)and Z-scale (ZS -6.77%). Because of this, the more than 35% drop in their stock price looks like an opportunity investors might regret missing in the future.
Remarkably consistent growth at a much more attractive price
Shares of Equinix have fallen nearly 40% from their peak. One of the advantages of the sale is that the dividend yield of this REIT data center (real estate investment company) amounts to nearly 2.5%. It’s not too far from its historic peak.
This decline comes even as Equinix continues to generate irresistible growth. The company’s revenue increased another 10% in the second quarter. It marked the company’s 78th straight quarter of revenue growth, which it says is the longest streak of any S&P500 member. The data center REIT plans to continue growing, driven by strong demand for its data center solutions. It currently has 50 major projects underway and has recently completed acquisitions in Chile, Peru and the West Africa region. These investments should contribute to its continued growth.
Given the massive sell-off in Equinix’s stock price, investors can buy this excellent growth stock at a much lower valuation. The company sees its adjusted funds from operations (FFO) reaching a range of $28.77 to $29.10 per share this year (up 6% to 7% from 2021). With its shares recently around $510 each, Equinix is trading at around 17.6 times FFO. That’s a lot cheaper than the 30+ FFOs he picked up to start the year.
This dividend seems unstoppable
Walgreens Boots Alliance’s stock price is down more than 35% from its recent high. That pushed the healthcare company’s dividend yield to 5.7%. That’s an attractive level for a company with Walgreens’ track record of growth. The company has increased its quarterly dividend for 47 consecutive years. This easily qualifies him as Dividend Aristocrat and has him at three years of the even more elite class of Dividend Kings.
Walgreens’ dividend growth streak isn’t expected to end anytime soon. The company’s strategy to transform into a consumer-centric healthcare company is paying off. As a result, it sees its financial results accelerating over the next fiscal year. At the same time, it has increased the visibility of its long-term outlook, leading the company to expect to achieve below-teen adjusted earnings per share growth in its fiscal year 2025 and beyond.
With shares down this year, Walgreens now looks like an incredible bargain at around 7.3 times its lead price/earnings ratio (PE). Not only do investors get Walgreens at a discount, but they’re also paid pretty well while they wait for the company’s strategy to deliver results, thanks to its higher dividend yield.
Zscaler’s stock price has fallen more than 60% this year. Because of this, the cloud security company is trading at a much more reasonable valuation of 17.7 times sales, compared to more than 60 times sales earlier this year. Although it is still quite a high price, Zscaler is rapidly increasing its valuation.
The company’s annual recurring revenue jumped 62% in its 2022 fiscal year, topping $1 billion for the first time. This has continued its rapid growth, with Zscaler’s revenue growing at a compound annual rate of 55% since 2018. Zscaler plans to continue its rapid growth, aiming to increase its recurring annual revenue to $5 billion over the next few years. That would still give it only a tiny fraction of the $72 billion in market opportunity it sees for its current cloud security products.
Zscaler uses a land and expand strategy. It wins customers to its core solutions and expands the relationship as they move to new features and products. The company sees a 6x upsell opportunity within its existing customer base alone.
It also continues to invest in improving its product offerings. For example, it recently acquired ShiftRight to further enhance its platform, providing additional benefits to customers. With a strong financial position, Zscaler has the flexibility to continue to invest in building its capabilities so that it can continue to earn, retain and expand its customer relationships.
Unstoppable growth at even better values
Nothing has stopped Equinix, Walgreens, and Zscaler from growing over the years. Despite their excellent growth track record, their stock prices are down sharply this year. For this reason, investors can get these unstoppable growth stocks at much lower valuations. This is an opportunity that investors may regret missing in the future as these companies are expected to continue to grow, which could eventually lead to a rebound in their battered stock prices.
Matthew DiLallo has positions in Equinix and Zscaler and has the following options: October 2022 short sale of $35 on Walgreens Boots Alliance. The Motley Fool has positions in and recommends Equinix and Zscaler. The Motley Fool has a disclosure policy.