Nasdaq Bear Market: 3 Industry-Leading Stocks That Can Double Your Money By 2025
Sometimes things don’t go as planned. That has been the story for investors in 2022, with all three major US stock indices falling in their respective bear markets. None of the major stock indices has been hit harder than the one driven by technology. Nasdaq Composite (^IXIC)which has lost about a third of its value since the start of the year.
But when fear rules the roost on Wall Street, opportunity rears its head. Although it is not known when a bear market will occur, how long it will last, or how steep the decline will be, one thing is certain: every notable decline in major stock indexes throughout history, including the Nasdaq, has eventually recovered. (and then some) for a bull market rally. This makes bear markets an opportune time for investors to put their money to work.
The Nasdaq bear market can be an especially smart time to buy industry leaders who have been beaten. What follows are three industry-leading stocks that have the ability to double your money by 2025 if bought during the 2022 Nasdaq bear market.
The first industry leader with the potential to double his money by mid-decade is Alphabet (GOOGL) 0.63%) (GOOG) 0.69%)the parent company of the Internet search engine Google.
Like most FAANG stocks, Alphabet has been beaten this year. The company’s shares have fallen 38% as the likelihood of a US recession grows. That’s a concern for Alphabet given that most of its revenue comes from advertising. Advertising spending is often one of the first things to hit when the US or world economy shrinks.
What makes Alphabet an industry leader is Google. According to data provided by GlobalStats, Google has accounted for no less than 91% of the Internet search share worldwide on a monthly basis looking back three years. Google is effectively a monopoly of Alphabet, which is why the company benefits from exceptional ad pricing power during long periods of economic expansion. There is nothing to suggest that this search engine dominance will fade anytime soon.
Of course, there’s more to Alphabet than just its search engine revenue stream. For example, the streaming platform YouTube is the second most visited social site in the world and has delivered great ROI since it was acquired for $1.65 billion in 2006. Alphabet is currently rolling out tools to better monetize YouTube Shorts, which They are short videos that last less than a minute.
Alphabet also has the opportunity to continue to grow its global share of the cloud infrastructure services market. A third quarter report from Canalys estimates that Google Cloud increased its share of global cloud spending to 9%, which makes it the third largest provider in the world. Traditionally, cloud service margins can revolve around advertising margins. Presumably, this gives Alphabet a means to significantly expand its operating cash flow by mid-decade.
If you need a stronger reason to believe Alphabet’s stock may double, consider that. it’s cheaper now than ever as a publicly traded company. Alphabet has been valued at an average multiple of 19 times cash flow over the past five years. Investors buying stock right now are getting Alphabet at a multiple of 7 times Wall Street’s forecasted cash flow for the company in 2025.
A second industry leader that may double its money by 2025 despite the Nasdaq Composite crash is the US. marijuana broth Cresco Laboratories (CRLBF 1.57%). Cresco’s “industry leader” rating has to do with his wholesale operations, which I’ll talk about a bit later.
All marijuana stocks, including Cresco Labs, have been absolutely impressive in 2022. Cresco stock has lost 61% of its value (as of December 16, 2022) due to lack of progress on cannabis reform in Capitol Hill. With the SAFE Banking Act once again missing from the annual national defense bill, the prospect of federal legalization or banking reform remains as bleak as ever.
However, marijuana stocks do not need federal legalization to thrive. Approximately three-quarters of all states have legalized medical marijuana, and 21 of those states also allow adult use and/or retail sales. That’s a great opportunity for multi-state carriers (MSOs) to increase their sales and bring in the green.
Than really helps Cresco Labs stand out is its aforementioned leading wholesale operations. Wall Street is not the biggest fan of wholesale cannabis given that the margins associated with wholesale are well below those of traditional retail sales. Fortunately, Cresco Labs has bulk on its side. It holds one of the few cannabis distribution licenses in California (the #1 selling weed state) and is able to place its proprietary products in over 1,200 dispensaries across the country. Even with lower margins than traditional retail channels, this leading wholesale segment can be a significant profit generator.
Beyond this wholesale segment, The other major catalyst for Cresco is its pending acquisition of all shares. from MSO beware of colombia (CCHWF -2.39%). Last month, Cresco and Columbia Care announced the planned sale of a dozen aggregate dispensaries and manufacturing facilities spanning three markets. This sale is necessary to complete the Columbia Care deal and give the soon-to-be-merged combined entity a presence in 18 states with more than 120 operating dispensaries. This deal should create cost synergies and ultimately make Cresco Labs a more efficient MSO.
If Cresco Labs can turn around recurring profitability in 2023, it should have no problem doubling in value by mid-decade.
The third industry leader who can double his money by 2025 despite being beaten by the Nasdaq bear market is social media shares metaplatforms (GOAL 2.28%). Meta is the company behind the social networking destinations Facebook, Instagram and WhatsApp.
Like Alphabet, Meta Platforms has been overwhelmed by the prospect of weaker ad spend this year and into 2023. During the third quarter, Meta generated just over 98% of its ad revenue.
The other problem for Meta is its aggressive spending at Reality Labs, the metaverse segment. Chief Executive Officer Mark Zuckerberg has shown no sign of willingness to cut spending on Reality Labs, even as ad spending weakens. The bottom line is a $9.4 billion loss from this operating segment for the first nine months of 2022.
But what the skeptics are overlooking is how dominant Meta’s social media assets are. According to DataReportal figures, Facebook (2.93 billion), WhatsApp (2 billion), Instagram (1.39 billion) and Facebook Messenger (976 million), are the respective numbers 1, 3, 4 and 6 in terms of global assets. users There is no alternative platform that advertisers can turn to for a more diverse or targeted set of eyes than Meta’s social media assets.
This is a good time to mention that recessions and economic slowdowns typically don’t last more than a couple of quarters. By comparison, periods of economic expansion are measured in years. Although ad pricing power is weak for Meta at the moment, investors are historically overly bearish about ad-driven stocks during these short-term lulls in growth.
goal is also sitting on a treasure chest. Even with a lot of cash diverted to Reality Labs, the company ended the most recent quarter with nearly $32 billion in net cash, cash equivalents and marketable securities. In other words, it has the luxury of being able to invest in the metaverse thanks to its highly profitable ad operations and cash-rich balance sheet.
Over the past five years, investors have voluntarily paid an average multiple of 17 times cash flow to own Meta shares. But if you hit the Wall Street Consensus Cash Flow Estimate for 2025, you’d be buying shares now for just 4 times the cash flow.