Nasdaq Bear Market: 2 Supercharged Growth Stocks You’ll Regret Not Buying on the Dip

the Nasdaq Composite it is currently 23.8% below its high, well above the 20% threshold that defines a bear market. Losses of that magnitude can be unsettling, especially for new investors, but it’s important to remember that recessions are ultimately temporary. Macroeconomic headwinds have dragged stock prices lower, but those headwinds will eventually die down and the market will recover.

That doesn’t mean all companies will see their share price rally. But high-quality stocks like Z-climber (ZS -5.14%) Y free market (MELI -3.84%) — down 49% and 51%, respectively, from their highs — are well positioned to recover when market conditions improve. Meanwhile, investors have the opportunity to buy both shares at a discount.

Here’s why you’ll regret passing up the opportunity to buy these two stocks on the downside.

1. Zscaler: The Largest Network Security Cloud

Zscaler specializes in zero-trust network security, cloud workload protection, and digital experience monitoring. Its platform, known as Secure Access Service Edge (SASE), relies on artificial intelligence to inspect network traffic and enforce security policies in the cloud, eliminating the need for expensive on-premises devices. Securely connect users to apps and data in public clouds and private data centers from any device or location.

Zscaler SASE spans more than 150 data centers and inspects 250 billion requests daily, capturing trillions of security signals in the process. That makes it the world’s largest network security cloud. The resulting data advantage theoretically means that it offers better protection against threats than any other provider. In fact, the research company Gartner has recognized Zscaler as an industry leader for 11 consecutive years.

Secular trends like software as a service and other forms of cloud computing make traditional network security solutions ineffective and inefficient. It no longer makes sense to route traffic through a central corporate data center, simply because applications and data often live in the cloud. More generally, cybersecurity is not a discretionary expense. Companies must protect their sensitive applications and data.

Zscaler’s leadership continued to drive strong demand in the fourth quarter of fiscal 2022 (ended July 31). Their total number of customers increased 20% year-over-year to 6,700, and average customers increased their spending by more than 25%. In turn, quarterly revenue increased 61% year-over-year to $318 million, and free cash flow (FCF) soared 170% to $75 million.

Going forward, investors have good reason to believe that Zscaler can maintain that momentum. Management puts its target market at $72 billion, and Zscaler should benefit as more companies embrace cloud computing and remote work.

The shares are currently trading at 27.1 times sales. That’s certainly not cheap, but it’s a discount compared to the three-year average of 37.2 times sales. And in light of Zscaler’s rapid growth and huge market opportunity, it seems like a reasonable price to pay.

2. MercadoLibre: The e-commerce market leader in Latin America

MercadoLibre operates the most popular online commerce ecosystem in Latin America, and its fintech platform (Mercado Pago) is the third most popular digital wallet in the region. The company reinforced its strong market presence in both ecosystems with a strong offering of adjacent products.

MercadoLibre provides digital advertising and fulfillment services to merchants, simplifying logistics and helping them attract buyers. In fact, its logistics business (Mercado Envios) handled 91% of shipment volume in the second quarter, and 80% of that volume arrived within 48 hours. On the fintech side, its credit business (Mercado Credito) offers working capital loans to merchants, personal loans to consumers, and credit cards. Mercado Credito’s loan portfolio expanded 230% in the second quarter.

Those value-added services make MercadoLibre’s commerce and fintech ecosystems more rigid, and that translates into pricing power. Case in point: The trade acceptance rate (trade receipts as a percentage of gross merchandise volume) expanded to 16.5% in the first half of 2022, up from 15.7% in the first half of 2021. AND the fintech acceptance rate (fintech revenue as a percentage of total payment volume) expanded to 3.9%, up from 3.2%.

Unsurprisingly, that fueled impressive financial results. In the second quarter, revenue rose 53% to $2.6 billion and earnings soared 77% to $2.43 per diluted share. And shareholders have good reason to believe the momentum will continue. Internet penetration is increasing rapidly in Latin America, driving the adoption of online shopping and digital payments.

In fact, Argentina, Brazil and Mexico account for the majority of MercadoLibre’s total revenue, and all three countries are among the 10 fastest growing e-commerce markets in the world. More broadly, Latin America itself is the second-fastest-growing e-commerce market in the world, with online retail sales expected to rise 19% to $167 billion in 2022, according to eMarketer.

The shares are currently trading at a cheap price of 5.5 times sales, a bargain compared to the three-year average of 13.7 times sales. That is why this growth stock is a buy.

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