NASDAQ Bear Market: What Will 2x?

The media began to spotlight the bear market on June 13, 2022. That was the day the S&P 500 closed at a 20 percent loss from its most recent peak, which was a high of approximately 36,585 on January 3, 2022.

However, by June 2022, the NASDAQ had already been in bear territory for some time. On March 7, 2022, it had closed 20 percent below its November 19, 2021 high.

The NASDAQ drop was primarily caused by dramatic declines in the value of tech stocks, which make up roughly 50 percent of the NASDAQ index. Rising inflation prompted increases in interest rates, which tends to make investors rethink their commitment to growth stocks. Most tech companies fall into the growth category, so the selloff was painful – but not unexpected.

The good news is that bear markets end. At least, they always have before. Even the agonizing bear market just before the Great Depression – and later, the one before the Great Recession – eventually turned around, and bull markets followed. That means tremendous opportunities for investors.

In the current bear market, growth stocks are trading at rock-bottom prices, so returns will be amplified as the market recovers. The big questions are, how long will the bear market last? And which stocks offer the best opportunity?

There are two NASDAQ stocks that stand out for their potential to double in value during the next bull cycle.

How Long Will The Bear Market Last?

Bear markets might feel like they are never-ending – especially for investors who frequently check their portfolios’ value. Endless rows of red returns are discouraging. However, historically, bear markets are much shorter than bull markets.

Since 1929, the average length of a bear market is under a year – 9.6 months to be exact – while a bull market lasts for an average of 2.7 years. Sometimes, bull markets are much longer. The 2020 stock market crash ended an 11-year bull market, and the 2020 bear market lasted just 33 days.

In other words, though bear markets can temporarily devastate portfolios, the key is to avoid panicking. Wait out the storm, and whenever possible, take advantage of low prices on high-potential growth stocks.

Will Alphabet Stock Recover?

Alphabet, parent to Google, is a prime example of the sort of company that has lost a substantial portion of its value during the bear market. Year-to-date, Alphabet stock is down more than 32 percent, but almost everyone agrees that recovery is inevitable. In fact, industry experts have suggested that Alphabet stock could double over the next few years. It has a wide moat to ward off competitors, and it constantly invests in innovation.

Alphabet’s biggest advantage is its near-monopoly of the global search engine market. Outside of China, Google facilitates more than 90 percent of online searches conducted worldwide. Yes, the search platform is available to users free of charge, but that doesn’t mean Google can’t turn a profit.

Advertisers pay top dollar to appear at the top of search engine results, along with preferred placement in other products like Gmail and Google Maps.

For the third quarter of 2022, Google Search delivered 57.2 percent of Alphabet’s top-line revenue – a total of $39.5 billion. True, growth was muted at a paltry 4.2 percent, but that isn’t unusual in bear conditions. Marketing departments are often the first to see budget cuts during difficult economic periods.

There is no question that Google Search has plenty of room to grow, even though it already holds the lion’s share of the market. The reason is deceptively simple. Only two-thirds of the global population has internet access today, and that figure is growing.

In addition, internet use is increasing exponentially among those who only recently gained access. As Google integrates these new users into its ecosystem, its digital ad revenue will go up.

The second advantage Alphabet has over many of its would-be competitors is that it won’t have to rely on ad revenue alone in the long term. Google Cloud is holding firm to its position in the top three cloud computing providers, and it is slowly pulling market share away from the companies in first and second place – Amazon Web Services and Microsoft Azure.

Google Cloud isn’t making money quite yet, but the losses are gradually decreasing as revenue goes up. For the third quarter, Google Cloud’s revenue increased 37.6 percent year-over-year, and there is plenty more business to be had.

The entire cloud computing industry is projected to grow by 15 percent per year through 2028, at which point annual spending will exceed $1 trillion. It’s a high-margin business, so Google Cloud doesn’t have to capture much of that market to turn a profit. With that in mind, Alphabet stock is a buy in the NASDAQ bear market.

Is Amazon Stock Expected To Rise?

Amazon has the good fortune of being the market leader in two different high-growth industries.

First, it is the leading e-commerce platform in the United States, in addition to holding a substantial share of global online sales.

As of June 2022, Amazon controlled 37.8 percent of all US e-commerce sales. Walmart was in a distant second place, with just 6.3 percent of the US e-commerce market, and no other company broke four percent.

Aside from its web-based retail services, AWS is the world’s number one cloud computing platform. At 34 percent, AWS’s market share is larger than Microsoft Azure and Google Cloud’s combined – they hold 21 percent and 11 percent of the market, respectively.

Despite its powerful position in e-commerce and cloud computing, Amazon hasn’t been immune to the effects of the NASDAQ bear market. Amazon stock is down more than 44 percent year-to-date, and the company made history on November 9, 2022, when it was the first ever to officially lose $1 trillion in value.

Short-sighted investors might be frightened into selling after news like that, but those with a long-term perspective know better.

Amazon’s revenue is still growing, albeit more slowly than during the COVID years, and there is every indication that the trend will continue. Share prices may never be this low again, and those who buy Amazon stock now will markedly boost their profits when Amazon stock recovers.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.