3 Growth Stocks To Buy In The Worst Nasdaq Bear Market In 10 Years

A bear market is defined by a decline in the value of a financial asset or index of 20% (or more). Now, that Nasdaq-100 The technology index is down 29% in 2022 so far, and if the year ends here, it will be the worst performance in the last decade. In fact, it would be the highest annual decline since the 2008 global financial crisis.

But that doesn’t have to be bad news for investors. Bear markets tend to produce broad-based selling, which means that many quality stocks get tossed aside – and that spells opportunity for investors willing to put money to work, especially with the long term in mind.

A panel of Motley Fool contributors has identified Datadog (DOGS 7.62%), Pinterest (PIN 4.45%)and Arista Network (ANET 1.24%) as three stocks buy in the thick of this bear market. This is the reason.

Cloud monitoring tools are critical, and the tone is optimistic

Anthony Di Pizio (Datadog): When it comes to this bear market for quality opportunities, companies that have raised their 2022 sales guidance for three straight quarters may be a good place to start. cloud computing has opened countless doors for small and large businesses, because it allows them to move their operations online and create more touch points with customers without the need for additional physical stores.

But a business can find it challenging to monitor the performance of, or draw insights from, its expansive online presence. That’s where Datadog comes in — whether it’s entertainment, healthcare, gaming, or retail, the Datadog platform is designed to quickly alert businesses to technical issues for the fastest possible resolution.

Some problems can be almost invisible under normal circumstances; a particular website may load too slowly, or a specific segment of customers in one geographic location may have trouble accessing a business’s website. In any case, it’s Datadog’s duty to shine a light on those glitches so they can be picked up quickly.

The company just reported its financial results for the third quarter (ended September 30). It grew its revenue by a whopping 61% to $437 million, resulting in an increase in full-year guidance to $1.654 billion at the high end of the range. This follows upward revisions in the first and second quarters, and Datadog is one of only a few companies with such an optimistic tone in this difficult economic environment. Many companies actually slashing their predictions instead.

Much of Datadog’s growth has come from large organizations, which makes sense because the larger the business, the more it relies on cloud-based infrastructure. In Q3, Datadog had 2,600 customers spending a minimum of $100,000 annually, marking a 44% jump year over year.

With Datadog shares down 61% from their highs, this could be one of the early throwaways. It’s an opportunity for investors to buy now.

A stock social media superior down big

Jamie Louko (Pinterest): Investors have smashed the willing button on social media shares, as many are struggling to retain users and have seen advertising revenue fall off a cliff. Taking Platform Meta (META 1.03%), for example. In Q3, revenue fell 4% year over year, and monthly active users increased by only 2% in the same period.

Pinterest, however, is bucking this trend. It has struggled in the past year, but such a company is it came out from the other side of the tunnel. The social media platform saw sequential user growth from 12 million in Q3, to 445 million monthly active users.

The company also grew monetization faster than its social media rivals in Q3. snap (SNAP 7.92%) saw the global average revenue per user (ARPU) down 11% compared to last year’s quarter, to $3.11. Comparatively, Pinterest increased Its global ARPU by 11% in the same period, to $1.56. Snap’s ARPU excluding North America and Europe also fell 9%, but Pinterest’s ARPU in the same region rose 38% to $0.11.

How can Pinterest continue to attract ad spending while competitors are struggling? CEO Bill Siap said it is the best The company’s Q3 earnings call:

Pinterest is a unique place for advertisers because our users seek inspiration and discovery with intention and purpose. This has several implications. To begin with, we have on-platform, first-party signals like search, save, and curation boards that translate into highly valuable and monetizable customer insights for advertisers.

However, this does not come at the expense of profit. The company has generated $61 million in net income and $591 million in free cash flow over the past 12 months.

Despite this competitive outperformance, Pinterest trades at just 26 times free cash flow – well below Snap’s valuation of 120.5 times free cash flow. With the fall of Pinterest and the Nasdaq, it might be the right time buy some shares of these superior social media stocks.

The technology that powers the modern data center

Trevor Jennewine (Arista Network): Arista specializes in data center networks. It provides the switches, routers, and wireless access points needed to create and connect networks, and the associated software for network automation, telemetry, and security. Arista first brought its technology to the cloud, but has since expanded into corporate data centers and campus workspaces.

Management says its main innovation is the Extensible Operating System (EOS), software that relies on artificial intelligence to keep the network up and running and secure. A single version of EOS runs on every Arista switch and router, enabling customers to integrate their entire IT ecosystem — from public clouds and private data centers to corporate campus workspaces — into a unified network.

That differentiates Arista from legacy vendors such as Cisco, which tends to complicate network management by using different operating systems in different environments. Arista removes that complexity. EOS runs everywhere, which makes it easy for IT teams to update software, test new features, and automate workflows. It lowers the total cost of network ownership for customers.

Arista has leveraged that advantage to become a leader in high-speed data center networking. It currently holds 41.5% of the market share in 100G, 200G, and 400G switches (the fastest widely adopted switch in the market), while second place Cisco holds 22.5% of the market share. That leaves Arista in a good position for the future. Trends such as cloud computing and data-intensive applications (such as artificial intelligence and 5G) will continue to refine data centers, creating the need for faster network solutions.

Despite the economic woes, Arista recently reported jaw-dropping financial results in Q3. Revenue soared 57% to $1.2 billion, and GAAP earnings rose 61% to $1.13 per diluted share. But Arista still has plenty of room to run. Management puts the market opportunity at $ 35 billion by 2025, and that figure should continue to grow as data centers require fast network solutions to keep pace with the ever-evolving IT world. That’s why this growth stock is worth buying today.

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