Nasdaq Bear Market: 3 Screaming Bargains That Can Double Your Money by 2025

0

Investing in the stock market requires investors to “get their hands dirty” from time to time. While major US stock indices have moved higher over the long term, stock market corrections, crashes and bear markets are a normal part of the investment cycle. Last year, new and regular investors received this reminder.

When the lights went out in 2022, all three major US stock indices had posted their worst returns since 2008. But it was the growth dependent Nasdaq composite (^IXIC -0.98%) that raised the caboose with a 33% loss.

Image source: Getty Images.

While the Nasdaq loses a third of its value in such a short period of time, it is undoubtedly cruel to short-term traders, but it presents a generational opportunity for patient investors to get their hands on high-quality stocks at a discount. What follows are three screaming bargains that could double your money by 2025.

Teva Pharmaceutical Industries

The first surefire bargain that has the potential to double your money by the middle of the decade is the manufacturer of brand name and generic drugs Teva Pharmaceutical Industries (TEVA -1.07%).

Over a five-year period, Teva faced a seemingly endless series of headwinds and mistakes. The company overpaid for generic Actavis, lost the sales exclusivity of its top-selling branded multiple sclerosis drug (Copaxone), suspended its once-high dividend and faced a laundry list of lawsuits ranging from bribery allegations to its role in the opioid crisis. In other words, there are legitimate reasons why Teva’s stock has underperformed in recent years. However, these gray clouds seem to be lifting.

The biggest catalyst for Teva Pharmaceutical is putting opioid lawsuits in the rearview mirror. Teva has entered into a $4.2 billion nationwide settlement to be spread over 18 years. While the final dollar figure may be slightly higher than some people expected, it removes a significant portion of the financial uncertainty that has held Teva’s valuation low for so long.

The other major change for Teva Pharmaceutical is that the balance sheet is steadily improving. When turnaround specialist Kare Schultz was hired as CEO in September 2017, Teva had net debt of more than $34 billion. But thanks to a combination of divesting non-core assets, tightening its trouser legs and using operating cash flow to service debt, Teva’s net debt has shrunk to a more reasonable $19 billion.

Teva’s income statements also show that the fast-growing branded therapies are now outpacing the revenue lost to Copaxone’s generic competitors. Austedo, the drug for tardive dyskinesia, is on track to reach or exceed $1 billion in annual sales, while migraine prevention therapy Ajovy is closing in on $400 million in annual revenue.

With all of Teva’s bad news, it stands out as a screaming buy with a multiple of just 4 times Wall Street’s predicted earnings in 2023. Doubling this multiple to a still-cheap 8 over the next three years seems achievable.

Love bag

The bear market on the Nasdaq also weighed on furniture stocks Love bag (LOVE -0.08%)the second screaming bargain that can double your money by 2025.

Lovesac faces challenges that most retailers are facing right now. This includes dealing with historically high inflation, supply chain issues, rising inventory levels and the many signs that the US will slip into recession at some point this year. All of these factors imply that traditional retailers will struggle in the coming quarters. Fortunately, Lovesac is anything but a traditional retailer.

Where most physical furniture retailers buy their products from the same small group of wholesalers, Lovesac distinguishes itself with its innovative products. While it was originally known for its bean bag style chairs called “sacs,” nearly 90% of the company’s net sales now come from sactionals – modular sofas that can be rearranged in a variety of ways.

Sactionals have over 200 different cover choices, are upgradeable with wireless charging and surround sound systems, and are eco-friendly. The yarn used in the sactional covers is made from recycled plastic water bottles. In short, there is no other product on the market that can cover the basics of function, optionality and environmental friendliness like sactionals.

Lovesac’s other unsung hero is its innovative omnichannel commerce platform. Despite having physical stores in 40 states, this company is much more than its physical stores. During the pandemic, it was able to shift a significant percentage of sales online and rely on pop-up showrooms and various brand partnerships to increase sales. Having multiple channels to move its products has led to better inventory management and reduced overheads.

Investors should also note that Lovesac’s products are aimed at middle- and upper-income consumers. These are people who are less likely to be negatively affected by higher inflation or a recession.

With Lovesac continuing double-digit growth and on track for more than $5 in earnings per share in fiscal 2026 (calendar year 2025), it absolutely screams “bargain!”

A person working from home looking at his smartphone with an open laptop on his lap.

Image source: Getty Images.

PubMatic

The third screaming bargain that could double your money by 2025 is small-cap adtech stocks PubMatic (PUBM -4.25%).

The Nasdaq bear market has been random for the past year when it comes to printing ad stocks. Since advertisers tend to scale back spending at the slightest sign of economic weakness, all ad stocks, including PubMatic, have taken it on the chin. But this short-term pain should lead to plenty of future gains for long-term investors.

The most important thing for optimists is to look at the advertising landscape with a broader lens. While recessions are an inevitable part of the economic cycle, they generally don’t last more than a few quarters. In comparison, economic expansions are usually measured in years. Ad-driven companies benefit from these disproportionately long periods of expansion.

In addition to macro factors working in PubMatic’s favor, the company is at the center of the fastest growing trend in the ad space. Through 2025, global digital ad spend is expected to grow at a compound annual rate of 14%. Broken down further, mobile, digital video and connected TV (CTV) programmatic advertising are expected to deliver compound annual growth rates of 20%, 24% and 27%, respectively, through 2025. Since PubMatic generates a significant percentage of its revenue from CTV, it’s no surprise that organic growth is well above the average for the digital advertising industry.

As I noted earlier, PubMatic is strategically positioned to excel as one of the few remaining sell-side (SSP) platforms. Consolidation across SSPs has seen PubMatic rise to the top of the pack as one of the premier programmatic advertising platforms to help publishers sell their digital display space.

Plus, in hindsight, PubMatic made a genius decision to design and build its cloud-based infrastructure. By not relying on a third party for its programmatic advertising platform, the company can retain more of its revenue as it scales.

The icing on the cake here is that PubMatic ended September with $166.1 million in cash, cash equivalents and marketable securities, with no debt. It has enough capital to continue to innovate and is valued at less than 10 times Wall Street’s projected earnings for 2025.

Leave A Reply

Your email address will not be published.