[Editor’s Note: “10 of the Best Long-Term Stocks to Buy When the Market’s Down” was originally published in March 2020. It is regularly updated to include the most relevant information.]
The best time to find long-term stocks to buy is when the market is falling, and so long as time is on your side, you don’t have to worry about timing the bottom.
That’s because the secular growth narratives supporting long-term winning stocks endure over time, while broad economic and market panics are fleeting. They pass. They always do. And when they do, long-term winning stocks get back to winning.
Take 2008 for example. In September, the S&P 500 fully entered a bear market. The market proceeded to fall another 45% before it bottomed. But, had you bought Apple (NASDAQ:AAPL) or Netflix (NASDAQ:NFLX) in September 2008 — well before the market hit its lows — you’d be up more than 1,000% on each investment today, because the iPhone and streaming TV growth narratives behind Apple and Netflix endured over the following decade, while the housing and financial crisis lasted only a few quarters.
Go back even further to 2000/01. Same story. Different year. Stocks entered a bear market in March 2001. That wasn’t the bottom. Stocks fell another 20% over the next few months. But, buying Amazon (NASDAQ:AMZN) or Nike (NYSE:NKE) at any point during that panic would’ve secured you 1,000%-plus gains, too, because the e-commerce and athletic apparel growth narratives behind those companies endured over the following decades, while the slow economy of the early 2000s lasted only a few quarters.
Lather, rinse, repeat for the 2020 bear market, brought on by the novel coronavirus pandemic.
This pandemic, while big and scary, is temporary. Effective treatments are on the way. A vaccine is, too. As is economic normalization. Soon enough, we will put this pandemic behind us. When we do, long-term winning stocks will yet again get back to winning.
With that in mind, the 10 best long-term stocks to buy in this bear market includes:
- Chegg (NYSE:CHGG)
- Okta (NASDAQ:OKTA)
- Shopify (NYSE:SHOP)
- Pinterest (NYSE:PINS)
- Beyond Meat (NASDAQ:BYND)
- Twilio (NYSE:TWLO)
- Roku (NASDAQ:ROKU)
- Square (NYSE:SQ)
- The Trade Desk (NASDAQ:TTD)
- Stitch Fix (NASDAQ:SFIX)
Best Long-Term Stocks to Buy: Chegg (CHGG)
Year-to-Date Performance: +51.6%
First up on this list of long-term stocks to buy in the bear market is Chegg.
Chegg is the education company of the future. The company has built a connected learning platform that is tailored to meet the needs of modern high school and college students, by offering those students a myriad of academic help services where they want them (online), how they want them (on-demand) and at a familiar pricing structure (subscription model).
Chegg is still in the early stages of its journey. The platform, while rapidly growing, only has 3.9 million subscribers. There are 54 million high school and college level students across the U.S. and Europe who could find a use for Chegg.
Even further, this journey is accelerating. Thanks to Covid-19, physical schools have closed and students have pivoted in bulk to online learning platforms like Chegg. That’s why Chegg reported record growth in the first quarter of 2020, and is expected to report even bigger growth in the second quarter.
The virtualized education trend has begun on a global scale.
As such, over the next several years, academic services will become increasingly virtual, and Chegg will stay on a big growth trajectory.
Specifically, Chegg should sustain 20%-plus subscriber growth and 25%-plus revenue growth. Increased scale will drive positive operating leverage, and my modeling suggests that $4 in earnings per share is totally doable by fiscal 2025.
Throw an average systems software sector 25-times forward multiple on that. You arrive at a 2024 price target for CHGG stock of about $100, up more than 75% from where shares trade hands today.
Year-to-Date Performance: +50.0%
Next up, we have cloud security company Okta.
Okta is pioneering a breakthrough solution in cloud security. In essence, as opposed to building a castle of security around a company’s services, Okta outfits each individual in the ecosystem with their own body armor.
It’s a genius concept, because if everyone in the ecosystem is protected, then so is the whole ecosystem. At the same time, it’s a relevant solution, since companies require the flexibility and mobility benefits that an identity-based security system offers, especially in today’s work-from-home environment (which may usher in a new norm for work, wherein mobility and flexibility are of paramount importance).
At present, Okta is the undisputed leader in this space, with a ton of momentum to further separate itself from competitors over the next few years. Consequently, I easily see this company as a double-digit revenue grower over the next decade. The software business model also features high gross margins with tremendous scalability, so that double-digit revenue growth should drive far bigger profit growth.
I see Okta as able to hit $10 in earnings per share by 2030. Based on an average application software average 35-times forward multiple, that implies a $350 price target by the end of the decade — about double today’s price tag.
Best Long-Term Stocks to Buy: Shopify (SHOP)
Year-to-Date Performance: +78.2%
E-commerce solutions provider Shopify is the one of the best growth stocks to own for the long haul for one very simple reason. The company is the backbone of the future of commerce.
In the days before e-commerce, every store needed to have a physical storefront. Now, though, with so many consumers doing their shopping online, physical storefronts don’t matter as much. Instead, retailers need to a have storefront on the internet, or a website.
But, not many companies are good at building these websites, enabling commerce through them, and tying them into alternative online sales channels like social media. Indeed, creating a connected, e-commerce enabled website can be pretty complex these days. That’s where Shopify steps in. The company helps retailers and merchants of all shapes and sizes build the best website possible.
This reality paves the path for Shopify to become a far bigger player in the retail world over the next few years.
From a numbers perspective, the company will sustain 20%-plus revenue growth into fiscal 2025, and 10%-plus revenue growth into 2030. Gross margins are up near 60%, and coupled with a highly scalable business model, those big gross margins pave the path for double-digit revenue growth to turn into far bigger profit growth.
I see profits moving towards $30 per share by 2030. Based on an average application software sector 35-times forward multiple, that implies a 2029 price target for SHOP stock of over $1,000.
Year-to-Date Performance: +1.1%
Visual search giant Pinterest is in the early stages of a huge revenue and profit growth narrative, the likes of which will drive PINS stock materially higher over the next four to five years.
Pinterest already has a huge user base that exceeds 300 million monthly active users. Those users aren’t going anywhere anytime soon, because Pinterest offers a unique inspiration and discovery value prop in the crowded digital media landscape.
Importantly, the company is in the early stages of monetizing those sticky users.
Because Pinterest is already a collection of action-minded individuals looking for inspiration, the platform is a natural place for high-conversion, effective advertising, especially in the travel, food, and apparel verticals. Consequently, over the next several years, the company will successfully ramp up its digital ad business, and drive steady 15%-plus revenue growth.
On the profit side, we already know that the digital ad business model comes with big gross margins and tremendous scalability. Just look at Facebook (NASDAQ:FB). There’s no reason Pinterest’s digital ad business will be different. Thus, between now and 2025, Pinterest will expand its profit margins by leaps and bounds, and power huge profit growth.
All together, I see Pinterest ramping up towards $1.65 in 2025 earnings per share. Based on an average digital ad sector 25-times forward multiple, that implies a 2024 price target for PINS stock of over $40, or more than double today’s price tag.
Best Long-Term Stocks to Buy: Beyond Meat (BYND)
Year-to-Date Performance: +58.1%
Plant-based meat is the future. As a result, Beyond Meat stock is a long-term winner worth buying amid recent weakness.
The story is pretty simple. Consumers these days are increasingly making consumption decisions with a focus on environmental, social and governance (ESG) impacts. Think electric cars. Or solar energy. Or even plant-based dairy products.
Plant-based meat falls perfectly into this trend. Relative to animal-based meat production, plant-based meat production reduces carbon emissions (cows contribute significantly to global warming) and respects animal welfare (no animals have to be killed). Those benefits will become increasingly attractive to a wider array of consumers over the next decade.
As they do, plant-based meat will follow in plant-based dairy’s footsteps. It will march towards 10%-plus penetration in the global meats market by the end of the decade.
The global meats market in 2030 will likely measure around $1.5 trillion. That implies a plant-based meat market size of $150 billion.
Beyond Meat, the most recognizable name in the space, will easily capture at least 5% of that market, leading to $7.5 billion or more in sales. The business operates at industry-high 35% gross margins, and scale will drive operating margins significantly higher on a $7.5 billion revenue base.
By 2030, I think this company can do about $15 in earnings per share. Based on an average consumer staples 20-times forward multiple, that implies a 2029 price target for BYND stock of $300.
Year-to-Date Performance: +87.2%
Cloud communications platform Twilio is a long-term winner that has huge upside potential over the next few years.
The story at Twilio is pretty simple. Every business in the world employs email marketing to reach and sell to consumers. But, consumers don’t check those emails. They’ve developed an immunity to business emails. Besides, they don’t talk to their friends through email — they talk to their friends through texts.
Clearly, if businesses want to connect with consumers, they need to start texting.
Twilio enables businesses to do just that, in a streamlined, programmatic way. That is, Twilio has created automated software tools which enable businesses to deploy text-based business-to-consumer communications.
It’s a genius pivot which enables businesses to keep up with consumers. And Twilio is the best in the market when it comes to providing programmatic, text-based B2C communications tools.
As such, over the next few years, Twilio will sustain big growth. My modeling suggests that 10%-plus customer growth, 20%-plus revenue growth and significant margin expansion are all in the works.
If so, this company could easily be looking at $10 in earnings per share by 2030. Based on an application software 35-times forward multiple, that implies a 2029 price target for TWLO of $350.
Best Long-Term Stocks to Buy: Roku (ROKU)
Year-to-Date Performance: -22.6%
Streaming device maker Roku is so much more than just a streaming device maker. The company has effectively turned into the “cable box” of streaming TV, and in so doing, has guaranteed itself huge growth potential over the next few years.
Everyone is pivoting from linear to streaming TV. The streaming TV landscape is starting to look a lot like the linear TV landscape, with a ton of supply and a ton of demand. In the linear TV world, the cable box connected all that supply to all that demand through a streamlined, aggregated platform. In the streaming TV world, Roku is the “cable box,” aggregating all the streaming services and offering consumers a streamlined, centralized ecosystem through which they can access all the content.
This is an exceptionally valuable position to be in.
A ton of money is spent on linear TV ads. But, ad dollars chase eyeballs, and eyeballs are running from linear TV into streaming TV. So, over the next few years, all that money will follow consumers into the streaming TV world. As it does, a lot of that money will make it’s way into the Roku ecosystem, since Roku is where 40 million streamers (and growing) start their streaming TV journey every day.
My modeling suggests that this will ultimately be a 20%-plus revenue grower into 2025, with sizable enough gross margins to drive tremendous scalability and push profits up toward $6 per share. Based on an application software 35-times forward multiple, that implies a 2024 price target for the stock of $210.
Shares trade hands around $100 today.
Year-to-Date Performance: +24.5%
Payments processor Square is an innovative company optimally capitalizing on one of the biggest trends in the consumer world.
Across the globe, consumers are increasingly ditching cash and opting for alternative payment methods. Square is capitalizing on this cashless commerce trend in two big ways.
First, the company has built cashless payment processors for merchants and retailers. They’ve also built a robust seller ecosystem around those payment processors. That ecosystem includes offerings like payroll management, small business capital and commerce analytics.
Second, the company has built a cashless, peer-to-peer payments app — Cash App — and created a robust buyer ecosystem around that payments app, offering things like fractional stock trading and a debit card with unique promotions.
In other words, through innovation, the company has aligned itself perfectly with the cashless revolution. This revolution is truly just getting started. By 2025, it’s quite likely that cash — which is still fairly prevalent today — will be a rarity.
Consequently, into 2025, I see Square as a 20%-plus revenue grower with the potential to scale profits towards $4 per share. Based on a payments stock average 30-times forward multiple, that implies a 2024 price target for SQ stock of $120 — almost double the current stock price.
Best Long-Term Stocks to Buy: The Trade Desk (TTD)
Year-to-Date Performance: +6.2%
Programmatic advertising is the future of advertising, and as a result, The Trade Desk is a long-term winner.
What The Trade Desk does is pretty simple. The company provides programmatic advertising solutions for ad buyers. Breaking that down, The Trade Desk leverages data and algorithms to allocate demand-side ad dollars across a variety of digital ad channels. This helps optimize the reach and effectiveness of those ad dollars.
This is simply a better way to advertise. It’s faster, because it’s all automated. It’s smarter, because it’s all data-driven. And it produces better outcomes, because it increases the effectiveness of each ad.
Yet, only a small fraction of the world’s $500 billion-plus ad dollars are spent programmatically, giving The Trade Desk a ton of runway to grow market share and sustain big growth for a lot longer.
I see this company as a 20%-plus revenue grower over the next few years, with strong and stable profit margins. My modeling suggests that $10 in earnings per share in possible by 2025.
Assuming so, then a 35-times application software multiple on that implies a 2024 price target for TTD stock of $350.
Stitch Fix (SFIX)
Year-to-Date Performance: -11.3%
When it comes shopping, less is more. This simple concept is why Stitch Fix is set to be a huge winner in the long run.
Science experiment after science experiment prove that too much choice in shopping produces undesirable outcomes. Yet, the shopping world remains far too complex. There are thousands of apparel brands out there, each offering thousands of products, giving consumers millions of options to chose from. That’s just too many.
Insert Stitch Fix. The company offers online, on-demand personal styling services. It matches your personal style data with brand style data to shrink the shopping world from a few million random options, to a few dozen relevant choices.
Stitch Fix is still in the early stages of pioneering this curated shopping model across the U.S. and Europe. But, because the platform capitalizes on the secular theme of less is more, Stitch Fix adoption rates will soar into 2025. As they do, this company will sustain double-digit customer growth and 15%-plus revenue growth.
Zooming out, I see Stitch Fix hitting around $2 in earnings per share by 2025. Based on a consumer discretionary 20-times forward multiple, that implies a 2024 price target for SFIX stock of $40.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the best stock pickers in the world by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long SHOP, OKTA, CHGG, PINS, BYND, ROKU, SQ, TTD and SFIX.