When the Nasdaq composite index peaked in February, investors who bid on the dip likely lost money. Confidence in the technology is waning. Selling follows after most sharp rallies, while the index struggles in building an uptrend.
The market is shifting away from the stay-at-home pandemic trade and seeking traditionally valued stocks on the Dow Jones Industrial Average. Valuations are another headwind for the sector that rewarded investors with gains above 100% or more in the last year, in some cases.
Investors cannot time the dip, so buying the best stocks on the Nasdaq is the next best thing to do.
The seven best stocks on the exchange and listed in alphabetical order are:
- Cisco Systems (NASDAQ:CSCO)
- DocuSign (NASDAQ:DOCU)
- Dollar Tree (NASDAQ:DLTR)
- Facebook (NASDAQ:FB)
- Intel (NASDAQ:INTC)
- Microsoft (NASDAQ:MSFT)
- Regeneron Pharmaceuticals (NASDAQ:REGN)
In the table, Regeneron scores the best overall and on quality. On quality, every stock scores an 82/100 or above except for DocuSign. DocuSign makes up for the lower quality score with a strong valuation ratings score of 72/100.
Facebook sticks out for having a perfect 100/100 on its growth score.
The scores will change for the better as these firms increase profits and revenue in 2021.
Nasdaq Stocks: Cisco Systems (CSCO)
Cisco Systems bottomed in November 2020 at below $36. CSCO stock staged a rebound after it posted strong quarterly earnings. On March 1, it announced the completion of its Acacia Communications acquisition. Cisco paid $4.5 billion for the company. Chief Executive Officer Chuck Robbins said Acacia will help it meet the fast-growing demand for data. He said, “our Internet for the Future strategy puts Acacia’s high-speed coherent optics technologies front and center as we work to empower webscale companies, service providers, and data center operators.”
In the second quarter, Cisco posted a product order growth of 1% year-on-year. GAAP earnings per share fell 12% YOY to 60 cents. Although revenue did not change at $12 billion in Q2, it forecast Q3 revenue growing 3.5% to 5.5% YOY. EPS will be in the range of 64 to 69 cents.
Strong DevOps buyers, IoT, and the Meraki technology platform are growth drivers for Cisco.
After failing to break out at above $250 since the start of the year, DocuSign is trading in a holding pattern. The EPS beat in the fourth quarter failed to lift DOCU stock.
In Q4, DocuSign posted EPS of 37 cents beating consensus estimates by 15 cents. Revenue grew by an impressive 56.7% at $430.9 million. The company forecast revenue of $1.96 billion to $1.97 billion. In the months ahead, as companies bring workers back to the physical office, contracts will get digitized. They will need a solution offered from DocuSign instead of going back to paper.
After the trifecta again of beating estimates on earnings, revenue, and offering guidance that exceeds expectations, DocuSign is the best stock on the Nasdaq to watch.
In the model, readers may assume an EBITDA multiple of around 42 times. This would reflect the strong revenue growth ahead, as companies embrace digitization for contract management.
Readers may assign a lower discount rate if they are confident that the company will continue beating expectations.
Dollar Tree (DLTR)
Like DocuSign, discount store Dollar Tree posted strong fourth-quarter results. It earned $2.13 a share, up 310% YOY. Investors cannot go wrong buying DLTR stock.
Net sales rose by 7.2% to $6.77 billion. In the all-important same-store sales metric, Family Dollar’s 8.1% increase suggests continued strength ahead. Dollar Tree’s Family Dollar partnered nationally with Instacart. This resulted in continued sales momentum at its stores. Furthermore, the company introduced a new “combination store” format that performed very well.
During fiscal 2020, it tested this format at its approximately 50 stores in rural and small-town communities. The strong results suggest that the company will expand the format this year. In Q4, the company bought back 1.83 million shares for $200 million. With $2.4 billion in its share repurchase authorization, shareholders are getting the maximum return from their investment.
Nasdaq Stocks: Facebook (FB)
Apple’s (NASDAQ:AAPL) upcoming privacy changes are an existential threat to Facebook. But CEO Mark Zukerberg said that the changes will put Facebook’s commerce products in a stronger position. Apple is giving users direct control on its privacy. So when Apple’s iOS 14 gives them privacy options, users could limit the way Facebook tracks them.
Giving limited customer data to customers may end up hurting advertisers. Since advertisers have few other platforms besides Facebook, ad sales should not change.
To expand its addressable market, Facebook launched Instagram Lite to 170 countries. The growing user base will solidify the experience-sharing site’s social networking market share.
In the fourth quarter, Facebook said it would buy back $25 billion in shares. This is in addition to its $34 billion authorization. The continued site usage and 33% revenue growth assures that investors are getting the best returns by holding FB stock.
Intel’s Rocket Lake processor launch keeps the mature chip giant in the game. The company says the 11th generation Intel core offers “unmatched overclocking, game performance.”
The i9-11900K chip is nothing short of impressive. It offers speeds of up to 5.3GHz, which should appeal to power users and PC gamers. The chip is 19% faster than previous generation architectures. The integrated graphics architecture performance is an equally notable achievement. Business users who buy CPUs want on-board graphics support to lower the cost over ownership. On the press release, Intel said that the UHD graphics matter “because games and most applications continue to depend on high-frequency cores to drive high frame rates and low latency.”
For a few quarters, Advanced Micro Devices (NASDAQ:AMD) enjoyed a sizable technical lead over Intel. Rocket Lake is an answer to AMD’s Ryzen 5000 series chip. Still, AMD offers better performance at the price paid. But with limited supplies from the latest Ryzen CPU, Intel has a chance to accelerate sales in 2021.
Software giant Microsoft grew its addressable market when it received the European Union’s approval for the Bethesda acquisition. Acquiring ZeniMax Media, the parent of Bethesda Softworks, gives Microsoft 23 game studios.
Titles like Doom and Fallout have growing revenue potential as the gaming sector remains hot. Consumers have few other major sources of entertainment during and after the pandemic. Microsoft will not only increase its cash flow from its Office365, SQL Server, and Windows sales but will get a lift from games.
In early March, hackers took advantage of a flaw in Microsoft’s email software. The hack affected tens of thousands of organizations in Asia and Europe. Despite the negative news, MSFT stock did not react at all. Shares traded steadily in the $230 to $240 range for the month.
Microsoft is resilient to bad news as the market looks ahead to its continued growth.
Nasdaq Stocks: Regeneron Pharmaceuticals (REGN)
After announcing positive topline data for its novel coronavirus antibody, Regeneron has yet to attract investors. REGN stock is taking a back seat to Covid-19 vaccine suppliers instead.
The drug manufacturer is posting billions in revenue for its blockbuster drug, Dupixent. On top of that, markets are ignoring the potential of its treatment for Covid-19 patients. On March 23, Regeneron reported the results of its Phase 3 trial. The antibody cocktail reduced hospitalization or death by 70% for non-hospitalized Covid-19 patients. It also shorted the duration of symptoms by four days.
Regeneron said that doses in the 1,200 mg to 8,000 mg range had similar efficacy. This suggests that if the U.S. Food and Drug Administration approves REGEN-COV, it will have a 1,200 mg dose level. Chief Scientific Officer Dr. George D. Yancopoulos said, “We will discuss the new data with regulatory authorities and request that the 1,200 mg dose be rapidly added to the U.S. Emergency Use Authorization, in order for the anticipated REGEN-COV supply to be available to treat even more patients.”
If approved, Regeneron will become one of the best stocks on the Nasdaq to hold.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. Disclosure: On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.