A remarkable 30-year bull run for the Nasdaq 100 saw it gain nearly 4,000% by 2020.
But, the party came to a screeching halt when the pandemic hit. Within a matter of weeks the tech-heavy index lost a third of its value and plunged deep into a bear market. Yet just as quickly, it made a U-turn and more than doubled again over the next 18 months.
While that roller coaster ride was intense, it’s been a bit rocky since, and the Nasdaq 100 still hasn’t regained those former highs. It is within striking distance, though, sitting just 7% below its former peak. For investors with a long-term mindset, this means bargains still abound.
What follows are three unstoppable Nasdaq stocks to buy right now.
DexCom (DXCM)
Medical device manufacturer DexCom (NASDAQ:DXCM) specializes in continuous glucose monitors (CGM) used by diabetics and is the second largest player behind Abbott Labs (NYSE:ABT). In the market for Type 1 diabetes, though, DexCom is the leader by a better than 2-to-1 margin.
According to a UBS (NYSE:UBS) analysis, 83% of people with Type 1 diabetes will use a CGM, suggesting DexCom’s lead will continue to grow. However, Type 2 diabetes could be the place of growth for the medical device specialist’s future.
UBS expects just 30% of Type 2 diabetics will use a CGM at the start of the next decade. But the number of people taking basal insulin, the slow-release type that regulates blood sugar throughout the day, is expected to grow to 50% of the diabetic population. Further, 21 million Type 2 diabetics don’t take insulin at all. Analysts see that as the biggest opportunity for CGM sales. And once DexCom taps the international market, it will realize additional continued market share increases.
The medical device company raised full-year revenue forecasts from a range of 17% to 21% growth to one of 20% to 22% growth. That is largely the due to sales outside of the U.S.
Even so, the market slashed DexCom’s stock by a third. Two analysts also recently cut their price targets, though they left their buy recommendations intact. DexCom’s stock is not cheap on a price-to-earnings, price-to-sales, or free cash flow basis, but the long and broad runway of opportunity it faces makes it worth the premium.
Palo Alto Networks (PANW)
Premiere cybersecurity company Palo Alto Networks (NASDAQ:PANW) is enjoying significant growth in recent years. Cybersecurity is an essential component of doing business these days, thanks to the growing number of threats to privacy.
The Identity Theft Research Center says data breaches are on a record-breaking run this year. There were 951 incidents of compromised data in Q2 and over 1,390 events in the first six months of 2023.
That’s driving their billings higher, which saw a 23% increase in fiscal 2023. Equally important, the cybersecurity expert is able to dramatically increase its production of free cash flow. FCF this year was more than $2.6 billion, a 47% increase over 2022 and nearly double from the year prior.
Palo Alto Networks just split its stock 3-for-1 on Sept. 14 indicating a very bullish sentiment by management. Although shares are up 72% year to date (YTD), this industry’s fast-growing business has no ceiling.
Sirius XM Holdings (SIRI)
A decade or so ago Sirius XM Holdings (NASDAQ:SIRI) wasn’t that good of an investment. However, the business has improved.
Sirius investors only gained a 19% total return over the past ten years. The S&P 500 tripled in value in that time frame while the Nasdaq 100 grew five-fold.
So why buy Sirius now? Shares are down 30% YTD on fears of ad revenue drying up and a recession taking a toll on new vehicle sales.
First, the auto industry is coming out of its slump. New car sales surged 15% higher in August year over year (YOY), which should increase new subscription sales where actually makes most of its money. Q2 revenue was $2.25 billion with subscriptions accounting for $1.73 billion worth. Most of Sirius’ ad revenue came from the music streaming service Pandora that it acquired four years ago.
Also, SIRI still produces a lot of cash. Management forecasts it will end the year with $1.2 billion of free cash flow.
The stock trades at just 12 times next year’s earnings estimates, less than twice its sales, and a deeply discounted 12 times FCF. Yet over the past decade, it solidified its finances and now offers an attractive valuation.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
