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Top Growth Stocks to Watch During a Stock Market Downturn

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Stock market volatility is inevitable, and growth stocks are especially susceptible to drastic fluctuations. Typically among the first to rebound during an upturn, these stocks also experience sharper declines in turbulent times. It’s crucial to view these dips as potential investment opportunities in strong companies at lower prices, rather than reasons for trepidation. By maintaining a watchlist and being prepared, investors can capitalize on the cyclical nature of the market.

Keeping this strategy in mind, let’s delve into some promising growth stocks that could be advantageous buys during a market downturn.

The Tech Mogul: Microsoft

Microsoft (NASDAQ: MSFT) may not be a bargain at its current valuation, priced at about 14 times annual sales. This premium places it among the most expensive profitable tech companies, compared to peers like Apple (trading at 7 times revenue) and Amazon (a mere 3 times sales). Despite this, Microsoft’s diverse growth channels, particularly in artificial intelligence through partnerships like OpenAI and its expanding enterprise services division, continue to attract investors. The company’s recent 16% sales surge underscores its growth potential beyond AI.

The Retail Titan: Costco

Costco Wholesale (NASDAQ: COST) rarely appears undervalued, boasting a 40% increase in stock price over a year in a market up 26%. Trading at over 1.3 times sales, double that of rival Walmart, investing in Costco at its current price might not be ideal. While the company is currently thriving with increased customer traffic, record-high membership renewals, and success in online sales with innovative offerings like the recent gold bar trend, there’s potential for disappointment due to high market expectations surrounding fee hikes and profitability.

Consider purchasing Costco stock after a potential pullback following any failure to meet lofty Wall Street projections.

The Social Media Behemoth: Meta Platforms

Meta Platforms (NASDAQ: META) has soared over 130% in the past year, positioning it as a frontrunner among top-performing companies. Despite challenges in digital advertising, Meta Platforms recorded a 16% revenue increase and a remarkable 66% surge in earnings to $39 billion. CEO Mark Zuckerberg expressed optimism in a recent press release, hinting at further growth potential. While the current premium of 33 times earnings may seem steep, analysts anticipate future earnings growth, especially as the ad market recovers. Keeping a close watch on ad metrics can signal the beginning of this rebound, making Meta Platforms a stock to monitor for a more appealing valuation during market downturns.

Is Meta Platforms a Worthy Investment?

Prior to investing in Meta Platforms, consider:

Motley Fool Stock Advisor analysts identified the top 10 stocks for future growth, excluding Meta Platforms. This selection of stocks is expected to yield significant returns over the coming years.

Stock Advisor offers a roadmap to investment success, providing expert guidance on portfolio construction, analyst updates, and two new stock picks monthly. Since 2002, the Stock Advisor service has outperformed the S&P 500 threefold.

Explore the 10 recommended stocks

*Stock Advisor returns as of April 4, 2024

Randi Zuckerberg, former Facebook director and spokesperson, and sister of Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is also on The Motley Fool’s board of directors. Demitri Kalogeropoulos holds positions in Amazon, Apple, Costco Wholesale, and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, and Walmart. Additionally, The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool adheres to a strict disclosure policy.

Opinions expressed are solely those of the author and may not reflect the views of Nasdaq, Inc.

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