As the market pulls back in April, it’s time to put some dry powder to work. Some of the top Nasdaq stocks have pulled back significantly and present opportunities at current levels.
After a 25% rally since November 2023, when the market barely had any pullback, a bigger correction was in the cards. It appears this is happening now, with the Nasdaq declining for the third consecutive week. However, the narrative for stocks hasn’t changed, and it’s an opportune time to start loading up on top Nasdaq stocks.
Although there are some geopolitical tensions in the Middle East, the U.S. economy remains resilient. Atlanta Fed GDPNow model is projecting U.S. Q1 economic growth at 2.9%, one of the best rates in the developed world. Furthermore, consumer spending is robust, supported by the low unemployment rate.
This bull market is still intact as long as the economy remains resilient. Use this pullback to buy these top Nasdaq stocks that the market has unfairly punished.
Netflix (NFLX)
After the 9% post-earnings selloff, Netflix (NASDAQ:NFLX) has become one of the top Nasdaq stocks to buy. It’s surprising that the stock fell after an impressive quarter. Although the company disappointed investors by stating it would stop disclosing subscriber numbers, the selloff was unwarranted.
Indeed, everything else about Q1 2024 results was stellar. Netflix remains the number one entertainment company, reporting 269.6 million subscribers. The streamer blew past Wall Street’s subscriber estimates, adding 9.33 million subscribers, almost double the 4.9 million expected.
Revenue for the quarter was $9.37 billion, representing 14.8% growth. The company showed impressive operating leverage, with operating income of $2.6 billion compared to $1.7 billion in Q1 fiscal year 2023. As a result, operating margins improved from 21% to 28.1%. Meanwhile, the firm generated $2.1 billion in free cash flow in the quarter.
To put the cherry on the cake, the guidance surprised to the upside. The company expects 13% to 15% revenue growth in fiscal year 2024 and management plans to continue increasing operating margins.
Finally, analysts weighed in with bullish calls after earnings. Bank of America reiterated an overweight rating with a $700 price target. They believe Netflix can sustain double-digit top-line growth. The growth, alongside margin expansion and buybacks, will support 25% to 30% EPS compounded annual growth.
Costco Wholesale (COST)
The recently released March retail report was another sign that consumers are in healthy shape and continue to spend. And what better way to invest in more consumer spending than Costco Wholesale (NASDAQ:COST), one of the most beloved retailers?
Since its earnings reports, COST stock has pulled back about 9% from recent highs. This pullback offers an entry into one of the best long-term compounders. Its everyday low-price strategy supports a flywheel of increased memberships and shopping volume as customers look for bargains.
Indeed, over the years, Costco Wholesale has perfected its merchandise selection, becoming a treasure hunt destination for shoppers. Shoppers always seem to find bargains at COST, from groceries to apparel and even gold bars! This, plus the virality of deals at Costco Wholesale from shopping influencers, has only boosted the company’s appeal.
That’s why the retailer keeps releasing industry-leading revenue growth numbers despite its size. For the fiscal year ended September 2023, it reported growth of 6.76%. Sales are still robust, with the company reporting Q1 FY2024 and Q2 FY2024 sales growth of 6.1% and 5.7%, respectively.
The strength continues. Its March sales showed comparable sales for the five weeks ended April 7 grew 7.7%. Net sales for the period were $23.48 billion, up 9.4%. Costco Wholesale remains one of the top Nasdaq stocks to buy. Its loyal fanbase will keep trooping to stores for bargains.
Nvidia (NVDA)
One area that has corrected sharply in recent weeks is the momentum trade. Artificial intelligence stocks have been caught up in this drawdown, taking a serious beating. The king of AI, Nvidia (NASDAQ:NVDA), hasn’t been spared. It has corrected over 20%, with a severe 10% drop on April 19.
This is the much-awaited pullback long-term investors hoped for, making Nvidia one of the top Nasdaq stocks to buy. The AI story is still intact, and we are in the early innings of multiyear growth. Furthermore, after the recent drop, it trades at 30 times forward earnings, a bargain multiple for a company with analyst estimates forecasting over 80% revenue growth in FY2025.
Based on earnings reports and news flow, the demand for AI chips is insatiable. For instance, reports have emerged that Microsoft (NASDAQ:MSFT) plans to double its GPU inventory to 1.8 million. Nvidia is the main supplier to cloud service providers and will directly benefit from this surge in demand.
Lastly, Taiwan Semiconductor Manufacturing (NYSE:TSM), the largest foundry, reported earnings on April 18, highlighting robust AI demand. Management noted they expect revenue from AI processors to grow at a 50% compounded annual growth rate. Nvidia outsources chip manufacturing to Taiwan Semi, so these comments were a positive read-through for the semiconductor giant.
On the date of publication, Charles Munyi 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.
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