After a significant rally since November 2023, the Nasdaq has entered a correction phase, providing an opportunity for investors to buy quality stocks at discounted prices.
The U.S. economy remains strong, with robust consumer spending and a low unemployment rate. The Atlanta Fed GDPNow model projects U.S. Q1 economic growth at 2.9%, one of the best rates in the developed world.
Netflix (NFLX)
Despite an impressive quarter, Netflix’s stock declined 9% post-earnings. The company’s decision to stop disclosing subscriber numbers prompted the selloff, but the fundamentals remain strong.
Netflix remains the top entertainment company, adding 9.33 million subscribers in Q1 2024, almost double the expected 4.9 million. Revenue grew 14.8% year-over-year to $9.37 billion, and operating margins improved from 21% to 28.1%.
Bank of America maintains an overweight rating on Netflix, with a $700 price target. They believe the company can sustain double-digit top-line growth, margin expansion, and strong EPS growth.
Costco Wholesale (COST)
The recent March retail report indicated continued robust consumer spending, making Costco Wholesale an attractive investment.
Costco’s low-price strategy has built a loyal customer base, driving increased memberships and shopping volume. The company’s unique merchandising selection and bargain-hunting atmosphere have made it a preferred destination for shoppers.
Costco Wholesale has consistently delivered industry-leading revenue growth. In the fiscal year ended September 2023, sales grew 6.76%. March 2024 sales growth remained strong, with comparable sales increasing 7.7% for the five weeks ended April 7.
Nvidia (NVDA)
Artificial intelligence stocks have corrected sharply in recent weeks, including Nvidia. However, the AI story remains intact, and Nvidia is a leader in this emerging field.
After the recent drop, Nvidia trades at a reasonable 30 times forward earnings, despite analyst estimates forecasting over 80% revenue growth in FY2025.
Cloud service providers and hardware manufacturers are reporting strong demand for AI chips, which benefits Nvidia as a leading supplier of AI chips. Recent comments from Taiwan Semiconductor Manufacturing, the largest foundry, indicate robust AI demand, further supporting Nvidia’s prospects.
These top Nasdaq stocks, Netflix, Costco Wholesale, and Nvidia, present opportunities for investors to capitalize on the current market pullback and position their portfolios for potential growth.
