Zacks

2 Big Growth Stocks to Buy on the Dip for Q2 and Beyond

Benjamin Rains
8 min read

In This Article:

The first quarter of 2021 was a wild ride, with the Nasdaq soaring to new highs in mid-February only to fall into a correction, down 10% from its highs, in just under a month. Meanwhile, the Dow and the S&P 500 climbed to records, as Wall Street rotated into cyclical sectors such as finance, energy, and other economic rebound plays.

The market movement reflects the optimism about the possibility of 6% or higher U.S. GDP growth in 2021 and the hope that people will be able to return to something closer to their normal in 2021 as the coronavirus vaccine is rolled out. The injection of trillions of dollars into the U.S. economy and the Fed’s easy money policy has also brought about the return of inflation worries that led to the flurry of bond selling.

Yet even with the 10-year U.S. Treasury above pre-pandemic levels at 1.75%, it remains well below the 3% that yields hit in 2018 and ultra-low by historical standards. This likely extends there is no alternative investing. And the market ended the first quarter on a high note, as the Nasdaq continues to chop around after bulls bought the dip on March 8, while the S&P 500 touched new highs on March 31.

Let’s also remember that the earnings picture continues to improve. All of this could mean that despite some of the recent volatility, investors with long-term horizons might want to buy beaten-down pandemic winners with strong growth outlooks at big discounts as we head into the second quarter (also read: The Return of Strong Earnings Growth)…

Snap Inc. SNAP

Snap has bolstered its social media app that became famous for its disappearing photos and videos. The company has rolled out far more video content and shows and has partnerships with Disney DIS, the NFL, celebrities like Kevin Hart, and more.

Snapchat’s Discover page has gained traction and it’s been in the booming mobile gaming market for roughly two years now. The company also constantly releases various augmented reality offerings and it launched its Spotlight feature late last year that aims to take on TikTok.

Snap’s beefed-up portfolio of entertainment offerings has attracted advertisers as more people disconnect from ad-supported legacy media in favor of Netflix NFLX and simply ignore more traditional online banner ads. Investors should also know that Snap has boasted that in the U.S. it reaches “more than 90% of 13 to 24 year-olds and more than 75% of 13 to 34 year-olds.” In fact, the company said that “over 90% of the U.S. Gen Z population watched Shows and publisher content in Q4 2020.”

Snap’s ability to reach this “unduplicated and hard-to-reach audience” has attracted Wall Street’s attention, as it continues to add users and monetize its growing platform, as Facebook FB and other internet giants face further government scrutiny. Snap topped our Q4 estimates in early February, with its daily active users up 22% year-over-year to 265 million. Overall, Snap’s FY20 revenue climbed 46% to $2.51 billion. This marked its third-straight year of roughly 45% sales growth, and its outlook remains impressive.

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