Nasdaq Correction: 2 Brilliant Stocks Down 39% and 60% to Buy Before They Soar, According to Wall Street

The Nasdaq Composite Index has been on a rollercoaster ride, and it's not just the tech stocks that are feeling the heat. The index has entered correction territory, down more than 10% from its recent highs, and investors are scrambling to figure out what to do next. But for those with a long-term perspective, this could be a golden opportunity to scoop up some of the best stocks at a discount.

Let's dive into the details and see why two brilliant stocks, Nvidia and Amazon, are worth considering despite their recent declines.

The Current Nasdaq Correction: What's Driving It?

The current Nasdaq correction is driven by several key factors, including uncertainty surrounding U.S. trade policy, particularly the tariffs imposed by the Trump administration on goods imported from several countries. This has led to concerns about the economic impact and potential disruption to corporate earnings. Additionally, consumer sentiment has plummeted to its lowest level in more than two years, and recession fears have resurfaced, further contributing to the market's volatility.

Historically, Nasdaq corrections have been driven by a combination of economic, political, and investor speculation factors. For example, the Nasdaq correction in February 2020 was due to the COVID-19 pandemic, while the correction in early 2022 was triggered by the Fed's interest-rate-hiking campaign and Russia's invasion of Ukraine. In comparison, the current correction is more directly tied to trade policy and consumer sentiment, which are unique factors in the current economic landscape.

Despite these differences, historical data shows that Nasdaq corrections have typically been short-lived, with the index rebounding quickly. For instance, the Nasdaq slid more than 10% in July and August of 2024 but quickly rebounded, ending the year up nearly 29%. Similarly, in mid-2019, the Nasdaq fell by more than 10% but immediately reversed course, fully recovering by early July. However, there have been outliers, such as the dot-com bubble burst in 2000, which resulted in a prolonged bear market that lasted for years.

Nvidia: A Tech Giant on Sale

Nvidia, the leading player in the graphics processing unit (GPU) market, has seen its stock price plummet by 39% from its peak earlier this year. But why is this a buying opportunity?

First, let's look at the current valuations. Nvidia now trades for 25 times forward earnings estimates, down from 48 earlier this year. This implies that the stock is now in bargain territory, potentially offering a good opportunity for future growth. Historically, the Shiller CAPE ratio, which measures price and earnings per share over a 10-year period, reached the level of 37, something it's done only twice before since the launch of the benchmark as a 500-company index in the late 1950s. Though it still is high at the level of 35 today, it has started to come down. This suggests that the current market declines have brought many stocks, including Nvidia, into more attractive valuation ranges, potentially setting the stage for long-term gains.



Amazon: The E-commerce Juggernaut

Amazon, the e-commerce and cloud computing giant, has also taken a hit, with its stock price down by 60% from its peak. But is this a buying opportunity?

Amazon now trades for 31 times forward estimates, compared with 45 just a few months ago. This implies that the stock is now in bargain territory, potentially offering a good opportunity for future growth. The current market correction has pushed many stocks into bargain territory, making it an attractive time for investors to buy quality companies at lower valuations.

Catalysts for the Potential Rebound

Based on the provided information, Wall Street analysts are pointing to several specific catalysts for the potential rebound of stocks, particularly in the context of the Nasdaq Composite and the broader market. Here are the key catalysts and their likelihood of materializing:

1. Historical Performance and Recovery:
- Catalyst: Historical data shows that the Nasdaq Composite has a strong track record of recovering from corrections. For example, the Nasdaq fell by 35% from November 2021 to October 2022 but gained 56% since the trough. Similarly, it fell by 30% from February 2020 to March 2020 but gained 154% since the trough.
- Likelihood: High. Historical performance suggests that corrections are often followed by significant rebounds. The Nasdaq has shown resilience and the ability to recover from previous downturns, indicating a high likelihood of a rebound.

2. Dollar-Cost Averaging and Long-Term Investing:
- Catalyst: Investors are encouraged to embrace dollar-cost averaging, which involves investing a fixed amount regularly regardless of market conditions. This strategy can help offset the impact of market volatility and take advantage of lower stock prices during corrections.
- Likelihood: High. Dollar-cost averaging is a proven strategy that can help investors benefit from market corrections by buying more shares at lower prices, increasing the potential for long-term gains.

3. Bargain Hunting Opportunities:
- Catalyst: The current market correction presents an opportunity for investors to buy stocks at discounted prices. For instance, Nvidia now trades for 25 times forward earnings estimates, down from 48 earlier this year, and Amazon trades for 31 times forward estimates, compared with 45 just a few months ago.
- Likelihood: High. The current correction has pushed many stocks into bargain territory, making it an attractive time for investors to buy quality companies at lower valuations.

4. Economic Fundamentals and Long-Term Prospects:
- Catalyst: Despite short-term volatility, the long-term prospects for many companies remain strong. The Nasdaq Composite is heavily weighted with innovative companies that are expected to drive technological advancements in the future.
- Likelihood: High. The long-term outlook for many Nasdaq-listed companies is positive, with potential breakthroughs in areas such as artificial intelligence and quantum computing. This suggests that the current correction is a temporary setback rather than a long-term decline.

5. Market Sentiment and Investor Behavior:
- Catalyst: Investors who take a long-term view and focus on quality companies are likely to benefit from market corrections. Historical data shows that the Nasdaq has always recovered after tough periods and gone on to advance.
- Likelihood: High. Investors who maintain a long-term perspective and focus on quality companies are likely to see their investments recover and grow over time, despite short-term market volatility.

Conclusion

In summary, the current Nasdaq correction presents a unique opportunity for investors to buy quality stocks at discounted prices. Nvidia and Amazon, two of the most innovative companies in their respective fields, are currently trading at attractive valuations. With a long-term perspective and a focus on quality companies, investors can take advantage of this correction and position themselves for future growth. So, don't miss out on this opportunity to buy these brilliant stocks before they soar.