The best Nasdaq stocks to buy are those with the firepower to live up to the index’s impressive recovery. The Nasdaq is home to a host of tech stocks, including some of the mega caps that are now the most valuable companies on the planet. In the past, this has served the index well, as the tech revolution continued to send shares higher. However as interest rates climbed, valuations started to look a little frothy and the index suffered a major decline. Investor sentiment around these higher-value tech stocks has now improved, and the Nasdaq has made its way markedly higher so far this year.
The current conditions are challenging though. Between consumers’ dwindling disposable income to companies’ need to cut costs, growth is getting more difficult to come by. That will likely make the Nasdaq’s prospects patchy at best. With that in mind, it’s worth assessing the top Nasdaq stocks to close out the rest of the year.
The best Nasdaq stocks to buy are those with strong brand power. This is particularly important when it comes to consumer goods and services, because it means people are willing to pay more for a brand they know and trust. But it’s also important when it comes to B2B services as rising costs makes companies ruthless about the services they’re willing to send to the chopping block.
Though the index has made a strong recovery from its previous lows, there are still some turnaround stocks to watch. Profitability is a key metric to watch given the current cost environment— so companies that are able to deliver margin improvements are a strong pick.
Nasdaq Stocks to Buy: Amazon (AMZN)
Amazon (NASDAQ:AMZN) may be best known for its namesake retail arm, however it’s AWS— their cloud business, making it one of the best Nasdaq stocks to buy. Investors got used to AWS delivering outsized growth quarter after quarter, but more recently we’ve seen that part of the business start to sputter a little bit. The market took this news with a hefty dose of caution, but for investors who are willing to ride out the storm, this shouldn’t be a deal breaker.
The current environment means companies are much more cautious about their spending, so a growth slow down isn’t all that unusual. AWS is still in a strong position to capitalize on the ongoing cloud transition, and Amazon’s offerings will benefit from improving AI capabilities down the line. The group’s position means it hasn’t caught the first wave of optimism for language-based models, such as OpenAI. But other offerings like text-to-image and deep learning are more within the AWS wheelhouse.
Amazon’s business is in a strong position to grow down the line, and although it’s still highly valued, it’s some way lower than it has been in the past.
Apple (AAPL)
Apple (NASDAQ: AAPL) sells higher-end electronics that should arguably be rubbed off shopping lists amid the cost of living crisis— but they haven’t, and that makes the company one of the best Nasdaq stocks to buy. While Apple’s products are a far cry from being low-cost, the group’s not necessarily catering to the elite. Many of the group’s customers are still price sensitive, so you’d expect to see them slide down the value chain toward cheaper alternatives now that costs are rising. The most recent results showed the handsets aren’t necessarily flying off the shelves, but production suggests the upcoming iPhone 15 is expected to have a positive reception.
Continued strong demand for hardware has set up the Services business for success. The group’s been building out this arm, and growth here offers investors something to be particularly excited about. Adding new users is virtually costless once the platform is built, so margins are enticing in this part of the business.
Apple’s been able to make the most of a difficult environment, and that’s one of the reasons to love the stock. As conditions improve, Apple should be in a strong position to deliver outsized growth, particularly as its Services arm continues to flourish.
PayPal (PYPL)
There’s a lot to like about PayPal (NASDAQ:PYPL), making it a great pick among Nasdaq stocks to buy. The group is the OG of digital payments, and that comes with a lot of benefits. Being a well-known, trusted name goes a long way as payments shift online. The more consumers that use the service, the more merchants that will want to add it to their website. The more websites boasting a PayPal logo, the more consumers will trust it— and the virtuous loop continues.
But there’s room for improvement, and that’s what makes PayPal worth buying now. The group’s focused on building out a third-party payment option that allows merchants to create their own payment system without the PayPal branding. Right now this is driving growth at the business, but it isn’t taking profitability along for the ride. This part of the business is lower-margin, so it’s done very little to stoke investor interest.
However with a new CEO at the helm, PayPal has pledged to drive margins in the other direction. If the group can pull off this change of course effectively, shares could see a major bump in the quarters ahead.
On the date of publication, Marie Brodbeck 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.