the Nasdaq Composite (NASDAQ: ^IXIC) The Nasdaq Composite closed in correction territory on Aug. 2 for the first time since early 2022. The decline was driven by a disappointing jobs report that hinted at a weakening economy. However, the growth-focused index has since rebounded 4%, and history suggests it could rally further in the coming months.
The Nasdaq has suffered. 11 corrections in the last 15 yearsOver the past year, the index has returned an average of 25% in the 12 months following its first close in correction territory. That means a 21% gain by August 2025. Of course, past performance is no guarantee of future results, but Wall Street analysts are generally bullish on two Nasdaq stocks:
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alphabet (NASDAQ: GOOGLE) (NASDAQ: GOG) The average price target for the stock is $205, implying a 27% upside from its current share price of $161.
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atlasian (NASDAQ: TEAM) The average price target for the stock is $209, which implies a 25% upside from its current share price of $167.
Here’s what investors should know.
1. Alphabet
Alphabet Inc.’s Google is the world’s largest digital advertiser. The company is losing ground on the open internet, but its revenue share will still outpace the second-place company. Meta platforms According to eMarketer, Alphabet’s dominance in online search (Google Search) and streaming media (YouTube) is the foundation for the success of its advertising business. These platforms allow the company to collect data and deliver relevant ads to consumers.
Beyond advertising, Alphabet has another major growth driver in cloud computing. Google accounted for 12% of public cloud spending in the second quarter. That’s less than Google’s revenue share. Amazon (32%) and Microsoft (23%), but it still represents progress. Google had an 11% share of public cloud spending in the same quarter last year. Investments in artificial intelligence Tools like Gemini could help the company extend its stock gains in the future.
Alphabet reported strong second-quarter results, beating estimates on revenue and earnings. Revenue rose 14% to $84.7 billion as cloud computing sales accelerated. Meanwhile, GAAP earnings jumped 31% to $1.89 per diluted share on disciplined cost controls. Investors have good reason to believe the momentum will continue.
Digital ad spending is expected to grow 10% annually through 2028, and spending on public cloud computing services is expected to grow 19% annually over the same period, according to analysts. That puts Alphabet on track for double-digit sales growth, and diligent cost control should translate into slightly faster earnings growth.
In fact, Wall Street expects earnings to grow 17% annually over the next three years. That estimate makes the current valuation of 23 times earnings look fair. Those numbers give a PEG ratio of 1.3, a discount from the five-year average of 1.5. That figure is also a discount from Microsoft and Meta Platforms’ PEG ratios of 2.6 and 1.5, respectively. So investors should feel comfortable buying a small stake in Alphabet stock today.
2. Atlassian
Atlassian provides software for work management, IT service management (ITSM), and enterprise planning. Its products help companies plan, track, and complete projects. The company is a recognized leader in DevOps platforms, software that supports collaboration between development and operations teams. Atlassian also has a strong presence in enterprise service management software.
What sets Atlassian apart is its ability to unify work management, IT service management, and enterprise planning tools on a common platform that connects technical teams (development and operations) with non-technical teams (finance, HR, and marketing). Additionally, Atlassian also relies heavily on word-of-mouth marketing to attract new customers, allowing the company to outspend its peers in product development spending.
In theory, this strategy creates a momentum, where compelling products naturally attract customers to Atlassian, and aggressive R&D investments continually add value to customers. “This momentum is unique in that it efficiently attracts thousands of new customers of all sizes from around the world every quarter,” Atlassian’s recent shareholder letter states. “It allows us to have one of the most efficient go-to-market models in all of software.”
Atlassian reported strong financial results for the fourth quarter of fiscal 2024 (ending June 2024). Revenue rose 20% to $1.1 billion, and non-accounting net income rose 16% to $0.66 per diluted share. However, the stock fell after the report due to weak guidance. Management expects revenue to grow 16% in fiscal 2025, a modest slowdown compared to the 23% growth the company reported in fiscal 2024.
But there was some good news. “We continue to expect total revenue growth over the next three years at a compound annual growth rate in excess of 20%,” management said. In addition, Atlassian estimates that its $67 billion market is growing at 13% annually, and the company sees a significant opportunity ($23 billion) to expand its relationships with existing customers.
Wall Street expects adjusted earnings to grow 19% annually through fiscal 2027. That consensus makes the current valuation of 57 times adjusted earnings look expensive. Atlassian is a good company with a strong competitive position, but I’ll keep this stock on my watchlist for now.
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John Mackey, the former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, the former head of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewein The Motley Fool has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Atlassian, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: Buy $395 Jan 2026 on Microsoft and Sell $405 Jan 2026 on Microsoft. The Motley Fool has Disclosure Policy.
History Says Nasdaq Will Rise: 2 Growth Stocks to Buy Now, According to Wall Street Originally posted by The Motley Fool