History Says Nasdaq Will Rise: 2 Growth Stocks to Buy Now, According to Wall Street

The Nasdaq Composite (^IXIC 1.13%) closed in correction territory on August 2 for the first time since the start of 2022. The impetus behind the decline was a disappointing jobs report that suggested a weakening economy. However, the growth-focused index has since rebounded 4%, and history suggests it could climb even higher in the coming months.

The Nasdaq has undergone 11 corrections over the past 15 years, with the index returning a median of 25% in the 12 months since its first close in correction territory. That implies 21% growth through August 2025. Of course, past performance is never a guarantee of future results, but Wall Street analysts are generally bullish on two Nasdaq stocks:

• Alphabet (GOOGL 0.99%) (GOOG 1.05%) it has an average price target of $205 per share, which implies a 27% upside to the current share price of $161.
• Atlasian (TEAM -1.10%) it has an average price target of $209 per share, which implies a 25% upside to the current share price of $167.

Here’s what investors should know.

1. The alphabet

Google Alphabet is the world’s largest digital advertiser. The company is losing ground on the open internet, but its revenue share will still outpace the number two Meta platforms by 5.5 percentage points this year, according to eMarketer. Alphabet’s dominance in Internet search (Google Search) and streaming media (YouTube) are the foundations of its successful advertising business. These platforms allow the company to collect data and deliver relevant advertisements to consumers.

Beyond advertising, Alphabet has another important growth engine in cloud computing. Google accounted for 12% of public cloud spending in the second quarter. This figure does not correspond to the share of income held by Amazon (32%) and Microsoft (23%), but still represents progress. Google accounted for 11% of public cloud spending in the same quarter last year. Investments in AI tools like Gemini could help the company expand its stock gains in the future.

Alphabet reported solid financial results in the second quarter, beating top and bottom estimates. Revenue rose 14% to $84.7 billion as cloud computing sales growth accelerated. Meanwhile, GAAP earnings rose 31% to $1.89 per diluted share due to disciplined cost control. 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 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.

Indeed, Wall Street expects earnings to grow 17% annually over the next three years. That estimate makes the current valuation of 23 times earnings look about right. These numbers give a PEG ratio of 1.3, a discount to the five-year average of 1.5. This number is also a reduction from Microsoft and Meta Platforms’ PEG ratios of 2.6 and 1.5, respectively. Therefore, investors should feel comfortable buying a small position in Alphabet stock today.

2. Atlasian

Atlassian provides labor management, IT service management (ITSM) and enterprise planning software. Collectively, its products help companies plan, track and complete projects. The company is a recognized leader in DevOps platforms, which is software that supports collaboration between development and operations teams. Atlassian also has enterprise service management software with a strong presence.

What sets Atlassian apart is its ability to unify work management, ITSM and enterprise planning tools on a common platform that connects technical teams (development and operations) with non-technical teams (finance, HR and marketing). To add, Atlassian also relies heavily on word-of-mouth marketing to attract new customers, which allows the company to outspend its peers on product development.

This strategy theoretically creates a flywheel, whereby compelling products naturally draw customers to Atlassian, and aggressive R&D investments continually add more value for customers. Atlassian’s latest shareholder letter states, “This flywheel is a unique advantage, effectively attracting thousands of new customers of all sizes worldwide each quarter. It’s what allows us to have one of the most efficient (go-to-market) models across all programs.”

Atlassian reported strong financial results in the fourth quarter of fiscal year 2024 (ended June 2024). Revenue rose 20% to $1.1 billion and non-GAAP net income rose 16% to $0.66 per diluted share. However, the stock fell following the weak guidance report. Management expects revenue to grow 16% in fiscal 2025, a modest slowdown from the 23% growth the company reported in fiscal 2024.

However, there was some good news. Management said: “We continue to expect total revenue over the next three years to grow at a compound annual growth rate of more than 20%. Additionally, Atlassian estimates that its $67 billion addressable market is growing 13% annually, and the company sees a significant opportunity ($23 billion) to expand its relationship 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 would keep this stock on my watch list for now.