The Nasdaq Composite (^IXIC +1.52%) closed in correction territory on March 26, but the index has historically bounced back quickly. Since 2010, the Nasdaq has returned a median of 25% in the 12 months following its first close in correction territory. Indeed, the index has already recouped its losses and hit a new high.
Investors can lean into the Nasdaq rebound by owning shares of Alphabet (GOOGL +1.68%) (GOOG +1.99%) and Robinhood Markets (HOOD +4.49%). The stocks have already advanced 20% and 23%, respectively, since the Nasdaq first closed in correction territory. But I see more upside for patient investors. Here’s why.
Image source: Getty Images.
1. Alphabet
Alphabet earns most of its revenue through digital advertising. The company has a durable competitive moat in its ownership of popular internet properties YouTube and Google Search, and it has reinforced that edge with artificial intelligence (AI) tools that improve targeting and automate campaign creation. Last year, paid clicks climbed 6% and cost per click increased 7%.
Alphabet also has a booming cloud computing business. Revenue growth accelerated to 48% in the fourth quarter, outpacing Amazon (24%) and Microsoft (39%), as Google Cloud continued to gain share. Revenue growth has accelerated in three straight quarters due to strong demand for AI products, especially Gemini models and custom AI chips called Tensor Processing Units (TPUs).
Meanwhile, Alphabet’s autonomous driving subsidiary, Waymo, is expanding quickly. The company now offers ridesharing services in 11 U.S. cities, up from five last year, and plans to launch in about 15 more cities by year-end. Waymo is on pace to provide over 1 million fully autonomous rides per week by the end of 2026, up from 400,000 at the end of 2025.
Wall Street estimates Alphabet’s earnings will increase at 11% annually through 2027. That makes the current valuation of 31 times earnings look relatively expensive, but analysts have consistently underestimated the company. Alphabet beat the consensus estimate by an average of 15% in the last six quarters. I expect that trend to continue as the company benefits from the AI boom.
Today’s Change
(4.49%) $3.90
Current Price
$90.75
Key Data Points
Market Cap
$82B
Day’s Range
$89.57 – $93.32
52wk Range
$39.21 – $153.86
Volume
50M
Avg Vol
32M
Gross Margin
94.96%
2. Robinhood Markets
Robinhood provides brokerage and banking services that target younger investors. It was the first company to offer zero-commission stock trades, and its mobile-first platform features an intuitive interface, troves of educational material, and an artificial intelligence assistant called Cortex. The platform also provides access to equities, cryptocurrencies, options, and prediction markets.
Robinhood earns a significant amount of money from payment for order flow, meaning sales are tightly tied to trading volume. That makes its popularity with young traders particularly consequential. Millennials and Gen Z are entering (or will soon enter) their peak earning years, and are forecast to inherit more than $80 trillion in the next two decades, per UBS. As they accumulate wealth, trading volume on Robinhood should increase.
Additionally, Robinhood recently got some great news from the Securities and Exchange Commission (SEC). A decades-old rule that forced day traders who borrow money from their broker to keep at least $25,000 in their accounts will be replaced by a new rule that requires brokers to set margin requirements daily. Looser rules should also drive trading volume higher.
Robinhood reported reasonably good financial results in the fourth quarter despite a drop in monthly active users. Revenue increased 27% to $1.2 billion amid market share gains in equities, options, and prediction trading. However, earnings fell 34% to $0.66 per diluted share, primarily due to a one-time tax benefit in the previous year, though operating expenses also jumped due to growth investments.
Wall Street expects Robinhood’s earnings to grow at 19% annually through 2027, which makes the current valuation of 42 times earnings look tolerable. Indeed, among 29 analysts, Robinhood stock has a median target price of $100 per share, which implies 16% upside from its current share price of $86. But I think long-term investors who hold this stock for the next decade could make a fortune.
