Nasdaq Composite Slips Into Correction
The Nasdaq Composite has fallen into correction territory after a recent dip. The slide followed sobering labor market news: the U.S. added fewer jobs than many expected, and unemployment rose to its highest level since 2021. That combination has unsettled investors and added a fresh layer of uncertainty to an already choppy market.
There is, however, a counterweight to the worry. Historically, the Nasdaq has tended to recover strongly after corrections. Over the last 15 years, the index has delivered an average gain of 21.9% in the 12 months following a correction. If that pattern holds anywhere close to form, it points to a potential rebound of about 22% over the next year. The index has mostly moved sideways since the correction began, which, paradoxically, can set the stage for a stronger move when momentum returns.
Looking Ahead: Why Some See Upside
Past results don’t guarantee what comes next, but many on Wall Street remain constructive on large-cap tech. In particular, sentiment is upbeat on Amazon and Zscaler, two companies with very different business models yet similar long-term growth narratives. Below, a closer look at what’s driving that optimism—and where investors are focusing their attention.
Amazon: A Strong Forecast Ahead
Amazon sits across e-commerce, digital advertising, and cloud computing, and it continues to expand its reach in each. In online retail, Amazon is projected to capture 40.4% of U.S. e-commerce sales this year, up from last year. Its advertising business has also become a major force, accounting for 13.9% of total digital ad spending.
Cloud remains a cornerstone. Amazon Web Services leads the market, representing roughly 32% of cloud infrastructure spending. In the second quarter, Amazon reported revenue growth of 10% to $148 billion. That was just shy of what analysts had penciled in on the top line, but earnings of $1.26 per diluted share comfortably beat expectations, reflecting ongoing efficiency and scale.
The near-term challenge is growth that looks a touch lighter than hoped. Management guided to about 9% revenue growth for the third quarter, short of the 11% many analysts expected. Even so, Amazon’s core businesses are taking share in their respective markets, and Wall Street projects earnings to grow at an annual rate of 23% over the next three years. Against that backdrop, today’s valuation appears reasonable to many investors who are focused on the company’s steady execution rather than one quarter’s pacing.
Zscaler: Positioned for Future Success
Zscaler approaches cybersecurity with a zero trust model, built to address common gaps left by traditional, perimeter-based tools. Instead of pushing traffic through private data centers, Zscaler inspects web traffic in the cloud. That design helps avoid performance bottlenecks and supports consistent protection for users wherever they connect.
Earlier this year, Zscaler posted strong results: revenue rose 30% to $593 million, and non-GAAP net income improved meaningfully. After the report, management issued cautious guidance, calling for revenue growth to slow to 20% in the next fiscal year. The main reason cited was elevated turnover within its sales team, a temporary headwind that can affect bookings in the short run.
For patient investors, that reset has opened a potential entry point. Analysts expect Zscaler’s revenue to grow at about 21% annually over the next three years, suggesting the long-term story remains intact even as the company works through near-term sales execution issues.
Should You Invest in Amazon Today?
If you’re weighing an Amazon position, balance the short-term noise against the long-term arc. Amazon didn’t make the current top stock picks list, but many still view it as a solid fit for growth-focused portfolios. Its scale, ongoing market-share gains, and ability to adapt across e-commerce, advertising, and cloud give it multiple ways to create value over time.
As always, match decisions to your goals and risk tolerance. Keep an eye on broader market trends, earnings updates, and how guidance evolves. Both Amazon and Zscaler have the potential to deliver for shareholders as the tech landscape shifts—so long as you’re comfortable with the bumps that can come with growth.
Frequently Asked Questions
What pushed the Nasdaq Composite into correction?
The market retreated after weaker-than-expected labor data, with fewer jobs added and unemployment rising to its highest level since 2021. That combination weighed on sentiment and pulled the Nasdaq into correction territory.
What does history suggest about rebounds after corrections?
Over the past 15 years, the Nasdaq has averaged a 21.9% gain in the 12 months following a correction. While history isn’t a promise, it points to a potential rebound of roughly 22% if the pattern repeats.
How is Amazon positioned across its main businesses?
Amazon is projected to capture 40.4% of U.S. e-commerce sales this year, holds a 13.9% share of digital ad spending, and leads cloud infrastructure with about 32%. Recent results showed Q2 revenue up 10% to $148 billion and earnings of $1.26 per diluted share.
Why did Zscaler issue cautious guidance after strong results?
Despite 30% revenue growth to $593 million and improved non-GAAP net income, Zscaler guided to 20% revenue growth next fiscal year due to higher turnover in its sales team, a near-term headwind that can slow bookings.
Are there price targets for Amazon and Zscaler mentioned here?
Yes. Wall Street has set a target price of $220 for Amazon, implying a potential 26% upside, and the same target for Zscaler, implying a potential 38% upside.
