Wall Street is again proving that investors seem to make all their money during the winter months.
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“A profound unfairness”: The merciless stigma of being an older long-term unemployed person.
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Can Nvidia Rally 21% and Surpass Apple to Become the Second Most Valuable “Magnificent Seven” Stock?
March 8 was a wild day in the stock market. Shares of Nvidia (NVDA -0.12%) surged to an all-time high of $974 only to fall over 10% from that high to end the day at $875.28. At the peak, Nvidia was less than 9% away from surpassing Apple (AAPL -0.22%) in market cap. By close, it was a little over 20% away.
Given Nvidia’s big swings, it seems like the stock could very well surpass Apple to become the second most valuable “Magnificent Seven” stock behind Microsoft. Here’s why Nvidia could keep outperforming Apple in the short term, but why Apple is the better long-term buy.
Image source: Getty Images.
Earnings are driving the Nvidia story
Nvidia is not an unprofitable growth stock that is rallying based on optimism and greed alone (although those are contributing factors). The business is doing phenomenally well, achieving a level of sales and earnings growth paired with margin expansion.
NVDA Revenue (TTM) data by YCharts
The only concern with Nvidia is its valuation. Its price-to-earnings (P/E) ratio based on its trailing 12-month (TTM) earnings is 73.6. But consensus analyst estimates expect Nvidia’s earnings per share (EPS) to more than double from the $11.90 it earned in fiscal 2024 to $24.50 in fiscal 2025. That gives Nvidia a forward P/E of 35.7 — which is far more reasonable.
The easiest way for Nvidia to pass Apple in market cap is for investors to keep bidding up the stock. But the more realistic way is if Nvidia’s earnings live up to expectations.
Nvidia will report its full-year fiscal 2025 results some time in late February or early March next year. If it reports $24.50 in earnings, the stock would likely be far higher, especially if there is optimism for even more growth ahead. A business that is more than doubling earnings with high margins and leading the artificial intelligence (AI) revolution deserves a premium valuation, probably something like double the P/E of the S&P 500.
Nvidia deserves the highest P/E of all the Magnificent Seven companies, but the company is nearing a point where it is running up too far, too fast.
Nvidia benefited from earnings growth and a valuation expansion. It’s hard to assume the valuation will continue to expand, but the stock could still go up if the first half of fiscal 2025 goes as analysts expect. Each new quarter of high earnings will increase the trailing-12-month number and lower the P/E, leaving room for the stock to rise to fill the gap. There is nothing better in the stock market than earnings growth, and right now Nvidia has it, and Apple doesn’t.
Buying Apple when it is out of favor has historically been a genius move
So why is Apple the better buy if Nvidia has such an easy path forward? Simply put, I think the setup for Apple makes it a much better investment. Nvidia may be the better trade, but a more surefire way of building wealth is by compounding over the long term.
Market sentiment is negative toward Apple. So negative, in fact, that Apple trades at a discount to the S&P 500. The only reason that should ever happen is if something serious was going wrong with Apple. The company has its challenges, but none of them warrant an underperformance like we have been seeing for the last six months or so.
The abridged version of why Apple stock is under pressure is because it hasn’t captured the spotlight with some major AI monetization announcement (Nvidia, Microsoft, and Meta Platforms have). iPhone sales are down in China, and growth is sluggish in general. But Apple has endured these periods before and overcome competition.
Piper Sandler‘s fall 2023 survey found that 87% of Gen Z had an iPhone, 88% expected their next phone to be an iPhone, and 34% owned an Apple Watch. The iPhone is essentially a consumer staple in the U.S. and is growing well across international markets outside of China.
Investors should focus less on the competition and more on Apple’s ability to further monetize its existing devices through services and AI. The key for Apple has always been to increase the depth (services) and breadth (more products like phones, computers, tablets, wearables, ear buds, and more) of its ecosystem. Having lifetime customers consistently increase their spending relies on product improvements.
The pressure is on Apple to make a splash this summer to drive iPhone demand and upgrades. If Apple delivers the improvements that drive growth, the stock could soar. But even if it doesn’t, it generates plenty of extra cash to make an acquisition and grow that way, or return cash to shareholders while maintaining a rock-solid balance sheet.
Apple’s brand, market position, and financial health give it the time and the wiggle room needed to make mistakes. The company is known for not leading investors on and only makes announcements when it feels the product or service is ready.
Apple has a better risk/reward profile than Nvidia
Nvidia has to hit sky-high earnings forecasts to keep going up. The semiconductor industry is also highly cyclical, and a downturn in customer spending could stall its growth trajectory. Nvidia may keep growing at a breakneck pace in the near term, but eventually, it will slow down. When that time comes, investors may be less willing to give Nvidia a multiple that is triple the market average.
Meanwhile, Apple is already a good value and has a clear path toward regaining Wall Street’s favor.
I don’t have a crystal ball, but if I had to guess, I would say Nvidia will briefly become more valuable than Apple. But three to five years from now, I think Apple will be worth more than Nvidia while also being a safer and less volatile investment.
Nvidia stands out as a high-risk/high-potential-reward play, while Apple is more like a low-risk/medium-potential-reward investment. Investors who are confident about sustained high demand for Nvidia’s products will want to watch each quarterly earnings report, understanding the importance earnings play in the story. The big gains have already been made in Nvidia, and investors should expect more reasonable returns going forward.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Rethink that retirement party. More and more, seasoned workers are defying expectations and staying put in the workforce for a compelling reason—they simply can’t afford to retire.
That’s the finding from a new study by Korn Ferry that found that the number of clients with investment powerhouse Fidelity who can afford to cover all their expenses in retirement dropped from 83% last year to 78% this year.
For help managing your own retirement planning, consider matching for free with a vetted financial advisor.
The Big Problem
The Korn Ferry study isn’t the only data showing a problem. Payroll services company Paychex found that about one out of every six current retirees (about 17%) were considering going back to work, with more than half of them reporting that they needed more money.
The increase in older workers staying on the job is causing concerns in the executive suite because corporate planners have been expecting their expensive older workers to retire which would open senior-level jobs for younger workers looking to advance their careers.
“You’re in a little bit of a box if the performance of the older workers is good,” says Ron Porter, leader in Korn Ferry’s global human resources center of expertise.
That’s a big switch from 2020 when corporate types were desperate to keep older workers on the job in the early phases of the COVID-19 epidemic. The resulting labor shortages that continued prompted many large companies to launch “returnship” programs aimed at recruiting and training people who’d been out of the workforce for any length of time, including parents and retirees. In 2023, however, many firms are looking to cut costs or restructure, and executives want to see higher-paid 50- and 60-somethings move into retirement.
If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.
Impact on Younger Workers
In fact, many corporations have been expecting the older members of their workforce to move on as naturally as the aged-in to qualifying for Social Security and could start making withdrawals from tax-deferred retirement accounts without penalty. The expectation was that younger workers with different skills could help reshape how they do business.
That desire could turn out to be bad news for middle-aged and younger workers. Because age discrimination by employers is illegal, it’s risky to target older workers. That could give older workers some new leverage with their employers, who could turn to offering buy-outs. Another option is the nascent practice of retirement-track positions. These jobs are designed to allow older workers to transition to retirement by putting them in positions to oversee and train younger workers, transferring knowledge and skill, and moving to shortened work weeks.
The Bottom Line
Older workers worried that they can’t afford to retire are staying on the job longer, causing concern among corporate executives who want their higher-priced employees to move on and open senior positions for younger workers.
Retirement Planning Tips
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A financial advisor can help you get ready for retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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Use SmartAsset’s free retirement calculator to get a sense of if you are on track to meet your retirement goals.
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Norway has had massive success with EV adoption — 82% of new cars sold in the country in 2023 were electric, according to the Norwegian Road Federation. This high adoption rate can be attributed to the generous subsidies the Scandinavian country has offered to electric vehicle owners as well as its investment in charging infrastructure.
Tesla’s sales in the country may represent only a sliver of the 1.8 million vehicles the company delivered globally last year, but its importance to the EV maker goes beyond revenue. Tesla’s early foothold there has made Norway a pivotal proving ground for the company and a national model for electric vehicle transition. As a result, Tesla CEO Elon Musk has taken a number of trips to the small Nordic country and has often praised its support for the technology change.
Norwegians were the first European customers to receive deliveries of the Tesla Model S in 2013. In April of 2014, Tesla broke Norway’s record for most monthly sales of a single model, electric or gas, with its Model S. Today, the top-selling model is Tesla’s Model Y. Tesla accounted for about 20% of all vehicles sold in the country last year, according to Norwegian Road Federation.
But with competition from other EV automakers including Toyota, Skoda, Volkswagen and BYD heating up, it remains to be seen if Norwegians will continue to favor Tesla in the future.
CNBC traveled to Norway to meet with local people, government officials and experts to find out how Tesla has become so successful in the Scandinavian country. Watch the video for the full story.
When it comes to artificial intelligence (AI), applications in machine learning, large language models, and compute networking garner most of the attention. But what investors may not realize is that use cases packaged around AI are evolving in real time.
One area that is getting particular interest is robotics. Indeed, companies such as Amazon and Alibaba have implemented robotics throughout their warehouses for years, creating efficiencies as it relates to packaging and logistics.
However, a rising number of the world’s largest technology companies are increasingly focusing on the next frontier of robotics: humanoid bots. In late February, Nvidia‘s (NVDA -0.12%) CEO, Jensen Huang, said “humanoid robotics should be right around the corner” during a panel discussion about AI.
Let’s dig into the rise of humanoid robotics and analyze the moves Nvidia is making in the space.
How does AI play a role in robotics?
Robotics is an interesting part of the overall AI narrative because it is uniquely positioned at the intersection of software and hardware. And believe it or not, there are lots of companies working to develop humanoid bots.
Two of the more recognized brands in robotics include Boston Dynamics and Tesla. Over the last year, Tesla has teased investors with previews of its humanoid bot Optimus — which is planned to be used across the company’s factories and assembly lines in the future.
One lesser-known robotics start-up called 1X hails from Norway. The company has raised $125 million in venture capital (VC) funding over the last year from high-profile investors including OpenAI, Samsung, and Tiger Global.
Image source: Getty Images.
What is Nvidia doing with robotics?
About a week after Huang’s comments regarding humanoid robots, Nvidia was cited as an investor in a $675 million funding round for start-up Figure AI. Nvidia joined Microsoft, OpenAI, Intel, and Amazon co-founder Jeff Bezos as investors.
Figure AI is developing humanoid robots that it plans to commercialize in industries such as manufacturing, warehousing, and retail. Figure AI’s robots are being trained on generative AI models to learn how to perform basic tasks. The theme? The company is seeking to disrupt the workforce — a market estimated to be worth $42 trillion annually.
How could Nvidia benefit?
Nvidia has incredibly lucrative opportunities in robotics. Currently, the company is primarily a hardware player — developing high-performance semiconductors called graphics processing units (GPUs).
However, Nvidia is quietly expanding outside compute networking. Specifically, the company’s enterprise software and services business is already operating at an annual revenue run rate of $1 billion. While this is impressive, it pales in comparison to Nvidia’s data center business — which generated $47 billion in sales last year.
Moreover, Nvidia is aggressively pursuing the enterprise software market through a combination of investments and strategic partnerships. The company is an investor in start-up Databricks, which largely competes with Palantir Technologies. Additionally, Nvidia also partners with Snowflake, helping bring AI capabilities to the company’s data cloud platform.
Given Nvidia’s distinctive position as both a hardware and software developer, the company has a massive opportunity to play an integral role in the development of humanoid robotics. I see the investment in Figure AI as a first step that could lead to further strategic partnerships and revenue opportunities across both sides of its business.
The important idea here is that Nvidia is subtly building an end-to-end AI solution — spanning across both software and hardware. As such, I think the company is setting itself up for long-term sustained growth in a variety of areas in the overall AI realm.
My guess is that Huang will continue to drop breadcrumbs, alluding to AI-powered applications that he believes Nvidia can play a role in. Despite the run-up in the stock, I think now is a terrific time to scoop up some shares and plan to hold long term.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Amazon, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Amazon, Microsoft, Nvidia, Palantir Technologies, Snowflake, and Tesla. The Motley Fool recommends Alibaba Group and Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
The Social Security Administration pays retirement, disability, and family benefits to tens of millions of Americans every month. It’s an impressive feat, but as with any human endeavor, mistakes happen.
Sometimes, those mistakes can lead to Social Security recipients getting smaller checks than they are entitled to, which could cost a person a significant amount of money over their lifetime if they don’t catch the problem and get it corrected. Here’s how to make sure no errors are sapping your benefits — or, if there are, how to get those issues corrected.
Image source: Getty Images.
Check your earnings record
Your Social Security benefit is based on how much you’ve paid in Social Security payroll taxes throughout your working life, and the government keeps a record of that in your earnings record. The data comes from the IRS, so it’s usually correct. But errors can arise if you forget to notify your employer of a name change, for example, or if you or your employer transpose the digits in your Social Security number on your employment paperwork.
In a worst-case scenario, your record might show no earnings at all for a year during which you worked. This could significantly bring down your Social Security benefit. But those errors are fixable.
First, check your earnings record at the my Social Security website. (If you haven’t done so already, you’ll need to create an account. But that’s well worth doing.) Look for any numbers that appear out of place.
A side note for high earners: It’s possible that your earnings record may correctly show a figure lower than your actual income for the year. That’s because the government doesn’t assess Social Security taxes on all income: There’s a cap. So, for example, in 2024, workers will only pay wage taxes on the first $168,600 they earn; in past years, the ceiling was lower. If you earned more than the maximum income subject to payroll taxes in a given year, your earnings record will show that year’s maximum amount instead of your real earnings.
If everything looks correct here, move on to the next step. But if you notice an error in the record, fill out a Request for Correction of Earnings Record form and submit it to the Social Security Administration. Enclose copies of any tax documents you have that prove your real income for the year or years in question. The Social Security Administration will investigate your claim and, if it finds it valid, it will update your earnings record accordingly.
Contact the Social Security Administration
Contacting the Social Security Administration should be your next step if you believe you’re being underpaid. You can do this by phone, email, or mail. Or you could schedule an appointment at your local Social Security office if you prefer to address the matter in person.
When you reach out, have your Social Security number handy and be prepared to explain the situation. Tell the Social Security Administration the amount you’re currently receiving and why you feel it’s too low. The representative will direct you on the next steps.
If, after investigation, the agency determines that you were underpaid, it will either compensate you via a separate payment or by increasing the amount of your monthly payments. Unfortunately, Social Security does not pay beneficiaries any interest on the money they were underpaid.
Social Security payment issues can take time to resolve, so it’s best not to delay if you suspect you’re being underpaid. Get the ball rolling as soon as you can and check in if necessary to ensure your case is being handled.
Tech stocks are not known for their top-notch dividend policies. Many companies in this sector are busy inventing tomorrow’s technologies, often prioritizing reinvestment over distributing cash profits through dividends.
Let me paint a picture for you. There are 2,457 stocks trading on American stock exchanges with a market cap of at least $1 billion, according to Finviz. Of them, 1,504, or 61%, offer some sort of dividend payout.
Narrow your view to the tech sector, and you’ll find 111 dividend payers out of 373 billion-dollar companies. Only 30% of these companies offer any dividends at all.
The gap grows even wider if you’re looking for generous dividend policies, too. Thirty-five percent of all billion-dollar companies provide an annual dividend yield of at least 2%. In the tech sector, the group of 2% yields shrinks to just 29 names, or 8% of the sector.
That being said, it’s not impossible to find great dividend payers in the metaphorical Silicon Valley. Some of those 29 names are absolutely fantastic income investments right now.
Let me show you three of my favorite ideas in that category. Savvy income investors can set up an effective dividend portfolio around semiconductor veteran Texas Instruments (TXN 0.81%), artificial intelligence (AI) expert IBM (IBM -1.22%), and materials science innovator Corning (GLW -0.06%).
Texas Instruments yield: 3%
Legendary chipmaker Texas Instruments has a long history of shareholder-friendly dividend payouts. The company sent its first dividend checks in the spring of 1962. The annual payouts have increased in every year since 2004.
Semiconductor companies tend to be very cyclical. Each sector member’s key products face sharp swings in demand as they often focus on hyper-specific end markets.
But TI gets around. It generated 40% of its 2023 revenue from industrial customers and 34% from automotive clients. Personal electronics and communications equipment also made significant contributions to the company’s top line. Moreover, TI makes both analog and digital chips, widening its exposure to different contract opportunities even within any particular target industry.
And don’t forget that the company runs its own manufacturing facilities, too. When fabless chip designers compete for production capacity at one of the industry’s third-party manufacturing giants, TI can just get to work with its own chipmaking machinery. So TI’s diverse clientele buffers it against sector-specific downturns, unlike many of its peers.
And this paragon of business stability isn’t even expensive. The stock has traded sideways over the last year, missing out on the tech sector’s artificial intelligence (AI) boom. As a result, the effective dividend yield has soared to 3%.
Sure, TI’s stock is down for a reason — it ran into a rare tag-team attack as both automakers and industrial computing giants are holding back their infrastructure investments at the same time. But these paired market weaknesses won’t last forever. You should consider locking in those juicy yields while they last, because TI will surely come back swinging when the global economy finally gets over the inflation-based flu.
Corning yield: 3.4%
The company behind the namesake glass-ceramic cookware has moved on to more advanced materials. You’ll find Corning’s hardened Gorilla Glass covering the screens on most smartphones nowadays, not to mention both the windshields and internal glass panels in modern cars. And fiber-optic cables accounted for $4 billion of top-line sales last year, or roughly one-third of Corning’s total revenue.
Like Texas Instruments, Corning is resistant to single-industry downturns. Both companies were caught by multiple sector challenges, and Corning’s stock is also back almost exactly where it was a year ago.
Its effective dividend yield is even richer at 3.4%. Smartphone sales can’t stay slow forever, and the auto industry can’t wait to take advantage of pent-up demand for modern vehicles whenever the interest rates on car loans start sliding down again. And the coronavirus pandemic halted the global expansion of 5G networking in its tracks, setting another important Corning market up for a strong upswing someday soon. Yes, high-speed wireless networks usually rely on even faster fiber-optic connections to the worldwide internet.
From cookware to cutting-edge networking and digital screens, Corning continues to innovate.
So Corning is also set up to recover over time, likely softening those robust dividend yields in the process. That’s just how the math works — higher buy-in prices result in weaker yields from the same dividend checks. That’s why I recommend locking in the generous yields on Corning and Texas Instruments while they last.
IBM yield: 3.4%
Finally, you already missed the best possible time to lock in IBM’s strongest yields, but Big Blue’s stock should still deliver both strong price gains and robust dividends for years to come.
IBM’s stock has gained nearly 60% over the last year. The strategy shift that started under CEO Ginni Rometty a decade ago is finally paying dividends, literally and metaphorically.
This company was a bit late to the AI party due to its unshakable focus on enterprise-class business solutions. IBM’s Watson AI platform has been around for years, harking back to the Deep Blue chess computer that defeated world champion Garry Kasparov in a game-changing 1997 match.
Prospective customers in this category are rarely free to simply jump on the next red-hot bandwagon. New solutions must go through a gauntlet of performance, security, and cost-efficiency tests. Any large-scale deal may require signatures from multiple levels of management. But when that time-consuming process is completed, IBM ends up with a multiyear contract and a burly helping of customer loyalty. Replacing a system that cleared every hurdle will be even tougher.
So you’re catching IBM in the early stages of an active upswing. The AI-driven success that inspired a 10% stock price jump the day after its latest earnings report should accelerate in 2024 and beyond. Thanks to the harsh reality of dividend calculations, a rising stock price will dilute IBM’s muscular 3.4% yield over time.
Time in the market is always more important than timing the market, though. In other words, it’s not too late to grab a few IBM shares in preparation for an AI-driven surge in the next few years. It may take decades before you see a 3.4% yield on new IBM investments again.
Space tourism company Virgin Galactic (SPCE 1.84%) reported full-year 2023 earnings at the end of February. This closed out a “record” year for spaceflight, in which the company flew its VSS Unity spaceplane seven times, and tripled its annual revenue. And what did this mean for the company’s multi-year history of losing money and burning cash?
Losses increased by $2 million, and cash burn grew by 24%, to $492.5 million. That’s according to S&P Global Market Intelligence, a provider of financial data on U.S. companies.
But beyond the headlines, S&P Global also provided audio from the post-earnings conference call that Virgin Galactic held with Wall Street analysts. It was there that investors learned three more things about Virgin Galactic, its plans, and its future prospects.
1. Virgin Galactic is planning a big price hike
In 2021, Virgin Galactic famously offered to fly tourists to the edge of space for as little as $200,000 a ticket. According to the company, 600 would-be astronauts took Virgin Galactic up on its offer, encouraging the company to raise prices for its next batch of tickets to $450,000 apiece in 2022.
This new offer wasn’t as popular. So far, only about 125 customers have signed up to buy Virgin’s pricier tickets. But with Virgin still losing money (and indeed, losing money a bit faster than it used to), the company has decided to raise prices again — this time, to $600,000 a ticket.
Virgin still thinks this price offers “outstanding value for the product and lifetime experience.” Citing media reports, CEO Michael Colglazier says archrival Blue Origin is probably selling tickets on its own New Shepard space tourism rocket for more than $1 million each. Virgin itself has successfully sold Unity tickets for $800,000 and up to various scientific researchers. Now, Colglazier confides that in rare instances when existing reservation holders give up their place in line, Virgin might sell new tickets for those placeholders at the new and improved $600,000 price.
This could potentially produce positive revenue surprises in future quarters.
2. Virgin Galactic is building new spaceplanes
Virgin Galactic’s longer-range plans continue to hinge on the Delta spaceplane. Resembling Unity in most respects, Delta will differ from Unity (which was supposed to carry six passengers, but actually carries only four) in that Delta will strip out excess weight to enable a full complement of six paying passengers per flight.
Combined with $600,000 ticket prices, this could generate $3.6 million in revenue per flight. Multiply that by an anticipated eight flights per month, and that would mean $28.8 million in revenue per month, $86.4 million per quarter, and $345.6 million per year, per spaceplane.
Virgin says Delta will begin flight tests in 2025, and enter service in 2026, flying out of Spaceport America in New Mexico. The company says it will need four or five spaceplanes and two motherships to support this pace of operations. Management did not say how much it expects to spend on the motherships, but each Delta will cost $50 million to $60 million. Thus, the total cost of outfitting just one Spaceport will exceed $300 million — perhaps by a factor of two or three times.
How many flights will it take to recoup that capital investment? Without more data, it’s impossible to be certain, but with five spaceplanes flying fully loaded flights, and 400 or more total flights per year, it seems likely the company could make back its capital investment within one year of completing its fleet.
That’s assuming, of course, that Virgin can find 2,400 customers willing to pay $600,000 a pop.
3. Virgin Galactic thinks its passenger market exceeds 300,000
Is this a realistic assumption? Virgin Galactic thinks so.
CFO Douglas Ahrens estimates there’s a total of about 300,000 people potentially willing and able to ante up that kind of cash worldwide, and the market is growing 8% annually. If he’s right, then 2,400 customers a year is only 1% of a growing market — and if the market grows 8% per year, Virgin could literally never run out of customers.
For this reason, Colglazier believes now is the time for Virgin Galactic to shift into “Phase 2” of its plans. Having proven its concept by flying 32 humans to space and back, Virgin Galactic will now move past its “R&D and prototype roots” and begin to scale up operations.
First, the company will build out Spaceport America and the fleet based there. Operations will accelerate with the arrival of Delta in 2026. As the tempo increases, and annual revenue passes $1 billion at Spaceport, the company will build a second spaceport in 2029 — aiming to create a whole chain of spaceports, each contributing annual revenue in the $1.1 billion to $1.4 billion range.
Admittedly, for a company that’s losing money, burning cash, and counting its revenue in just the single-digit millions today, the plan sounds a little farfetched — but at least Virgin Galactic has a plan.
Many investors have kicked value stocks to the curb in the new bull market. That’s not surprising considering the jaw-dropping gains that several large-cap growth stocks have generated.
However, value stocks typically beat growth stocks over the long term. And some value stocks will be bigger winners than others. I predict that these could be the best-performing value stocks through 2030.
1. Alibaba Group
Most investors would probably view Alibaba Group (NYSE: BABA) as a growth stock. After all, the company is a technology giant focusing on exciting areas including e-commerce, cloud services, and artificial intelligence (AI). But there’s a strong case that Alibaba is also a value stock.
Alibaba’s shares have plunged almost 60% below the highs set in late 2020. The beaten-down stock now trades at only 8.3 times forward earnings. That’s indisputably value territory, in my book.
What’s the main reason for Alibaba’s dismal performance and dirt cheap valuation? The sluggish Chinese economy. The once fast-growing company saw revenue rise by only 5% year over year in the fourth quarter of 2023 with adjusted earnings declining by 2%.
Don’t count Alibaba out, though. The company is investing in initiatives to boost growth. AI should serve as a major tailwind for its cloud platform.
I’m not the only one bullish about Alibaba. Of the 48 analysts surveyed by LSEG in March who cover the stock, all but one recommended it as a buy or a strong buy.
2. Enterprise Products Partners
Enterprise Products Partners’ (NYSE: EPD) forward earnings multiple is below 10.6x. That’s a bargain compared to the valuations for the S&P 500 and the energy sector as a whole.
I think Enterprise Products Partners has a key advantage that could help make it a big winner over the next six years. The midstream energy provider’s distribution yield tops 7.1%. Enterprise won’t need huge unit price appreciation (limited partnerships like Enterprise have units instead of shares) to deliver exceptional total returns.
Solid price appreciation could be in store for Enterprise, though. The demand for the company’s pipelines and other midstream assets is likely to increase in the coming years, especially if an oil supply shortage arrives in late 2025 as Occidental CEO Vicki Hollub predicts.
Even if the oil and gas industry hits a rough patch, Enterprise Products Partners should be in good shape. The company has a long history of generating strong returns on invested capital regardless of the swings in commodity prices.
3. Pfizer
Pfizer (NYSE: PFE) is in the same boat as Enterprise Products Partners in one sense. The drugmaker doesn’t need to deliver big share price gains to generate market-beating total returns thanks to its dividend yield of more than 5.9%.
This big pharma stock isn’t as cheap as Alibaba and Enterprise based on forward earnings multiples. However, Pfizer is a steal compared to several of its peers. I also think the current negative sentiment for the stock is way overdone.
Sure, Pfizer faces some challenges. Its COVID-19 sales continue to plummet. Several of the company’s top-selling products will lose patent exclusivity in the next few years, including blood thinner Eliquis, breast cancer drug Ibrance, and rare-disease drug Vyndaqel.
That doesn’t tell the full story, though. Pfizer has multiple new drugs and new indications for existing drugs that it expects to generate enough annual revenue by 2030 to more than offset any losses from patent expirations. The company also projects an additional $25 billion in new annual revenue by 2030 from business development deals.
Should you invest $1,000 in Pfizer right now?
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Keith Speights has positions in Enterprise Products Partners and Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Alibaba Group, Enterprise Products Partners, and Occidental Petroleum. The Motley Fool has a disclosure policy.
Prediction: These Could Be the Best-Performing Value Stocks Through 2030 was originally published by The Motley Fool