A long-overdue step toward giving investors crucial information to make informed decisions.
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These 7 steps can give Boeing a path to recovery.
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After years of rumors and speculation, Apple (AAPL -0.66%) is finally shutting down its effort to make a car. In this video, I’ll explain why Apple stock investors should view this as a positive.
*Stock prices used were from the trading day of Feb. 27, 2024. The video was published on Feb. 28, 2024.
Neil Rozenbaum has positions in Tesla. The Motley Fool has positions in and recommends Apple and Tesla. The Motley Fool has a disclosure policy. Neil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.
Matterport (MTTR 0.95%) reported earnings this week, and the market didn’t like what it saw. Revenue isn’t growing as quickly as hoped, and the company is struggling to get to profitability.
But there’s upside for investors in Matterport — that’s what Travis Hoium highlights in this video.
*Stock prices used were end-of-day prices of Feb. 21, 2024. The video was published on Feb. 21, 2024.
Travis Hoium has positions in Airbnb, Apple, Matterport, and Zillow Group. The Motley Fool has positions in and recommends Airbnb, Apple, Matterport, and Zillow Group. The Motley Fool has a disclosure policy. Travis Hoium is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.
It would be difficult to criticize The Trade Desk‘s (TTD -0.58%) recent business performance. Everything seems to be going right for the company. Revenue is growing at robust double-digit rates, customer retention remains extremely high, and the company has a debt-free balance sheet and plenty of excess cash flow.
This financial success, of course, isn’t too surprising for those following the company closely. The programmatic advertising specialist’s product execution has been astounding in recent years. The Trade Desk’s fourth-quarter results were just more of the same. But there’s a looming question: Is the company living up to its current valuation?
Here’s a close look at some of the ways this tech company continues to impress investors.
Market share gains
One of the biggest things that stands out about The Trade Desk’s recent business performance is its market share gains. As The Trade Desk CEO Jeff Green pointed out in the company’s most recent earnings call, the ad tech specialist has grown its revenue faster than the rest of the digital advertising space in each of the last eight consecutive quarters.
In one specific example of its momentum relative to major peers in the space, The Trade Desk’s full-year 2023 revenue increased 23% year over year — and that’s on top of 32% growth in 2022. Compare that to Meta Platforms‘ and Alphabet‘s 16% and 9% year-over-year revenue growth rates in 2023, respectively.
Looking ahead, Green said in the company’s fourth-quarter earnings call that he expects top-line momentum to persist.
While there is much to celebrate about 2023, I’m even more excited about 2024 and beyond, I’ve never felt more confident heading into a new year. I believe we are uniquely positioned to grow and gain market share not only in 2024 but well into the future.
Product execution
Another aspect of The Trade Desk’s business worth applauding is its rapid pace of innovation.
The company’s biggest innovation in 2023 was its overhauled buy-side platform, Kokai. Green said that his product team recently visited nearly 1,000 clients and almost all of them said Kokai was a significant platform upgrade for them.
The Trade Desk also made notable progress in retail media (partnerships with retailers in which they bring data to its platform to share with advertisers). This is “one of the fastest-growing areas” of The Trade Desk’s business, Green said during the fourth-quarter earnings call.
But many other innovations are playing a key role in The Trade Desk’s customer approval. Some key innovations gaining steam with customers include The Trade Desk’s identity solutions UID2 and EUID, its direct pipeline to advertising inventory called OpenPath, and its connected television (CTV) integrations.
All of these factors help contribute to The Trade Desk’s high customer retention rate, which has remained above 95% for 10 years straight.
Robust financials
Lastly, The Trade Desk is a cash flow machine. Free cash flow, or the cash flow left after capital expenditures are accounted for, totaled $543 million in 2023. Such strong cash flow, combined with a debt-free balance sheet, means the company can fund its business growth while also returning cash to shareholders. The Trade Desk repurchased $220 million worth of its stock during Q4 alone and said in its earnings release last week that it has authorized $700 million for repurchases going forward.
All of these factors combine to help justify the stock’s current valuation of approximately 73 times free cash flow. With this said, shares certainly aren’t cheap. It might be wise for investors interested in buying the stock to wait and see if shares pull back to a valuation that leaves more room for error. But given the company’s strong execution, it would also be tough to call the stock overvalued at this point.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and The Trade Desk. The Motley Fool has a disclosure policy.
Small-cap stocks have been lagging behind their large-cap peers over the past 12 months. While frustrating to small-cap investors, it may bode well for the stock market’s future performance, based on historical data, according to Charlie Bilello, chief market strategist at Creative Planning, a wealth-management firm with over $200 billion assets under management.
The S&P 500
SPX
rose 21% during the past 12 months, while the small-cap equity gauge Russell 2000
RUT
gained only 4.9% during the same period, according to FactSet data.
It’s a potentially bullish sign for the market, Bilello said in a Monday note. “Historically, stocks have experienced above-average returns following periods of small cap underperformance (‘weak breadth’) and below-average returns following periods of small cap outperformance (‘strong breadth’).”
Creative Planning
Meanwhile, as S&P 500 currently trades near its record high while the Russell 2000 remains almost 20% below its record close, the setup bodes well for stocks performance in the next 12 months, according to Bilello.
During the three previous biggest drawdowns of the Russell 2000 when the S&P 500 saw a record high, both indexes rallied in the following year, noted Bilello. And while it’s a small sample size, the Russell 2000 outperformed in the following year and joined the S&P 500 at the record highs, noted Bilello.
Read: Small-cap stocks had a rough start to 2024 — but could shine the rest of this year, says stock market’s biggest bull
After the Russell 2000 saw a 19.2% decline from its local high in April 1999, the S&P 500 rose 14.3% over the following year and the Russell 2000 gained 36.5% during the same period, noted Bilello.
Creative Planning
In February 1991, after the Russell 2000 experienced a 13.5% drawdown, the index went up 35.5% in the following year, while the S&P 500 increased 12.1%. And in January 1985, after the Russell 2000 saw a 13.3% decline, the S&P 500 rose 17.4% over the next year and the Russell 2000 gained 18.2%, Bilello said.
Super Micro Computer Inc. on Thursday delivered the latest upbeat signal for the chip industry.
The company, which is a partner of Nvidia Corp.
NVDA,
and offers servers that run artificial-intelligence chips, expects to report fiscal second-quarter results vastly above the consensus view. Super Micro
SMCI,
issued preliminary quarterly figures Thursday afternoon that call for $3.6 billion to $3.65 billion in net sales, ahead of the $2.8 billion FactSet consensus, which was also the midpoint of the company’s prior outlook.
Opinion (from November 2023): This Nvidia partner has seen its stock surge. But investors may be overlooking a risk.
Super Micro also now expects to post $5.40 to $5.55 in adjusted earnings per share for the December quarter, while analysts had been looking for $4.51 and the company’s earlier forecast called for $4.40 to $4.88.
The company’s release on the matter was brief, calling out “a strong market and end customer demand for our rack-scale, AI and Total IT Solutions” and noting that the company’s earnings call will take place after the close of trading on Jan. 29.
Super Micro shares were up more than 6% in aftermarket action Thursday.
The preliminary results come as the latest bit of good news for the chip sector. Earlier Thursday, Taiwan Semiconductor Manufacturing Co.
TSM,
issued a better-than-expected forecast for the current quarter while giving upbeat commentary on the future of artificial-intelligence chips. TSMC shares surged nearly 10% on the day, and the report helped to lift other chip stocks, including Advanced Micro Devices Inc.
AMD,
which finished the session in record territory.
Shares of Super Micro have almost quadrupled over the past 12 months, with the name seen as a play on the artificial-intelligence frenzy. In the fiscal first quarter, Super Micro generated more than half of its revenue from AI-related servers. The company acknowledged supply constraints on its last earnings call.
Americans say inflation rates will keep cooling in the year ahead, according to Monday data offering another sign of a brightening mood on inflation.
Looking ahead one year, consumers expect the inflation rate to fall to 3%, according to the Federal Reserve Bank of New York.
That’s the lowest anticipated one-year ahead inflation rate since January 2021, in the NY Fed’s ongoing survey of consumer expectations. The expectation of a 3% rate was down from 3.4% in November’s survey and down from 5% a year ago.
Consumers also expected inflation rates to drop three years and in five years. The last time inflation expectations fell in the survey’s one-, three- and five-year categories was in July 2023.
The numbers come days ahead of the next read on inflation rates. The Bureau of Labor Statistics will release December’s inflation rates on Thursday morning.
During November, Labor Department data showed the cost of living in November rose 0.1% from October, but the yearly rate cooled to 3.1% from 3.2%.
Inflation rates hit four-decade highs in 2022.
Inflation expectations are important because they hint at the price increases people think coming be coming and are willing to pay. But they also point at people’s mood about the economy.
In December, consumer confidence jumped to a five-month high, according to the Conference Board.
Monday’s New York Fed survey also asked participants what their household financial situation would look like a year from now.
Compared to November, more people said their financial situation would be better and fewer people said it would deteriorate.
There’s a Shortage of Electrical Wires, Transformers. That’s Good for These Stocks.
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The S&P 500 is up 23% this year after a tough performance in 2022 when it fell by 19%. The success of growth stocks has been a key reason why the broad index has been doing so well. And three of the best-performing ones in the S&P this year have been Nvidia (NVDA 0.84%), Meta Platforms (META 0.94%), and Royal Caribbean Cruises (RCL 4.28%). But can these scorching-hot stocks still be good buys heading into the new year?
1. Nvidia
Nvidia has been the biggest benefactor from the emergence of artificial intelligence (AI) this year. Demand for its AI chips has been through the roof, and data-center revenue has been flourishing as well. Last quarter, which ended on Oct. 29, the company posted record data-center revenue of $14.5 billion; it rose 279% year over year. Nvidia’s overall sales of $18.1 billion were more than three times the $5.9 billion it reported a year ago.
Given its strong results, it may not be surprising that the stock itself more than tripled in value this year. The big question for investors, however, is whether this still is a good buy heading into 2024. At around 65 times earnings, the stock has an inflated valuation.
I believe next year may be a tougher one for the markets, and companies may scale back on their spending due to a potential recession, which could lead to a slowdown in Nvidia’s customers ramping up their AI offerings. For that reason, I wouldn’t be surprised if Nvidia’s stock falls in value in 2024.
But as long as you’re willing to hold on to the stock for the long haul, it can still make for a great investment. Analysts from Gartner project that the demand for AI chips could double by 2027. And with Nvidia being the big name in AI chips, and helping businesses automate their operations and get into the cloud, it can still be a top growth stock to buy and hold in the years ahead.
2. Meta Platforms
Shares of Meta Platforms are up 180% since January. Investors have become more bullish on the business amid a stronger ad market. But that too could come under pressure next year. While there is the hope that interest rates decline next year and there is a soft landing for the economy, the potential for a worse-than-expected recession could throw a wrench into Meta’s growth. And while the company did achieve 23% revenue growth last quarter (period ended Sept. 30), that isn’t typical for the business.
META Revenue (Quarterly YoY Growth) data by YCharts.
I’m not optimistic Meta can maintain this level of revenue growth. Meanwhile, its metaverse business, Reality Labs, continues to cost the company billions in earnings. While there’s a lot of hype surrounding Meta’s business this year, I think it may be approaching a peak.
At around 31 times earnings, this isn’t a stock I’d consider buying for next year as its valuation is too pricey given that its surge in growth may not be sustainable, and there are still the losses relating to Reality Labs to worry about. Those factors could hinder the stock’s performance in the future.
3. Royal Caribbean Cruises
The cruise industry has been recovering this year. With no more lockdowns and travel restrictions no longer a concern, Royal Caribbean Cruises stock has been one of the hottest stocks to own this year, soaring by 150%.
Through the first nine months of the year, the company reported revenue of $10.6 billion, up 69% from the previous year. Royal Caribbean is also back to posting profits, with its bottom line during that stretch totaling $1.4 billion compared to a loss of $1.7 billion in the same period in 2022.
While the stock looks expensive at a price-to-earnings multiple of 37, with Royal Caribbean still in recovery mode, its earnings numbers should continue to improve. This is one of the stocks that I think could still do well in a potential downturn next year as cruises cater to an older, more affluent customer base, which could provide some much-needed resiliency for investors.
With oil prices also coming down, which should help improve profitability, and demand still looking strong, Royal Caribbean’s stock could continue to be a great buy heading into next year.
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. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
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