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Carnival (CCL -4.95%) and Coupang (CPNG 1.02%) may not seem out of favor, but zoom out. Both of these one-time highfliers are now trading more than 70% below their all-time highs.
If you have $1,000 to invest, you may want to consider one of these stocks. They’re on sale right now, at least compared to their historical peaks. Let’s take a closer look so you can decide if you want to go shopping.
1. Carnival
The cruise line industry’s recovery is complete. Carnival posted encouraging financial results this week. Revenue rose 22% to $5.4 billion for the fiscal first quarter that ended on Feb. 29. The world’s largest cruise line operator posted an operating profit, reversing an operating deficit from the prior year. Interest expense would turn the profit into a loss on the bottom line, but the red ink was less than what it was targeting three months earlier.
Analysts also figured that Carnival’s profit would be worse than what it ultimately reported. This isn’t a surprise anymore. Carnival has been consistently exceeding bottom-line expectations lately, and the last three quarters have put up double-digit percentage beats.
| Quarter | EPS Estimate | Actual | Surprise |
|---|---|---|---|
| Q4 2022 | ($0.87) | ($0.85) | 2% |
| Q1 2023 | ($0.60) | ($0.55) | 8% |
| Q2 2023 | ($0.34) | ($0.31) | 9% |
| Q3 2023 | $0.75 | $0.86 | 15% |
| Q4 2023 | ($0.13) | ($0.07) | 46% |
| Q1 2024 | ($0.18) | ($0.14) | 22% |
Data source: Yahoo! Finance. EPS = earnings per share.
Carnival is posting record revenue results, and the future is even more exciting. Demand and what folks are willing to pay for a bon voyage have never been stronger. Its booked position for the final three quarters of fiscal 2024 is its best on record, with pricing and occupancy well ahead of where they were last year at this point.
Net yields — an industry metric that basically tracks revenue per available passenger cruise day without the more variable expenses including air transportation and travel agent commissions — is expected to approach 10% this fiscal year. Carnival and its rivals have overcome the prolonged pandemic-related shutdown, but the shares have not.
Image source: Getty Images.
Carnival stock has more than doubled since the start of last year, but it’s still trading 76% below the all-time high it reached in early 2018. Yes, cruise line operators had to do some pretty desperate things to stay afloat when they were largely unable to take on passengers for more than a year in the wake of the COVID-19 crisis. Carnival bloated its share count and its debt levels. However, the company is now turning the corner on profitability.
It expects to generate an adjusted profit of $1.28 billion, or $0.98 a share, pricing the stock at a reasonable 17.5 times forward earnings. Carnival now has the means to pay down its debt or repurchase shares without sacrificing growing its fleet. The future is bright for cruise line stocks, and Carnival is leading the way.
2. Coupang
Let’s sail all the way to South Korea for our next stock on sale. Coupang is that country’s e-commerce leader, and it isn’t even close. With more than 100 distribution centers promising overnight delivery for orders placed before midnight, Coupang is within a 10-minute drive of 70% of South Korea’s shoppers.
Its latest report featured an encouraging trend. After a steady run of decelerating revenue growth since going public at $35 three years ago, revenue has now accelerated for four consecutive quarters.
| Period | Revenue Growth (YOY) |
|---|---|
| Q1 2021 | 74% |
| Q2 2021 | 71% |
| Q3 2021 | 48% |
| Q4 2021 | 34% |
| Q1 2022 | 22% |
| Q2 2022 | 12% |
| Q3 2023 | 10% |
| Q4 2023 | 5% |
| Q1 2024 | 13% |
| Q2 2024 | 16% |
| Q3 2024 | 21% |
| Q4 2024 | 23% |
Data source: Coupang. YOY = year over year.
Investors should be all over Coupang, but it continues to be a broken IPO. The stock is currently trading 74% below the $69 price point it hit when it peaked on its first day of trading in early 2021. Coupang was growing faster when it made its public debut, but it was oozing a lot of red ink at the time. It’s profitable now, armed with a cash-rich balance sheet to expand outside of its home turf and even make strategic acquisitions.
Coupang shares may not be cheap at just under 30 times next year’s projected earnings. Being an undisputed leader in an emerging industry in a country whose economy is on the rise deserves a premium. With momentum back on its side, the e-commerce company is on sale.
Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coupang. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.
Investors sell stocks for a variety of reasons, and Fool.com contributor Tyler Crowe recently sold quite a few stocks to free up capital to deploy in other opportunities. However, two of the sales caught the eye of Certified Financial Planner® Matt Frankel. In this clip, Matt asks Tyler why he decided to pull the plug on Apple (AAPL 0.54%) and Waste Management (WM -0.48%) despite their both being excellent businesses.
*Stock prices used were the afternoon prices of Dec. 14, 2023. The video was published on Dec. 15, 2023.
Matthew Frankel, CFP® has positions in Iron Mountain. Tyler Crowe has positions in Apple. The Motley Fool has positions in and recommends Apple and Iron Mountain. The Motley Fool recommends Waste Management. The Motley Fool has a disclosure policy. Matthew Frankel 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.
Tesla CEO Elon Musk doesn’t think highly of hybrid vehicles. Last year he dismissed them as a “phase” and said it’s “time to move on.” But Toyota doubled down on them—and the move has proved prescient.
Hybrid sales have been on a tear in 2023, jumping 48% in the first three quarters compared to the same year-ago period, the Wall Street Journal reported. Last year, hybrid sales dropped about 6% compared with 2021.
“It’s a smoking-hot market,” David Christ, head of sales for Toyota’s North American business, told the paper, adding that Toyota is making as many hybrids—which save fuel by combining a gasoline engine with an electric motor—as it can.
Demand for electric vehicles, meanwhile, has chilled. The market is still expanding, but the pace of growth has slowed considerably. After growing 63% globally in the first half of last year, it rose only 49% in the same period this year, the Journal reported.
That has carmakers rethinking investments in EV production, among them GM and Ford. Part of the problem is that the first wave of buyers has already bought their EVs, and the next group of would-be buyers is less willing and more price-sensitive.
“A large number of people are living paycheck to paycheck, and with a lot of debt, they have got credit card debt, mortgage debt,” Musk said on a third-quarter results call last month. “We have to make our cars more affordable.”
His comments came as Tesla disclosed its lowest quarterly earnings per share in two years, coming in 10% below already negative analyst forecasts.
Ford in its third quarter, meanwhile, reported a 41% increase in hybrid sales—easily outpacing EV sales—and said it expects to quadruple them in the next five years.
All this leaves Toyota chairman and former CEO Akio Toyoda, long a skeptic of the hype surrounding electric vehicles, feeling vindicated. He’s long felt the industry should hedge its bets on EVs by continuing to invest in hybrids and hydrogen-powered cars.
“People are finally seeing reality,” he said recently.
A little over a year ago, he told dealers gathered in Las Vegas that electric vehicles “are just going to take longer than the media would like us to believe… Toyota is a department store of all sorts of powertrains. It’s not right for the department store to say, ‘This is the product you should buy.’”
Last year, Toyoda resigned as CEO as investors clamored for Toyota to do more by way of all-electric vehicles.
“Toyota is not correctly responding to calls from the market to take a lead in electric vehicles,” Satoru Aoyama, senior director at Fitch Ratings, told the Financial Times in October last year, warning the company could “lose investor confidence.”
As it turns out, more confidence was merited, not less.
This story was originally featured on Fortune.com
Everybody sees millionaires as wealthy, except for millionaires themselves, a new study suggests.
Only 8% of investors with $1 million consider themselves wealthy, a recent report from Ameriprise Financial found. Instead, 60% categorized themselves as upper middle class, and a notable 31% considered themselves middle class. The study revealed wealth is more than just hitting a specific dollar number or lifestyle. Rather, it’s a mindset and a feeling of security.
“I think that people of wealth tend to be cautious and they tend to be open minded, and they tend to be intentional,” said Kimberly Maez, a private wealth adviser at Ameriprise Financial. “Whereas it’s not necessarily some of the things we always think it is. It’s a little bit more behavioral mindset focused.”
The study surveyed over 3,000 Americans between the ages of 27 and 77, roughly 600 of whom were millionaires and revealed insights in their conception of wealth.
Learn more about high-yield savings, money market, and CD accounts.
According to the study, 85% of millionaires believed that wealth meant “a sense of financial security.” Meanwhile, 66% thought of wealth as the ability to provide for themselves and their families, while 58% associated it with the freedom to do what they wanted.
Maez noted that the rich’s conception of wealth was not necessarily grounded in luxury.
“It’s not like driving supercars necessarily,” she said. “It’s just being more cautious and careful in trying to ensure that they are protecting what they’ve got because people of wealth also have a little bit of fear. They know how hard it’s been to build it and they know it can go away quickly.”
Still, the study revealed a stark contrast between investors with more than $1 million and those with less.
Of the millionaires surveyed, 62% of them said their top financial priority was “protecting accumulated wealth,” 43% said “saving for retirement,” and 32% said “managing market volatility.”
Read more: Retirement planning: A step-by-step guide
Meanwhile, the study found that 49% of investors with less than $1 million in assets prioritized “saving for retirement,” and 42% said “managing day-to-day living expenses.” The study also found that 35% said “increasing income” and “paying down debt” were big priorities.
Travis Sholin, financial adviser at Keystone Financial Services, pointed out that regardless of financial status, saving for retirement remains a priority for both the wealthy and the less so. He observed that “there is an emotional scarcity mindset that is inherent in all people” and that $1 million no longer has the same value due to inflation and rising costs of living.
“Those who have accumulated more do not want to lose it, and those still accumulating are still concerned about the day-to-day expenses,” he said. “Both parties want security in their retirement. With increased inflation and the cost of living, everyone is feeling the pinch right now. Even the millionaires.”
Maez said that the wealthy tend to be more risk-averse than they get credit for. Consequently, they focus on protecting the wealth they have rather than living extravagantly. She said many of her clients bargain hunt when shopping and avoid unnecessary expenses.
“Some of the most wealthy people I work with are also some of the most grounded people. So they don’t, they’re not caught up in a lot of things that you can get caught up in.”
In fact, only 13% pointed to “luck” as a top driver behind their ability to amass more than $1 million. Instead, “financial planning and investing” (80%), “making a good income” (71%), and “living within my means” (69%) were the top reasons for their success.
Americans could learn from the longer-term millionaire mindset, Sholin said.
“Even for older people…educating themselves and their children and grandchildren about the importance of thinking long term with investments and wealth,” he said. “Because that’s really what it comes down to. If they can psychologically create that long-term mindset, that’s how families become successful.”
Dylan Croll is a Yahoo Finance reporter.
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The Federal Reserve will hold interest rates steady at its meeting next week, extending the pause that began after the last rate hike in July.
The central bankers are giving off signals that they’d like to remain on the sidelines for some time, but will continue to keep alive the possibility of a hike in December, said Josh Shapiro, chief U.S. economist at MFR Inc.
“They’re not going to do anything. I think that they’re hoping they are done, but I don’t think they are at all ready to commit to that,” Shapiro said.
Stephen Stanley, chief U.S. economist at Santander, agreed the Fed would hold steady: “The FOMC has clearly decided to sit on its hand for another six weeks, hopefully giving time for some of the uncertainties hanging over the outlook to resolve.”
Traders in derivative markets agree. The chances of a rate hike next week have evaporated.
Fed officials will meet on Oct. 31- Nov. 1. The Fed will issue a statement at 2 p.m. Eastern on Wednesday after their meeting ends. Fed Chairman Jerome Powell will hold a press conference at 2:30 p.m.
What are the uncertanties?
There are many uncertainties about the outlook for U.S. inflation and economic growth.
For one, how can the Fed move to the sidelines given recent strong economic data?
U.S. third-quarter GDP accelerated to a 4.9% annual rate and September inflation data was not as sunny as prior reports over the summer, with the core personal consumption expenditure index ticking higher.
“If the policy decision was being made purely based on the economic data, a hike next week would be a slam dunk,” said Stanley.
Carl Tannenbaum, chief economist at Northern Trust Co, said the Fed can hold because their prior rate hikes are starting to bite consumers and businesses.
The rise in long-term bond yields
BX:TMUBMUSD10Y
since the Fed’s meeting in September is the equivalent of a quarter-point rate hike, he added.
The acceleration in GDP was pushed higher by special factors including a boost in inventories. He said the excess savings of consumers was running low and the strong spending seen in July-September was unlikely to be repeated.
The Fed is “more comfortable holding steady than they were three weeks ago,” Tannenbaum said.
Michael Feroli, chief U.S. economist at J.P. MorganChase, agreed that Powell will point to the tighter financial conditions “as a reason to stay on hold.”
“Powell will defend the decision to stand pat by pointing to the tightening in financial conditions and what that implies for the outlook,” Feroli said.
At the same time, the strong data means Powell won’t rule out an additional rate hike this year. The Fed’s dot-plot in September pointed to another hike by December.
Powell will make clear that another hike is going to depend “on what they’re seeing on inflation and the labor market between early November and mid-December,” said Gus Faucher, chief economist of The PNC Financial Services Group.
Powell is likely to continue the Fed’s mantra that interest rates will stay at peak levels for longer than expected.
“Fed officials will be quietly pleased that financial conditions have tightened and will remain sounding hawkish in order not to trigger a reversal of those market moves,” said Michael Pearce, U.S. economist at Oxford Economics.
Could the Fed hike again?
Krishna Guha, vice chairman of Evercore ISI, thinks the strong data “sustain the upside risks case in which the Fed could still get dragged back into hiking further,” either in December or in January or March of next year, with the potential of more than one hike.
“The upside risk of more later from the Fed lingers,” he said.
Derek Holt, head of capital markets economics at Scotiabank, said he was worried that “the whole narrative that is in the market – that inflation has been licked and bonds have done the Fed’s tightening for them” will eventually be reversed by the end of the year or later.
“You can craft a narrative, in my opinion, that says maybe the bond market is oversold and maybe we are declaring victory over inflation prematurely,” Holt said.
He said Powell is aware of this danger and will continue stress doubt over the persistence of the good news on inflation seen over the summer months.
The war for talent has already become a war for skills, and a ritzy college diploma isn’t the differentiator it once was.
A great mismatch between skills employers want and skills workers are able to provide has led to an increased focus on skills-based hiring, rendering old credentials like college degrees or years of experience less significant. Everyone from former Secretary of State Condoleezza Rice and former IBM CEO Ginni Rometty to Microsoft CEO Satya Nadella and LinkedIn chief Ryan Roslansky have stressed the importance of skills-based hiring and skill development among workers. That’s probably great news to those who would prefer not to attend college at all, given the insurmountable state of the student debt crisis.
Over the past few years, companies of all kinds in both the private and public sectors have been gradually shedding their degree requirements for new hires. Nearly half (45%) of respondents told ZipRecruiter in a new 2,000-person survey they’ve nixed degree requirements for certain roles this year, and 72% said they now practice skills-based hiring by definitively prioritizing skills over certificates—a sign that skills-first attitudes are catching fire.
The exact reasons underpinning the move are unclear, per ZipRecruiter. But the report suggests it could be a response to lower college enrollment, winnowed interest in certain fields (like finance and accounting), the increased simplicity of offshoring roles, and “rising skepticism about the value of a degree amid grade inflation and generative AI.”
Employers are “kind of pulling out all the stops and doing as much as they can” to narrow the skills gap, Julia Pollak, ZipRecruiter’s chief economist, tells Fortune. They’re “increasingly shifting to [strategies] that can have permanent effects, not just temporary Band–Aids of the past.”
That’s with good reason: According to the U.S. Chamber of Commerce, 95% of executives and HR heads say nontraditional candidates perform just as well, if not better than, degree-holders. Competency, ability to learn, and versatility is more practical than pedigree, leaders have found.
“With 1.5 job openings for every unemployed job seeker, it’s clear that narrowing the talent gap continues to be a challenge,” Richard Wahlquist, CEO of the American Staffing Association, tells Fortune. “Skills-based hiring can be a more fair and equitable way to hire people, and it can lead to more qualified and engaged workforces.”
Indeed, over half of ZipRecruiter respondents said that compulsory degree requirements are a major barrier to diversity, equity, and inclusion goals. The problem is compounded for smaller firms with less capital to invest in their recruitment and retention efforts to begin with. Businesses which were more likely to struggle with hiring (mainly small and medium-size firms) were more likely than larger and more established businesses to drop degree requirements and center skills.
This surprised Pollak, she says. “State government after state government is adopting skill-based hiring, and major companies like Walmart are making announcements to that effect. But I didn’t think it was a trend among small businesses.”
Clearly, they’re being as creative as they can, she adds. “Maybe because they’re the most constrained.”
The three skills bosses want most
ZipRecruiter’s new findings align neatly with their previous research on skills—and statements from executives over the years. The share of job listings on ZipRecruiter calling for an undergraduate degree dropped 10% between this year and last year.
But recruiters are still having a hard time finding the right people with the right skills to fill those roles. Nearly a quarter of employers told ZipRecruiter they’ve struggled to fill a vacancy owing to a skills gap. The big problem is a fundamental mismatch between priorities. The top three skills employers say candidates most lack, as revealed during interviews, are time management, professionalism, and critical thinking.
Many employers “have been stuck not filling positions because they couldn’t find people with the right skills or training,” Pollak says. “But that constraint may be loosened when they can consider people without [a typical] background or necessary skills, and bring them up to speed more quickly.”
For the harder and more specific skills, employers are ready to pony up for training; 30% said they added new employee training and development programs in the past year. Doing so is a win-win; most employers say those kinds of programs improve recruitment and retention efforts—as do student loan assistance programs, naturally.
“The issue is that there is tremendous demand for jobs among college-educated people,” she adds. “More demand than supply, in most cases.”
That’s because many U.S. employers are currently working with agencies to recruit workers from abroad, as well as seeing which roles can be feasibly eliminated and replaced with AI. Nearly half of employers are already replacing some human workers with artificial intelligence applications, ZipRecruiter finds. But more likely than that is the move to search for humans with AI know-how to do ever-more complicated and technical jobs. Within five years, the same job will require a 25% change in digital skills—and it’ll be on workers to shore up that difference, LinkedIn chief economist Karin Kimbrough said last week. Tony college degrees will surely be of less importance as AI continues rapidly expanding and innovating—even the Ivy League can see that.
“Do I think white-collar work will inevitably require a college degree? Absolutely not,” Harvard management professor Joseph Fuller told Fortune earlier this year. “It will require certain types of technical or hard skills not necessarily indicated by college.”
Unlike Kimbrough’s prediction, this future isn’t five or 10 years away. Per ZipRecruiter’s findings, it’s already here.
This story was originally featured on Fortune.com
There’s no one way of achieving success in the stock market and different strategies can be used to attain the basic goal: seeing big returns on an investment.
Talking of big returns achieved via divergent styles, then we can look at the techniques used by legendary investors such as Warren Buffett and Ken Griffin.
Both have had huge success but adhere to different tactics. Buffett made his reputation by favoring value investing, seeking out equities underappreciated at the time and then watching as the market catches up. Meanwhile, making good use of his love of mathematics, Griffin is a proponent of quantitative investment methods.
However, that does not mean that both paths do not cross at times. In fact, delving into both market sages’ portfolios, we find that they are both making some big bets on the same names.
So, we decided to check out 3 stocks held by both and see why they are such fans. By running these names via the TipRanks database, we can also get an idea for how Wall Street’s cadre of analysts see the future shaping up for these equities. Let’s check the details.
Snowflake Inc. (SNOW)
For our first Buffett/Griffin favorite, we’ll head to the tech sector, where we find Snowflake, a prominent data warehousing company known for revolutionizing the way organizations store, manage, and analyze their data in the cloud.
Snowflake offers a cloud-based data platform that provides businesses with a scalable and flexible solution for their data needs. The company’s key innovation lies in its architecture, which separates data storage from compute resources, allowing users to scale their data warehouses dynamically according to their specific requirements. This unique approach has made Snowflake a preferred choice for organizations looking to harness the power of data analytics without the complexities of traditional on-premises data warehouses.
Snowflake’s platform is designed to handle vast amounts of structured and semi-structured data, making it a versatile tool for data analytics, machine learning, and business intelligence applications and its usage has been growing at a fast pace. In the second quarter of fiscal 2024 (July quarter), revenue grew by 35.5% year-over-year to reach $674.02 million, while beating the consensus estimate by $11.74 million. Likewise, adj. EPS of $0.22 outpaced the forecast by $0.12.
While those results exceeded expectations, there have been concerns amongst some investors about growth slowing down. For Q3, the company guided for product revenue between $670 to $675 million, up 28% to 29% compared to the same period a year ago but decelerating sequentially, and the midpoint, below the analyst estimate of $674.9 million.
Meanwhile, Buffett has been heavily invested here for a while and currently owns 6,125,375 shares worth $923 million. As for Griffin, he bought the majority of his stack in Q2, and his 838,521 shares command a market value of more than $126 million.
HSBC analyst Stephen Bersey has no concerns around slowing growth, and claims Snowflake is set to be a prime beneficiary of AI’s rise.
“We believe that Snowflake has demonstrated impressive growth and operating leverage, and we think that the company will deliver turnover and EPS growth above peers for the foreseeable future,” the 5-star analyst said. “The company’s products present a strong value proposition, in our view, as they are focused on an important part of the enterprise technology stack, large dataset management and analysis.”
“Notably, we have embedded a tailwind to revenue into our estimates, driven by an increase in global investment spend on AI to capitalize on the recent breakthroughs in the vertical. We see Snowflake as one of the early beneficiaries to this increase in spending as the company’s product portfolio is focused on the critical component of AI, large datasets,” Bersey went on to add.
Conveying his confidence, Bersey’s Buy rating is backed by a $201 price target, suggesting SNOW shares will climb ~34% higher over the next 12 months. (To watch Bersey’s track record, click here)
Tech names like Snowflake have no trouble catch analyst reviews – and there are 25 such reviews on record for SNOW shares. They break down to 20 Buys and 5 Holds, for a Strong Buy consensus view. At $193.33, the average target implies gains of 28% could be in the cards for the coming year. (See Snowflake stock forecast)
DaVita Inc. (DVA)
We’ll turn now from tech to healthcare and look at DaVita, one of the largest providers of kidney care services in the United States, serving over 200,000 patients across more than 2,800 dialysis centers. The company also has several hundred others located in 10 countries.
DaVita is renowned for its patient-centric approach, focusing on delivering high-quality, personalized care to individuals suffering from chronic kidney disease and end-stage renal disease. The company offers a range of services, including in-center hemodialysis, peritoneal dialysis, home hemodialysis, and nutritional support, with the aim of improving patients’ quality of life and managing their condition effectively.
All that combined to deliver a Q2 report boasting beats both on the top-and bottom-line. Revenue of $3 billion represented a 2.4% year-over-year increase and beat Street expectations by $50 million. At the same time, adj. EPS of $1.94 came in ahead of the forecast, by $0.21.
Buffett remains long and strong here. He is the owner of 36,095,570 shares, which at the current price are worth $3.36 billion. Griffin’s holdings are more “modest,” with most purchased during Q2. His DVA holdings total 1,286,177 shares, amounting to $120 million.
It’s the prospect of growth ahead that UBS analyst Andrew Mok says justifies investors’ attention, even though that seems to go against the Street’s current rhetoric.
“We see inflecting treatment growth in 2Q-3Q ahead of accelerating growth in 2024+. Combined with better pricing and a lower cost structure (ESA savings, closed clinics), we see numerous tailwinds that support our Street-high earnings estimates and contrarian Buy rating. Further, our differentiated view that DVA will resume share repurchase in 4Q should serve as a positive catalyst and an accelerant to 2024 EPS not reflected in consensus estimates,” Mok opined.
That Buy rating goes alongside a Street-high $142 price target, making room for 12-month returns of 52%. (To watch Mok’s track record, click here)
As Mok notes above, his positive thesis is in contrast to others right now. With the 2 additional recent ratings being Holds, the stock manages to eke out a Moderate Buy consensus rating. Nevertheless, even the doubters see the shares as somewhat undervalued; the $123 average target implies shares will appreciate by 32% on the one-year horizon. (See DaVita stock forecast)
Charter Communications (CHTR)
For our final Buffett/Griffin-backed name, we’ll switch lanes again and turn to the telecom industry to check the details on the US’s second-largest cable operator. That’s the spiel behind Charter Communications, a company primarily known for its provision of cable television, high-speed internet, and telephone services to residential and business customers across the country.
Charter’s Spectrum brand extends its services to over 32 million customers across 41 states, leveraging a vast network that covers an impressive distance of over 750,000 miles with the extensive network infrastructure and advanced technology enabling the company to deliver a wide range of digital services, including high-definition television, on-demand video, and broadband internet with competitive speeds.
CHTR stock has enjoyed the spoils of 2023’s bull market, gaining 26.5% year-to-date, and that is despite missing expectations in its most recent quarterly readout. In Q2, revenue stayed roughly the same as in the year-ago period, showing a top-line of $13.66 billion, with the figure falling shy of expectations by $180 million. At the other end of the scale, EPS of $8.05 came in $0.05 below the Street’s forecast.
Positively, during the quarter, Charter purchased 1.1 million shares of its stock for approximately $378 million. Ken Griffin was also busy buying shares, almost tripling his holdings to 527,699. This holding is currently worth more than $228 million. Buffett made no changes to his stack, which remains substantial. He owns 3,828,941 CHTR shares, worth a massive $1.65 billion.
Wells Fargo analyst Steven Cahall is also a fan, laying out why he believes the stock represents a good investment opportunity.
“We think CHTR is the clearest expression of a new normal for Cable competition,” the analyst said. “It has a strong converged bundle with Spectrum One, stable net adds due to its expansion in rural and a more aggressive video posture with programmers. We’re comfortable with ~MSD % EBITDA growth, while capex should meaningfully step-down, beginning in 2026. This makes CHTR appealing as a levered cash return story, and we think it can maintain 8-9x EV/EBITDA.”
These comments underpin Cahall’s Overweight (i.e., Buy) rating on CHTR, while his $550 price target anticipates investors will be sitting on returns of 27% a year from now. (To watch Cahall’s track record, click here)
Overall, of the 15 analyst reviews submitted over the past 3 months, 7 join Cahall in the bull camp and with the addition of 6 Holds and 1 Sell, the analyst consensus rates the stock a Moderate Buy. Going by the $493.31 average target, the stock’s one-year upside potential stands at 14%. (See CHTR stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
A smartphone with a displayed Arm Ltd. logo is placed on a computer motherboard in this illustration taken March 6, 2023.
Dado Ruvic | Reuters
Chip design firm Arm said in a Tuesday filing that Apple, Google parent Alphabet, Nvidia and other technology companies are interested in buying up to $735 million in its shares as it seeks to go public on Nasdaq.
The investments might not happen, but the fact that these companies are considering them underlines the importance of Arm, whose designs are used for processors in data center servers, consumer devices and industrial products.
Chip foundry operators Intel, Samsung and TSMC are interested in investing alongside the three trillion-dollar technology companies, along with AMD and MediaTek, which make chip designs based on Arm architectures. Cadence Design Systems and Synopsys, which make electronic design automation software for processor development, have also expressed interest, according to a revised prospectus for Arm’s shares sale. As part of the deal, Arm could wind up with a $52 billion market capitalization and almost $5 billion in new cash.
Initial public offerings in technology have been rare in the past two years, with higher interest rates making investors less willing to place bets on risky high-growth companies. Arm, established in 1990, is different. It was listed in London and New York before SoftBank bought it for $32 billion in 2016. It produced a $105 million profit on $675 million in revenue in the second quarter.
In 2020, Nvidia announced plans to acquire Arm from SoftBank for $40 billion, but regulators in the U.S. and the U.K. pushed back. The two companies dropped the transaction in 2022, paving the way for Arm’s current U.S. IPO. Nvidia has introduced its own Arm-based chip that can work alongside its own graphics processing units.
The fact that Nvidia wasn’t able to buy Arm didn’t stop Nvidia’s co-founder and CEO Jensen Huang from talking up Arm during the chip-design company’s IPO roadshow.
“Arm is an extraordinary company, and everybody in the world knows how fond I am of this company and of this platform and this franchise and world-class management team,” Huang said in his signature leather jacket during the prerecorded roadshow video.
Nvidia is collaborating with Arm on a new cloud data center ecosystem, Huang said. Historically, Intel chips have dominated in data center servers.
Huang isn’t Arm’s only external promoter. Rick Tsai, vice chairman and CEO of MediaTek, appeared during Arm’s virtual roadshow, saying more products drawing on the two companies’ products will appear over time.
WATCH: Portfolio manager discusses the investment risks around Arm’s IPO
This year started with a red-hot stock market, there is no question of that. Since the start of 2023, even accounting for losses last week, the S&P 500 shows a year-to-date gain of 17%, and the NASDAQ is up 33%.
Currently, the gains are narrow, mainly relying on a handful of deep-pocketed, big-name tech firms, but there’s a likelihood that investor money will start spreading more widely. If the bull market does widen out, it will raise the question of which stocks to buy.
This is where Goldman Sachs comes in. The banking giant has a special rating for stocks which it holds in particularly high regard. This is called a ‘Conviction Buy’ rating. The firm’s prized list of Conviction Buy stocks reveals the stock picks that the firm’s analysts expect to beat the market.
Now, let’s zoom in on two such names that have earned a spot on Goldman Sachs’ list of top stock ideas.
Chevron Corporation (CVX)
The first Goldman pick we’ll look at is Chevron, one of the world’s largest oil companies, with a market cap of $298 billion and annual revenues in the neighborhood of $240 billion. The company’s operations are varied and include hydrocarbon exploration and production, a transportation division that includes a maritime shipping company, an active refining segment producing fuels, lubricants, petrochemicals, and additives, a retail division to market the refined products (including a chain of gasoline filling stations), and a 50/50 joint venture with Phillips 66 in the industrial fuel and chemical sector.
Post-COVID, the price of oil peaked in May of last year, and the price since then has been downward. Chevron’s financials have tracked with the price of oil, declining from a 2Q22 peak – but the company remains profitable, benefiting from continued high demand for oil and fuels. Consumer demand for oil has been rising this year and is expected to increase by 2.2 million barrels per day to reach a year-end average of 102.1 million barrels per day.
On the financial side, Chevron reported its 2Q23 results last month, and despite the continuing fall-off from peak values it beat the expectations on both revenues and earnings. The top line, a revenue total of $48.9 billion, was down 29% year-over-year, but was over $900 million better than the forecast. At the bottom line, the company’s EPS of $3.20 beat the estimates by 22 cents per share. In addition to beating the earnings forecasts, Chevron also generated $6.3 billion in cash flow from operations, and $2.5 billion in free cash flow. The company returned a record amount of capital to shareholders, a total of $7.2 billion.
That return to shareholders included the regular share dividend. Chevron last declared its dividend on July 28, for $1.51 per share. This annualizes to $6.04 per common share, and yields 3.8%. Chevron has a dividend history going back to 1990, and has been gradually raising the payment since 2005.
Goldman’s 5-star analyst Neil Mehta is impressed by Chevron’s cash and capital returns, and writes of the stock: “Look for an inflection in the US oil major’s shares as (a) key upstream projects come online and other execution risks abate, driving robust cash generation, (b) shares are supported by a leading capital returns profile among large cap Energy and the S&P100, and (c) relatively attractive valuation.”
Looking forward, Mehta rates Chevron as a Conviction Buy, and his price target of $187 indicates room for a 17% upside potential in the year ahead. (To watch Mehta’s track record, click here)
Overall, Chevron gets a Moderate Buy rating from the Wall Street consensus, based on 16 recent analyst reviews that break down 10 to 6 favoring Buys over Holds. The shares are priced at $159.31, and the average price target of $186.50 is practically the same as Mehta’s. (See Chevron stock forecast)
Macy’s, Inc. (M)
Next up is Macy’s, a well-known name in American retail. Tracing its origins back to 1858, this department store has evolved into an omni-channel retailer, boasting a significant e-commerce footprint and a network of brick-and-mortar stores. Macy’s offers quality brands across all price ranges, from upscale luxury to off-price discount, providing customers with a seamless and convenient shopping experience.
The company owns several brands, including its eponymous department stores, as well as Bloomingdale’s and Bluemercury. As of the end of the calendar year 2022, Macy’s operated 783 stores across all of its brands, with 566 Macy’s locations and 160 Bluemercury stores.
In an interesting move, Macy’s announced in March plans to conduct a transition in its corporate leadership. The current CEO, Jeff Gennette, will be retiring in February of next year after 40 years with the company. His position will be taken over by Tony Spring, who is currently an executive VP with Macy’s and the CEO of the Bloomingdale’s brand.
The company will release its 2Q23 financial results on August 22, but we can look back at Q1 to see where Macy’s stands now. The top line, of $5 billion, was slightly down from $5.3 billion in the prior-year quarter and $84 million below analyst expectations. However, Macy’s demonstrated stronger bottom-line results, with a 56-cent GAAP EPS, which was 10 cents better than the forecast. Looking ahead, Macy’s has revised its expectations for FY2023 sales, now projecting a range of $22.8B to $23.2B. This adjustment comes in contrast to the previous projection of $23.7B to $24.2B and falls below the consensus estimate of $24.01B.
Macy’s has a history of paying out cash dividends since 2003, with a brief interruption from early 2020 to the summer of 2021 due to the pandemic. Dividend payments resumed in August 2021 and have been gradually rising since then. The latest declaration on May 31 was for a 16.54 cent payment, distributed on June 15. The common share dividend currently annualizes to just over 66 cents, offering a yield of 4.06%.
This stock is covered for Goldman Sachs by analyst Brooke Roach, who sees the company poised for success on the back of a new growth strategy. She is also impressed by strength of the company’s brand and cash positions, and writes: “Look for the US department store to execute on its five pillar growth strategy after successfully completing ‘trial and learn phases’ this year. Focus on M’s new idiosyncratic initiatives, and look for strengthening execution and improving inventory management to drive market share capture, growth, and profitability, supported by Macy’s strong brand positioning and FCF generation.”
Roach goes on to give Macy’s a Conviction Buy rating, with a $23 price target implying a 41% one-year upside potential. (To watch Roach’s track record, click here)
The rest of the Street is less confident, however; based on 4 Buys, 6 Holds, plus 2 additional Sells, the stock has a Hold consensus rating. Meanwhile, the stock’s average price target of $18.33 suggests an upside of ~12% from the current selling price of $16.31. (See Macy’s stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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