Stocks inched higher last week as cautiously optimistic investors positioned themselves ahead of a crucial upcoming Fed meeting. The S&P 500 rose for the fourth week in a row, closing the week at 4,299, eclipsing the level needed to exit the bear market it had been in since January 2022. Each of the major U.S. indexes produced a fractional weekly gain in a mostly quiet week of trading.
The Federal Reserve is scheduled to conclude its upcoming policy meeting on Wednesday; most observers expect that the Fed will maintain its key benchmark interest rate at a range of 5.00% to 5.25%, potentially breaking a string of 10 consecutive meetings in which it has lifted rates. Market participants will be watching for indications as to whether the Fed might shift back to a rate-hiking mode at its subsequent meeting ending July 26 if it chooses to keep rates unchanged at its June session.
The S&P 500 is up about 20% from its mid-October lows, a threshold that could indicate a bull market. The economy has defied expectations for a slowdown in the face of higher interest rates. Still, some form of an economic slowdown could lie ahead, even as the foundation of a new bull market is likely already formed. Any renewed phase of volatility may bring opportunities to position your portfolio for a more sustainable rebound. Here are three stocks to watch as the market’s ‘come back’ unfolds.
Fasty Inc. (FSLY)
Cloud-computing platform provider Fastly has been getting much attention this year, which may be just the beginning. Despite an astonishing 91% increase this year, FSLY’s share price remains significantly (88%) below its October 2020 ATH of $126.58.
The company has yet to turn a profit. Nevertheless, over the past three years, revenue increased at an average rate of 23% per year. That’s well above most other pre-profit companies. Interestingly, the share price has fallen an average of 9% each year over the same period. This disconnect between valuation and revenue growth forms the foundation for an intriguing investment, especially for growth-oriented investors.
Fastly posted solid earnings in early May. Management’s efforts to cultivate the conditions for long-term success were evidenced by a year-over-year gain in new customers and decreased capital expenditures, which has allowed for enhancements to the company’s technology and its business model. As it rolls out more straightforward product packaging and pricing tiers, customer acquisition and growth across the platform should be supported. Based on current free cash flows, the mighty mid-cap company has a sufficient cash runway for over three years. Its debt is well covered by its earnings, and management forecasts a reduction in losses over the next twelve months.
Strong execution and favorable underlying fundamentals seem likely to continue to support this turnaround story. At less than $17 per share, FSLY seems worthy of consideration.
Las Vegas Sands (LVS)
With American consumers expected to continue cutting back on discretionary spending in the second half of the year, resourceful investors have taken a shine to leisure names with significant exposure in China, where a robust recovery in travel and tourism spending is underway. As the U.S. consumer softens, Macau-centric Las Vegas Sands has been gaining steam.
While travel restrictions impacted LVS’s Q1 performance, Wall Street is enthusiastic about the company’s performance throughout 2023 and the years ahead. Stifel recently upped its 12-month price target for the stock to $73 from $66 on the attractive risk/reward setup, stating, “If the U.S. consumer does decline, the pent-up demand from China’s and Singapore’s only gaming market should be healthy for another 12 months.”
LVS has risen 19% year to date and currently holds an 80% Buy rating. The pros covering the stock see a 50% upside over the next twelve months, a figure which has risen 10% over the past 30 days.
Plug Power, Inc. (PLUG)
The “green wave” has given way to multiple opportunities for investors seeking stocks with exponential growth potential. The alternative energy industry is expected to expand in value by an astounding 1000% over the next five years. After a deep dive into this burgeoning industry, we’ve come up with one name that we believe could be the next massive breakout from the green energy group.
Plug Power is a leading provider of alternative energy technology, specializing in hydrogen and fuel cell systems. PLUG’s solutions are primarily used in the material handling and stationary power markets. PLUG offers fuel cell systems that replace lead-acid batteries in electric vehicles, benefiting distribution and manufacturing companies.
PLUG’s stock is down YTD by 28.82%, but it’s showing great promise, and I like it for its upside potential. PLUG has a $4.5 billion market cap and TTM revenue of $770 million at $1.32 per share. Recently exceeding analysts’ MRQ revenue forecast by a modest 1.53%, a win is a win. With a P/B ratio of 1.15x, PLUG has YOY revenue growth (+49.65), EPS (+31.56%) growth—30.89% quarterly growth—and profit margin growth (+11.62%). With a 10-day average trading volume of 24.02 million shares, it’s clear that PLUG’s recent business deals to optimize its impact and effectiveness have popularized the stock. Here’s another great thing: PLUG has a median price target of $15, with a $78 high and a low of $7.50, representing the potential for a 785% price increase from where it sits now. Analysts are on to PLUG, too; Buy, is what they say.
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