It’s hard to argue with the fact that right now, there is a pretty potent sense of uncertainty in the media regarding where exactly the U.S. economy stands. This isn’t necessarily a unique phenomenon, as there will always be bears where there are bulls, doves where there are hawks, and vice versa.
Regardless, 2023 has thus far been a fascinating year. Although the unveiling of ChatGPT undoubtedly led to an enormous (and ongoing) tech rally, it’s not solely generative AI’s prowess that compels.
We need to remind ourselves that we should always be eyeing the broader market; keeping our portfolios diversified is critical. Compelling profits can be found just about anywhere…
MGM Resorts International (MGM)
MGM Resorts International (MGM) is a well-known name that operates diverse recreation venues, including casinos and resorts in the United States and Macau. With three key segments—Las Vegas Strip Resorts, Regional Operations, and MGM China—MGM recently surpassed Q2 estimates with an EPS of $0.59 per share vs. $0.52 per share as expected, a 13.94% surprise, and revenue of $3.94 billion, exceeding analyst expectations by 3.75%. Benefiting from its increasingly thriving Vegas properties and China’s reopening, MGM is a prime summer stock, ripe for the picking (as I’ll illustrate a little more).
As it maintains affordable pricing, MGM has been trading around the middle of its existing 52-week range, is currently up year-to-date by 36.53%, and holds a P/S (price to sales) ratio of 1.18x with $1.34 billion in free cash flow. In addition to beating the analysts in Q2, MGM reported year-over-year growth in revenue (+20.76%) and operating income (+181.06%), and it is forecasted to report $3.8 billion in sales at $0.55 per share for the current quarter. MGM pays a dividend, albeit modestly, with an annual yield of 0.02% and a payout of $0.01 per year. With a 10-day average volume of 5.43 million shares, MGM has an average price target of $59.50, with a high of $69 and a low of $46, representing enough room for more than 50% upside potential. MGM has 12 buy ratings and six hold ratings.
Topgolf Callaway Brands Corp (MODG)
One stock fitting for this list, sticking out for its enormous upside potential, is Topgolf Callaway Brands (MODG). A global leader in the golf industry MODG creates equipment, clothing, and accessories. Operating globally, including the U.S., Europe, and Asia, MODG’s three primary segments are Topgolf, Golf Equipment, and Active Lifestyle. MODG recently reported Q2 results that exceeded Wall Street analysts estimates with an EPS of $0.39 per share vs. $0.34 per share as expected, a 14.68% surprise. As the summer season boosts recreational interest, MODG’s venues anticipate heightened demand, supported by ongoing venue expansions to tap into the sport’s growing popularity.
MODG’s stock is currently down year-to-date by 14.13% and trading near the bottom of its 52-week range, has a PEG (price/earnings to growth) ratio of 0.71x, a P/S ratio of 0.89x, and a P/B (price to book) ratio of 0.91x. MODG also reported year-over-year revenue growth of 12.23% in addition to outdoing analysts’ estimates. For the current quarter, it is projected to report $1.1 billion in sales at $0.29 per share. With a 10-day average volume of 2.95 million shares, MODG has a median price target of $28.50, with a high of $56 and a low of $16; this indicates the potential for a whopping 230% price jump from where it currently sits. MODG has 12 buy ratings and two hold ratings.
Delta Air Lines Inc (DAL)
Last but not least, Delta Air Lines (DAL) offers both passenger and cargo air travel on a vast scale. Divided into airline and refinery segments, DAL shines as a prominent name in American aviation, aligning well with 2023’s summer travel surge. Impressively, DAL’s Q2 results surpassed analysts’ predictions with an EPS of $5.03 per share and revenue of $14.18 billion, outdoing estimates by measures of $0.97 per share and $251.59 million, respectively. At the latest earnings report, 56 hedge funds displayed bullish sentiment towards DAL, up from 51 in the previous quarter. Among them, GMT Capital holds a substantial position in DAL’s stock, holding over 6.2 million shares valued at $217 million.
Currently up by 37.02% year-to-date, DAL comes with a healthy 0.57x PEG ratio, a positive 20/200 day SMA (simple moving average), a P/S ratio of 0.53x, with a TTM (trailing twelve-month) momentum growth measure of 35.96%, and an operating free cash flow of $6.9 billion. DAL not only pulled an upset on analysts in Q2 regarding earnings forecasts but reported year-over-year revenue growth (+12.69%), net income (+148.57%), EPS (+146.96%), and net profit margin (+120.49%). For the current quarter, DAL is projected to post $14.5 billion in sales at $2.37 per share. DAL has an annual dividend yield of 0.89% with a quarterly payout of 10 cents ($0.40/year) per share. With a 10-day average volume of 7.32 million shares, DAL has an average price target of $60, with a high of $77 and a low of $53; this represents a strong upside potential of over 71%. DAL has 20 buy ratings from analysts (and zero holds).