In the ever-shifting landscape of the stock market, separating the wheat from the chaff is no easy feat. It’s a world where the wrong picks can erode your hard-earned gains, but the right ones? They have the power to catapult your portfolio to new heights. With thousands of stocks in the fray, pinpointing those poised for a breakthrough can feel like searching for a needle in a haystack.
This is where we step in. Every week, we comb through the market’s labyrinth, scrutinizing trends, earnings reports, and industry shifts. Our goal? To distill this vast universe of stocks down to a select few – those unique opportunities that are primed for significant movement in the near future.
This week, we’ve zeroed in on three standout stocks.
The New York Times (NYT) – Thriving Subscription Business with AI Potential
The New York Times (NYT) is standing out in the current media landscape, largely thanks to its strong subscription model and emerging opportunities within artificial intelligence. With a robust digital-first approach, NYT continues to grow its user base, even while many traditional publications are shrinking or struggling. In fact, The Times is on track to reach its target of 15 million total subscribers by 2027, aiming for an annual growth rate of around 10%.
Beyond just subscriptions, NYT has been actively diversifying its offerings through new content formats like podcasts, video, and expanded cooking and game services. These efforts have played a key role in driving user engagement, as well as boosting its total addressable market. This, combined with its pricing power and strong advertising growth, positions the company well for future gains.
A significant reason to keep an eye on NYT is its push into artificial intelligence. The company has been building internal AI capabilities, with opportunities to further monetize its vast content archive through licensing agreements and potential partnerships. Analysts see AI as a key driver that could enable double-digit growth in adjusted operating profit, while also creating opportunities for additional capital returns to shareholders.
In terms of stock performance, shares of NYT have climbed nearly 12% so far in 2024, following a strong 50% gain in 2023. Deutsche Bank’s price target of $65 suggests the potential for nearly 19% upside from current levels, signaling there may still be plenty of room for growth.
Chewy (CHWY) – E-Commerce Platform with Long-Term Growth Potential
Chewy (CHWY) is currently trading at around $30 per share, having risen approximately 65% from its price a year ago and 36% year-to-date in 2024. The company’s rapid growth is driven by its e-commerce platform, which offers thousands of pet products, including its own private-label brands. But that’s just the surface of Chewy’s long-term strategy.
A significant part of its expansion lies in diversifying its revenue streams. Chewy’s online pharmacy service includes compounding medications for pets, while its telehealth platform offers on-demand vet services. These healthcare options, combined with the launch of a pet insurance plan, aim to deepen customer engagement. The recent addition of a sponsored ads program is expected to contribute 1% to 3% to the company’s net sales by the end of 2024.
Chewy’s push into physical locations is also notable. So far in 2024, the company has opened six Chewy Vet Care clinics, which have exceeded expectations in new customer acquisition. Impressively, about 50% of customers who visited a clinic have subsequently placed orders on Chewy’s e-commerce platform, proving that these brick-and-mortar expansions complement its online presence.
Financially, Chewy posted strong results in Q2 2024, with net sales reaching $2.9 billion, up 2.6% from the previous year. What’s more, its net income skyrocketed by an impressive 1,380% to $299.1 million compared to just $20.2 million in Q2 2023. A significant portion of sales came from recurring customer purchases, with its Autoship program contributing to 78% of all net sales. Non-discretionary spending, such as healthcare and essential pet items, accounted for 85% of total spending.
While Chewy’s revenue growth rate was moderate, the company’s profitability surged, signaling that it’s making the right moves in expanding both its customer base and its product offerings. Long-term investors may want to keep an eye on Chewy as its combination of recurring revenue and new initiatives could continue to drive its performance in the years ahead.
Cloudflare, Inc. (NET) Cloudflare’s AI Ambitions Are Gaining Traction
Cloudflare has made impressive strides in the AI space, positioning itself as a potential leader in cloud-based AI infrastructure. Traditionally known for its cybersecurity solutions, Cloudflare is now leveraging its global infrastructure to provide AI-powered solutions. The company’s Workers AI platform, introduced last year, enables developers to build and deploy AI applications using Cloudflare’s network without having to purchase costly hardware like GPUs.
The most compelling aspect of Cloudflare’s recent strategy is its deployment of Nvidia GPUs across 180 cities globally, with plans to expand further. This infrastructure gives organizations access to powerful AI tools without the associated capital expenditures. As the AI and cloud computing markets continue to grow, this positions Cloudflare to capture a significant portion of the $580 billion IaaS market by 2030.
Additionally, the company’s new AI Audit tool, aimed at content creators, could generate additional revenue streams by allowing websites to monetize how AI bots use their content. These initiatives add to Cloudflare’s already strong growth trajectory, with revenue up 30% year-over-year in its second-quarter results. With analysts projecting Cloudflare’s earnings to grow at an annual rate of 62% for the next five years, the stock looks like a promising opportunity for investors looking to capitalize on AI-driven growth.
