3 stocks that can go up when the next bull market starts
The bear market of 2022 weighed heavily on developing stocks. Key indexes like Standard & Poor’s 500 (currently down about 18% from all-time highs in late December 2021) is masking some serious pain. Some tech stocks are down 50% or more.
Some of these companies may never recover, but others are high-quality clothing that has been dumped for no real good reason. Buying now can pave the way for incredible investment returns once this bear market gives way to the next bull. Three contributors to Fool.com think Amazon (AMZN -1.77%)And the AMD (AMD -3.28%)And the sea ltd (SE -7.28%) They are stocks that can go up once the clouds start to fade. Here’s why.
This long-term winner looks very cheap at the moment
Anders Billund (Amazon): E-commerce and cloud computing giant Amazon rallied in the early days of the COVID-19 pandemic, but the stock hit a brick wall in 2022. Amazon shares are trading more than 30% below 52-week highs, nearly twice the correction seen in the S&P market index. 500.
A brutal opponent seems logical at first glance. The April first-quarter report was below Wall Street expectations. Amazon’s investment in the electric car maker Rivian Cars It was expensive and disappointing so far. Moreover, the company’s guidance for the second quarter indicated the slowest annual revenue growth in Amazon’s history. So I get it if some investors feel uncomfortable with Amazon’s $1.3 trillion market cap.
However, the company is revamping its lagging growth trajectory, and some of the slowdown was primarily artificial.
The Prime Day sales event declined in the second quarter of 2021 but moved into the third quarter of this year, making the second-quarter annual comparison significantly more difficult. The third quarter, on the other hand, will benefit from the same shift in the calendar, and Amazon’s next set of indicative targets should look quite bullish.
Furthermore, the calendar is approaching the increased availability of COVID-19 vaccines in mid-2021, inspiring many shoppers to visit local stores rather than their favorite e-commerce portals. This influence has never been under Amazon’s control.
At the same time, the company continues to deliver solid business results in almost any market environment, despite the low share price. As a result, Amazon stock is trading at the lowest value to the organization relative to earnings before interest, tax, depreciation, and amortization (EBITDA) in the past 20 years. The same is true of Amazon’s price-to-earnings ratio.
This company built to last is supposed to resume Amazon’s growth story in the second half of 2022, as annual comparisons become less difficult. When the stock market recovers from its current inflationary pressures, Amazon shares appear to be spring-loaded for a solid rebound. And even if the recovery comes a little slower, Amazon is the kind of stock you’ll want to own for the long term anyway. A company’s diverse exposure to cloud computing, digital media, and logistics can sustain the good times even as the e-commerce business negotiates some speed bumps.
In short, I believe that Amazon stock belongs in the portfolio of nearly every long-term investor, and today’s low stock price should be seen as a buying opportunity.
Transformational integration not represented by the market
Nicholas Rossolillo (AMD): AMD, which was previously the subject of chip design, has come a long way in the past decade (stocks are up nearly 2,000% in the past 10 years), and it looks like it’s in better shape than ever over the next decade. The company’s processors for data centers and other high-performance computing applications are in high demand (sales of EPYC chips were up 88% year-over-year in the first quarter of 2022). And on the consumer PC front, AMD no longer works either. It makes some good stuff and has plenty of room to keep the “chuckles” away Intel CorporationMarket share leadership.
In another bet on its flagship silicon portfolio, AMD completed its merger with Xilinx early this year – one of the largest ever M&A deals in the tech sector. Xilinx will help expand AMD’s exposure to the fastest-growing enterprise computing markets, as well as help AMD break new ground in areas such as automotive, aerospace and defense.
The best part about Xilinx is that it will drive AMD profit margins higher. CEO Lisa Su said that growth for the full year of 2022 (including the addition of Xilinx) is expected to rise 60% compared to 2021. Add higher margins, meaning earnings per share are poised to grow at a faster rate. However, as many investors became wary of a significant slowdown in economic growth (or even a recession), semiconductor stocks were punished. AMD is down 46% from its all-time high.
The stock is currently trading for 33 times 12-month earnings, but trades for 20 times analysts’ estimates of full-year 2022 earnings — an assessment that appears to rule out the possibility of AMD’s net earnings growth well above its expected 60% run rate. . This makes AMD a purchase in my book. Once some of the bearish expectations that have hit most chip stocks this year start to dent, AMD may start flying again.
Sea Limited must emerge from this downturn on stronger foundations
Billy Doberstein (C Limited): Given its leading franchises in mobile gaming, e-commerce and financial technology, Sea Limited has the potential to go after a significant amount of the GDP of Southeast Asia and Latin America. Of course, these three diverse sectors are all consumer-oriented businesses, so they require the economy to move forward to really benefit. This is why Sea Limited will be a beneficiary once the current economic slowdown is over.
Make no mistake, Sea’s Q2 and 2022 quarter could suffer under a number of headwinds, and I’d be cautious as the upcoming Q2 earnings report approaches. Post-pandemic gaming hangovers are already featured in lackluster gaming revenue guidance for 2022, while higher food and oil prices could cause consumers in the region to shy away from discretionary items. It may also slow Sea’s high-growth e-commerce platform Shopee compared to last year’s strong growth rates. Meanwhile, the recession could hurt SeaMoney, the high-growth fintech platform that Sea is building and which is nonetheless subject to underwriting risk.
However, the sea must be able to get past this period. The company was smart enough to raise $6 billion in September last year, through the sale of low-priced convertible bonds, as well as stock sales when its share price was $318, more than four times the current price. This boosted Sea’s cash position, giving it the ability to expand without worrying about raising funds for the next few years. It’s a huge luxury to have, and it should enable it to expand its market-leading position in e-commerce and fintech in both Southeast Asia and Brazil over cash-strapped competitors.
While Sea lost $580 million in net profit in the fourth quarter alone, management has promised positive adjusted earnings before headquarters costs in its Southeast Asian e-commerce operations by the end of this year, as well as breakeven cash flow in the technology sector. Financial SeaMoney next year. Management has also wisely pulled out of highly competitive and money-losing markets such as India and France last year, where those markets had a longer time frame for profitability. All these indications are that management “gets it” and that it is rightly heading towards profitability after years of excessive growth.
The current focus on profits is appropriate and should put Sea Limited on a firmer footing once we go through this challenging economic period. Once the capital markets stabilize and either we get through the recession or fears of a recession, Sea’s growth should pick up again, likely from a better competitive position.
With its tentacles in many categories and geographies across Asia and Latin America, the potential for sea growth appears open, as long as the consumer economy in those regions remains strong. This is why I am cautious in the short term but optimistic about the long term in this stock, once the new bull market starts.