Amid the prevailing financial uncertainty, let’s explore two stocks that are worth considering for investment.
These stocks not only weather the storms of economic unpredictability but also present compelling opportunities for those who seek to secure their financial future and build a portfolio with a potential for long-term growth.
Alphabet
Alphabet, Google’s parent company, reported robust performance in its third-quarter results with an 11% increase in revenue, driven by a rebound in advertising. The revenue growth reached double digits for the first time in over a year. Notably, earnings per share exceeded expectations at $1.55 per share, and revenue reached $76.69 billion, surpassing estimates.
Picks for you
Despite reporting strong financial results and exceeding expectations in various areas, Alphabet faced a setback in its cloud business, which fell short of analysts’ estimates with cloud revenue amounting to $8.41 billion. This led to a nearly 10% drop in the company’s shares in the last 5 days.
Although Alphabet’s cloud business fell short of expectations, it still achieved significant growth, expanding by 22% compared to the previous year.
This growth rate was twice that of the overall company’s expansion. Furthermore, the cloud unit notably turned around its financial performance, shifting from a loss of $440 million in the same period the previous year to an operating profit of $266 million.
Despite a drop in after-market trading following the results, Alphabet shares have seen a substantial year-to-date increase of 47%, outperforming the broader S&P 500.
The recent price drop presents an opportunity for value investors to consider entering the stock market. The stock is currently undervalued and is trading below its intrinsic value, yet the company’s fundamentals remain strong.
The current stock price for Alphabet is $123.40. Analysts’ forecasts suggest that the stock has the potential to increase by approximately 23.4% in the next 12 months, with the minimum estimated increase being 2.1%. On the more optimistic side, the stock could potentially see an increase of approximately 45.8% within the next year.
These estimates are provided by financial analysts and are based on various factors, including the company’s performance, market conditions, and growth prospects. It’s important to note that these are forecasts, and actual stock price movements may vary.
It appears that, based on the opinions of 56 analysts who have provided stock ratings for Alphabet in the past three months, there is a strong buy sentiment regarding the company’s stock. Among these analysts, a majority of 40 analysts think it presents a fantastic opportunity to buy, 5 believe it’s a good opportunity to enter the market, and 11 suggest holding the stock.
Their strong recommendation to buy reflects a positive outlook on Alphabet’s future prospects and value.
CVS Health
CVS Health (CVS), often perceived as a stable and unexciting stock, is undergoing a transformation that could position it as a healthcare giant with substantial growth potential. While primarily known as a pharmacy retailer, CVS has diversified its business over the years. Recent strategic moves suggest that it is poised to make significant inroads into the healthcare industry.
With CVS’s price hitting a one-month low, it presents a great opportunity to accumulate some of the stock. The company offers an annual dividend yield of 3.65%, and it adds an extra dimension to the stock’s appeal, providing potential income to investors along with the opportunity for capital appreciation.
Diversification is key to CVS’s growth strategy. In addition to pharmacy retail, it has a presence in pharmacy benefits management and health insurance. Recent acquisitions, including Signify Health(SGFY) and Oak Street Health(OSH), indicate its intention to venture into home health and primary care.
One compelling aspect of CVS’s current position is its stock trading near its 52-week low. While acquisitions can initially impact stock prices, the $10.6 billion investment in Oak Street Health, though not inexpensive, may yield synergies and long-term growth potential.
The evolution of CVS stores into “HealthHUBs” represents a significant shift, offering an array of healthcare services, including treatment for common ailments and chronic conditions. By expanding into primary care, CVS aims to further broaden its service offerings, following in the footsteps of competitors like Walgreens Boots Alliance (WBA), which is introducing clinics in its stores.
While competition in the healthcare sector may intensify in the future, CVS’s advantage lies in its trusted brand and established name. The company’s strategic acquisitions, most notably Aetna(AET) in 2018, have propelled it into the forefront of the healthcare industry, resulting in substantial revenue growth.
From a valuation perspective, CVS appears undervalued. It currently trades at less than its projected future earnings, based on analyst estimates, and only 1.5 times its book value. In contrast, the average healthcare stock typically trades at 17 times projected future earnings and over 4 times book value. Given its size and leading role in the healthcare sector, CVS may be trading at more favorable multiples in the future, and yield a 65.9% return in the best-case scenario.
(CVS stock 12-month prediction. Source: TradingView)
While CVS’s past returns have lagged behind the broader market, its diversification and the aging US population, which will drive increased healthcare demand, offer potential for stronger future performance.
If CVS can achieve an average total return of 13% over the next 25 years, it has the potential to make investors wealthy.
This projection suggests that an investment of around $48,000, with the assumed growth rate and a 25-year holding period, could potentially reach $1 million. While there are no guarantees in the world of investing, CVS holds promise as a potential path to wealth creation.
Based on the opinions of 26 analysts who have provided stock ratings for CVS in the past three months, there is a strong buy sentiment regarding the company’s stock. Among these analysts, a majority of 19 analysts think it’s a strong buy, 1 believes it’s a good opportunity to enter the market, and 6 suggest holding the stock.
Buy stocks now with Interactive Brokers – the most advanced investment platform
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
