There should be nothing special about stocks at a 52-week high. Obviously the milestone indicates business has been good and likely will be better in the future. The market is signaling confidence the stock will continue to outperform. And studies suggest that thinking may be right.
One said “that nearness to the 52-week high is a better predictor of future returns than are past returns.” It discovered that stocks trading at or very near their peak end up continuing on their way as the good news that propelled them higher is proven true. The same is true in reverse. Stocks at or near their lows also continue falling.
Yet it is not universal. Movie theater operator AMC Entertainment (NYSE:AMC) was recently very close to its 52-week low and suddenly spiked 78% higher because Reddit star Roaring Kitty posted a meme on X (formerly Twitter). It had nothing to do with the theater chain or its business. It was just overexuberant traders piling into a meme stock. Of course, AMC has since collapsed again, losing a third of its value in just a week, but it remains almost 2x above where it was trading before the meme post.
Stocks can also fall from their highs after hitting a high note. Super Micro Computer (NASDAQ:SMCI) was at a 52-week high before earnings and it is now 27% below those levels on fears of slowing growth.
The three companies below are stocks at a 52-week high. Will they be like most that continue on their upward trajectory or will they crash and burn? Let’s look closer at each to find out.
NextEra Energy (NEE)
Utilities are not considered artificial intelligence (AI) stocks but that may soon change. The growth of data centers and the role AI plays in their proliferation positions the industry for tremendous future gains. NextEra Energy (NYSE:NEE) could be one of the biggest beneficiaries.
Because AI is an energy hog, demand for more and cheaper energy solutions will rise. That favors utilities in the southeast where electricity costs are lower than in much of the rest of the country. And those utilities investing heavily in renewable sources should edge out the competition. That’s why Florida-based NextEra is a uniquely formidable competitor.
NextEra has invested over $206 billion into its regulated and renewable energy projects since 2001. It is the world’s largest generator of renewable energy from the wind and sun and a top-tier stock in battery storage. Of the approximate 65 gigawatts (GW) of energy capacity in its portfolio, 36 GW are from renewable sources. And it keeps adding to it each quarter. It currently has about 3.5 GW of data center capacity and another nearly 3.5 GW in its backlog. It also has a pipeline of 250 gigawatts of renewables and storage in various stages of development.
With NextEra Energy stock at a 52-week high, there’s no reason it won’t power higher in the future.
Netflix (NFLX)
Another AI stock that comes out of left field is Netflix (NASDAQ:NFLX). While the movie streamer’s ability to raise prices and operate at a global scale make it the “gold standard” in the industry (that’s what Disney (NYSE:DIS) CEO Bob Iger called it), Wall Street thinks AI is what truly sets it apart. Or will.
Because Netflix is a tech-centric business, Needham analysts say AI will heavily influence its ability to create and collate content though it is already present in how it recommends content to viewers. Netflix says it also uses machine learning to drive content demand modeling and delivery caching.
Yet Netflix stock at a 52-week high is a result not so much of AI technology but its ability to outperform expectations. Last quarter it brought on 9.3 million new subscribers, far surpassing the 5.2 million analysts expected.
Wall Street now sees Netflix breaking through the $700 per share threshold (boy, did I ever get that wrong!). Trading at around $645 per share, it is already within striking distance. And with analysts forecasting 28% long-term annual growth in earnings its current high-point could soon seem quaint.
MercadoLibre (MELI)
At least I got MercadoLibre (NASDAQ:MELI) right. One of the first stock picks I made last year for InvestorPlace was the leading Latin American e-commerce and fintech stock. It is witnessing superlative growth in sales and volume and MercadoLibre stock is up 10% in 2024. It stands 30% higher over the past year.
The company’s e-commerce platform saw gross merchandise volume (GMV) surge 20% in the first quarter to $11.3 billion while its MercadoPago fintech solution enjoyed 35% growth in total payment volume (TPV) to $40.7 billion. The number of monthly active users of the fintech platform also soared 36% higher to 49 million.
My call on the stock was a bet on the growth of emerging market economies. Brazil and Mexico are MercadoLibre’s two largest markets. GMV grew 30% year-over-year in each while assets under management on the fintech side more than doubled in each country.
With Wall Street forecasting 35% long-term growth in earnings and the stock trading at less than twice that rate, MercadoLibre stock could be hitting new 52-week highs for some time to come.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
