A summer surge can help these stocks to buy reach all-time highs. Cooling inflation and Nvidia (NASDAQ:NVDA) acting as a linchpin for the stock market have strengthened enthusiasm.
Some stocks will heat up in the upcoming months. A fresh round of earnings and macroeconomic news will guide which stocks perform well and which ones lag behind. Investors who filter their search to companies with high revenue and net income growth stand a better chance of beating the stock market. These are some of the top stocks to buy leading up to a summer rally.
Stocks to Buy: Nvidia (NVDA)
Nvidia has been a top performing stock for several years. Its AI chips are unmatched, and while there’s plenty of money in the industry, Nvidia is the clear leader. Its stock price has climbed more than 3,000% over the past five years. Shares have already more than doubled year-to-date (YTD) as good financial results and an upcoming 10-for-1 stock split gets investors excited.
Revenue grew by an impressive 262% year-over-year (YOY) in Q1 FY25 while net income surged by 628% YOY. While AI chips have been a cash cow for Nvidia, it’s not stopping there. The company recently doubled down on cloud computing which should further accelerate revenue growth. Nvidia has the capital and the right leadership team to expand into additional industries.
The stock currently has a $2.8 trillion market cap. It’s realistic for Nvidia to become the world’s most valuable publicly traded corporation within 1-2 years. Strong demand from investors plus pristine financials suggests that the gains aren’t over.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has a chorus of optimistic analysts behind it. The advertising giant has a Strong Buy rating and a projected 12% upside from current levels. Alphabet has outperformed the stock market with a 27% YTD gain and a 5-year gain of 221%.
While advertising remains the main revenue driver, Google Cloud is making up a larger portion of total revenue. However, Alphabet can also tap into additional revenue streams via acquisitions. Alphabet is in talks to acquire HubSpot (NYSE:HUBS) which will give it a leg up in the CRM industry. HubSpot’s software is a top choice for many business owners, and it aligns nicely with Alphabet’s offerings.
Even without an acquisition, Alphabet is still delivering solid financials. Revenue increased by 15% YOY in the first quarter while net income rallied 57% higher compared to the same period last year. The stock trades at a 28 P/E ratio and comes with a 0.45% yield.
Stocks to Buy: Meta Platforms (META)
Meta Platforms (NASDAQ:META) is a leader in the advertising industry that has attracted millions of business owners. The social media giant has done a great job at grabbing people’s attention with pings, notifications, and algorithms that offer personalized content suggestions.
The formula has worked well for many years, but Meta Platforms has been hitting its stride as revenue growth and efficiency highlight recent quarters. The tech giant reported 27% YOY revenue growth in Q1 2024 while more than doubling its net income YOY. Those types of results have been getting investors excited, especially since the stock trades at a 26.5 P/E ratio.
Shares are up by 33% YTD and have gained 159% over the past five years. Meta Platforms trades at a $1.17 trillion market cap and offers a 0.44% yield. It’s one of the top stocks in the S&P 500 and continues to deliver for patient investors.
American Express (AXP)
American Express (NYSE:AXP) has the valuation and financials to support a summer surge. The stock only trades at a 19.5 P/E ratio despite delivering similar financial results as its fellow credit and debit card issuers. If American Express traded like its competitors, it would have a 30 P/E ratio or higher.
Furthermore, the stock offers a 1.18% yield and has maintained an annualized dividend growth rate of 10.51% over the past decade. The fintech firm is winning market share among Gen Z consumers which should pave the way to long-term financial gains. The company’s latest financial results suggest that it’s continuing to gain traction.
Revenue increased by 11% YOY in Q1 2024 while net income was up by 34% YOY. American Express reaffirmed its full year 2024 revenue and EPS guidance in the quarter. As momentum continues for the business, shareholders should end up with more gains in the summer.
Stocks to Buy: Texas Roadhouse (TXRH)
Texas Roadhouse (NASDAQ:TXRH) is a growing fast food restaurant that has a respectable valuation and growth metrics. The stock trades at a 35 P/E ratio and offers a 1.42% yield, both of which are much better than other fast food restaurant chains that are exhibiting double-digit YOY revenue growth.
The steakhouse chain reported 12.5% YOY revenue growth in Q1 2024 while delivering 31.0% YOY net income growth. Comparable restaurant sales grew at an impressive 8.4% YOY while domestic franchises saw a 7.7% YOY growth rate.
Texas Roadhouse opened nine company restaurants and three franchises to bring its total number of restaurants to 753. That’s a 7% YOY increase. Each restaurant is valued at approximately $15.2 million based on an $11.44 billion market cap. That’s a lower valuation per restaurant than Chipotle (NYSE:CMG) and other high-growth fast food chains. Shares are up by 44% YTD and have gained 234% over the past five years.
Chipotle (CMG)
While Texas Roadhouse has the better valuation, it still makes sense to give Chipotle a look. The Mexican fast food restaurant continues to attract loyal customers despite raising its prices four times in the past two years. That type of brand loyalty marks a long-term winner that can continue to produce returns for investors.
Chipotle has been crushing the stock market, including most of the Magnificent Seven stocks. Shares are up by 37% YTD and have gained 367% over the past five years. The company currently trades at a 66 P/E ratio and has double-digit net profit margins.
The first quarter was another successful quarter for the fast food giant. Revenue increased by 14.1% YOY while net income was up by 23.2% YOY. Chipotle opened 47 new restaurants in the quarter, bringing its total number of restaurants to 3,479. Existing restaurants saw comparable sales growth of 7.0% YOY. Chipotle anticipates opening 285-315 restaurants this year.
Walmart (WMT)
People will have more time to open their wallets in the summer. However, rising costs can entice people to search for more affordable options. Many consumers turn to giant retailers like Walmart (NYSE:WMT) to save money on various products.
People don’t have to binge shop to benefit from Walmart. It’s the leading grocer, so many people buy their essentials at the retailer. Consumers may end up buying additional products while going to a local Walmart for their groceries.
This business model has worked well for several decades, and its translated into solid returns for shareholders. The stock is up by 22% YTD and has almost doubled over the past five years. The stock trades at a 34 P/E ratio while offering a 1.28% yield.
Walmart recently delivered another productive quarter that featured 6.0% YOY revenue growth. E-commerce and advertising revenue continue to increase which should help the corporation’s profit margins in the future.
On this date of publication, Marc Guberti held long positions in NVDA, GOOG, and TXRH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
