Despite previous recession forecasts, the economy exhibited impressive resilience, notably in the U.S., with GDP achieving its fastest growth in two years. Inflation, although down from historic highs, persists above the Federal Reserve’s 2% target. Meanwhile, 10-year treasury bond yields have surged to 16-year highs, signaling evolving financial dynamics.
Approaching year-end prompts a strategic review of 2023’s investment choices. Investors seek stocks with rapid potential growth, aiming to capitalize on the holiday season for a spending spree. While anticipating a significant Santa Claus rally in a month may seem ambitious, these three highlighted stocks are not speculative. Rather, they showcase robust business fundamentals.
Target (TGT)
Target (NYSE:TGT) faces challenges due to its heavy reliance on discretionary spending, impacted by factors like student loans and high inflation, resulting in a 25% decline in shares this year. Second-quarter revenue decreased by 4.9% year over year (YOY). CEO Brian Cornell highlighted consumer cutbacks, especially in grocery spending, a typically resilient category.
Despite challenges in a high-inflation environment, exemplified by recent data, retail investments carry risks. TGT stock declined around 27% since January, reflecting these challenges. However, the trade-down effect might benefit retailers like Target. As consumers seek value for money in entertainment spending, this could potentially lead to a retail rebound.
In Q3, TGT beat EPS estimates at $2.10 (versus $1.48) and exceeded revenue expectations with $25.40 billion (versus $25.24 billion). Improved gross margins at 27.4% resulted from lower expenses and a 14% decline in inventories. Target’s optimistic holiday sales outlook, forecasting $1.90 to $2.60 per share in Q4, led to increased investor confidence. Despite a post-Q3 surge, TGT stock remains down 15% for the year, potentially offering a buy-the-dip opportunity.
Amazon (AMZN)
In October, Amazon (NASDAQ:AMZN) exceeded Wall Street estimates with Q3 earnings and revenue growth.
The tech giant’s stock surged as it highlighted strong momentum in its cloud services business. Q3 adjusted earnings were 94 cents per share, with revenue reaching $143.1 billion, a 13% YOY increase. Analysts anticipated earnings of 59 cents per share on $141.5 billion revenue. In the same quarter last year, Amazon reported earnings of 28 cents per share and $127.1 billion in sales.
Owning AMZN stock is akin to a diverse portfolio in a single asset, spanning e-commerce, content streaming, cloud computing, and AI. With services like Amazon Fresh, the company addresses inner-city “food deserts.” And now, these services are accessible to all U.S. customers, not just Prime members.
Finally, consumers value Amazon’s convenient online marketplace. Despite a premium price, the stock offers substantial growth and strong profitability, making it a compelling bet as a dominant force in its core industries.
Meta Platforms (META)
Meta (NASDAQ:META), well-known for its social media empire (Facebook, Instagram, WhatsApp, and Messenger), prioritized efficiency in 2023. In Q3, the company exceeded expectations with a 23% YOY revenue jump to $34.1 billion and a remarkable 168% increase in diluted EPS to $4.39.
The Family of Apps segment, covering social media platforms, thrived with a 24% revenue increase and an 87% rise in operating profit. Despite a $3.7 billion loss in Q3, Meta’s primary income source of advertising revenue surged by 23% to $33.6 billion, capitalizing on its extensive user base.
Meta Platforms delivers a notable total shareholder return (TSR) of 187% in the past twelve months, surpassing its five-year TSR of 20%.
On the date of publication, Chris MacDonald has a LONG position in META stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
5G, Artificial Intelligence, Cloud, Communications, Consumer Staples, E-Commerce, Media, Consumer Discretionary, Retail, Social Media, Streaming, Technology
