Historical Trends Suggest a Boost for the S&P 500 in 2025. Two Notable Stocks Worth Investing in Prior to This Upturn.
The United States stock market accomplished an outstanding feat in 2024, with the primary S&P 500 index reaching a record-breaking closing value of 6,090.27 on December 6th.
However, predictions suggest that 2025 might even surpass 2024's performance. After analyzing 14 interest rate cycles since 1929, Charles Schwab found that the S&P 500 index saw positive returns 12 months following the first rate cut in the cycle 86% of the time. However, the index faced negative returns following rate cuts in 2001 and 2007, due primarily to the ensuing recessionary environment.
September 2024 marked the beginning of the ongoing rate cut cycle, with the Federal Reserve reducing benchmark interest rates by 50 basis points. Given the current non-recessionary economic climate, it could be reasonable to expect the index to continue growing until September 2025. This optimistic outlook is widely supported by analysts. UBS estimates the S&P 500 to reach 6,400, while Oppenheimer Asset Management's Chief Investment Strategist, John Stoltzfus, foresees the index reaching 7,100 in 2025.
Consequently, small investments in high-quality stocks with strong growth potential are advisable. Here's why these two companies could be beneficial choices:
1. Oracle
Investing in database software and cloud services stocks, Oracle (ORCL -1.58%) is an intelligent option. Despite the company's second-quarter fiscal 2025 financial results falling marginally short of expectations, its pivotal position in the AI revolution and strong traditional database capabilities make it worthwhile to purchase shares in December 2024.
Oracle's cloud services and licensing support revenue account for about 77% of the company's total revenue. The cloud business is expected to generate $25 billion in revenue during fiscal 2025. Oracle's significant contribution to AI-optimized data center infrastructure is helping grow its cloud business. Major AI companies such as Nvidia, Meta Platforms, xAI, OpenAI, and Cohere rely on Oracle cloud infrastructure to train their AI models.
Oracle is working to enhance its cloud infrastructure's performance by releasing the world's largest and fastest supercomputer, which utilizes up to 65,000 Nvidia H200 GPUs. This performance advantage has made Oracle cloud infrastructure more affordable and faster than many competing cloud services, helping it secure large AI training workloads. Oracle's GPU usage increased by an astounding 336% year over year in the second quarter.
Oracle differentiates itself from several cloud infrastructure providers by using a modular design approach. Its cloud infrastructure can be constructed from only six standardized data racks, offering scalability and cost-effectiveness. Oracle has also developed geographic diversity by establishing 98 cloud regions and collaborating with major cloud service providers like Microsoft's Azure, Alphabet's Google Cloud, and Amazon's AWS.
Admittedly, Oracle may not seem like an exciting stock in the market. Nonetheless, the company's current trading price of 8.43 times trailing-12-month sales is less than the software industry median price-to-sales ratio of 10.4. As multiples rise alongside robust growth, Oracle could potentially experience substantial gain in its share price.
2. MongoDB
Investing in another database specialist, MongoDB (MDB -2.12%), can also be fruitful. Despite surpassing consensus revenue and earnings estimates in the third quarter of fiscal 2025, shares have dropped due to unexpected news of the company's longtime CFO and COO, Michael Gordon, leaving at the end of January 2025. However, this price fluctuation has created an attractive entry point for retail investors.
MongoDB added about 1,900 new customers in the third quarter of fiscal 2025, bringing its total customer count to over 52,600. The company also saw an increase in the number of high-value customers (those generating at least $100,000 in annual recurring revenue) to 2,314, up from 1,972 in the same quarter of the previous year.
Atlas, a cloud-native and integrated suite of database tools and services, forms almost 68% of MongoDB's total revenue. The cloud platform witnessed a 26% year-over-year revenue growth in the third quarter due to strong enterprise adoption for critical projects. Atlas provided infrastructure to over 51,100 customers at the end of the third quarter, up from over 44,900 in the same quarter the year prior.
MongoDB is looking to shift some of its go-to-market resources from mid-market to large enterprise channels. Moving funds from the mid-market to enterprise segments will likely decrease the rate of direct sales customer growth for a while but is expected to fuel long-term revenue growth.
MongoDB utilizes AI technologies and expert services to modernize its clients' outdated applications, many of which rely on traditional relational databases. To facilitate this transition, MongoDB employs a relational migrator, enabling the transfer of these applications to its document-friendly platform. This modernization process not only decreases expenses, time, and potential data loss or corruption risks but also offers a promising long-term growth potential within the legacy application modernization sector for MongoDB.
Additionally, MongoDB leverages the increasing interest of enterprises in AI-driven applications, which commonly involve processing intricate and comprehensive datasets. The organization regards its integrated platform (blending source data, metadata, operational data, and vector data) as more efficient compared to managing multiple complex databases.
Given its numerous growth drivers and robust financials, MongoDB appears to be an enticing investment at this moment.
In light of the predicted continuation of the stock market growth, investing in high-performing companies like Oracle and MongoDB could prove lucrative. For instance, Oracle, a database software and cloud services provider, has a strong position in the AI revolution and a low price-to-sales ratio, making it a potential value investment. Meanwhile, MongoDB, another database specialist, has reported increased customer count and revenue growth, offering an attractive entry point for retail investors despite recent management changes. Both companies' growth strategies and market position place them as promising investments in the realm of finance and investing.
