Three Equities with Potential for Rising Trends Until the End of 2024
As the year draws to a close, investors should not overlook some affordably priced stocks before the new year begins in 2025. Traditionally, fund managers make portfolio adjustments in December, leading to a phenomenon known as the "Santa Claus Rally," where stock prices significantly increase due to increased buying activity.
Three stocks that frequently attract heavy buying interest in December are Alphabet (GOOG -0.47%, GOOGL -0.44%), Meta Platforms (META -2.04%), and ASML Holding (ASML 0.66%). While each company has a promising long-term future, they also have specific short-term catalysts that make them attractive investment options.
Alphabet
Alphabet, widely known as the parent company to Google, boasts a strong presence in various sectors, including cutting-edge generative AI through its Gemini model. The Gemini model stands out as a leading choice in this field, thanks to Google Cloud, which offers clients the flexibility to rent computing space and scale up or down efforts effortlessly. Google Cloud also grants access to top-notch graphics processing units (GPUs) and AI accelerators, allowing for swift AI model training. The cloud computing division reported a 35% increase in revenue during the last quarter, highlighting its impressive performance.
Despite its strong performance, Alphabet's stock price fails to reflect its success. Trading at a mere 21.5 times forward earnings, Alphabet enjoys a significant discount compared to industry giants like Microsoft and Apple, which both trade at 31.7 and 30.4 times forward earnings, respectively. Moreover, Alphabet has shown a faster growth rate in earnings than these two tech titans, making its undervaluation fairly illogical. Additionally, Alphabet's stock price even undercuts the S&P 500, which trades at 24.6 times forward earnings. Given its impressive performance and undervaluation, Alphabet looks like an excellent investment opportunity that both fund managers and investors should not overlook.
Meta Platforms
Meta Platforms, much like Alphabet, can benefit from a near-copy-paste treatment when it comes to its similarities. Meta's monopoly lies in the social media arena, thanks to its dominant platforms such as Facebook and Instagram. Meta is also actively pursuing generative AI through its Llama model and has gained popularity as a go-to choice for developers working with AI.
Meta continues to perform at a high level, with revenue growing 19% year over year and diluted earnings per share (EPS) increasing by 37%. Despite its size, Meta has proven its strength as it continues to explore new avenues for growth.
While Meta shares trade at a valuation similar to the S&P 500 (24.5 times forward earnings), considering its impressive earnings growth and revenue expansion, the stock price can be considered inexpensive. Meta Platforms may experience another surge in value before the end of the year, making it an attractive long-term investment option.
ASML
ASML represents a significant departure from the other two companies, not being involved in advertising or possessing any direct competition. ASML is the world's sole manufacturer of extreme ultraviolet (EUV) lithography machines, which are essential for semiconductor companies to create advanced chips. Without ASML's technology, advancements in AI would be challenging to attain.
However, ASML's dependence on China poses a risk, as the country accounts for nearly 50% of the company's third-quarter sales. With increasing regulation, ASML faces restrictions on selling its equipment to China and its allies, affecting the company's bottom line. Management predicts that China's revenue share will decrease to around 20% by 2025, mitigating this issue.
ASML's revenue outlook was also adjusted from a range of 30 billion to 40 billion euros to 30 billion to 35 billion euros due to this market shift. Due to these circumstances, ASML's stock plummeted following the announcement. However, management remains optimistic about the long-term growth outlook and emphasized that the current situation was merely a temporary obstacle.
Despite facing short-term challenges, ASML's stock is now trading at a more reasonable 33 times forward earnings, making it the most affordable it has been in a long time. Given that ASML is the sole provider of EUV lithography machines and the growing demand for chips, ASML stocks are a worthwhile investment opportunity before 2025.
In the context of finance and investing, it's worth noting that undervalued stocks like Alphabet, despite its strong performance and impressive earnings growth, offer a potential high return for investors due to its stock price being lower than industry giants and the S&P 500.
Metal Platforms, with its impressive earnings growth and revenue expansion, could also be an attractive investment opportunity before the end of the year, given its stock price being considered inexpensive in relation to its valuation.
These two examples highlight how investors might consider affordably priced stocks, such as Alphabet and Meta Platforms, as potential investment opportunities, taking into account factors like earnings growth, revenue expansion, and stock valuation.
