Beyond the Magnificent 7 Stocks: 3 Underdogs to Watch in 2024
The positive future performance of the economy hinges on addressing concerns about businesses’ adaptation to post-pandemic dynamics. Efforts include renegotiating discounts with manufacturers as retailers seek to regain bargaining power. The effectiveness of these strategies and consumers’ response to potential price increases will play a pivotal role in fostering economic growth. The current economic performance of the United States is very positive and with continued doubt of a recession, you need to invest in these three underdog companies. These underdogs go beyond Magnificent 7 stocks, and take on a league of their own.
Mastercard Inc. (MA)
Mastercard Inc. (NYSE:MA) is a global payment solutions company, that provides electronic payment services to its clients. It currently trades for $439.75, a 12-month increase of 16.16%. With a 12-month median price forecast of $475.00 which is 8.1% more than its current price, analysts are bullish. Keeep in mind this is out of 40 analysts.
The global payment systems market is currently valued at $2.85 trillion and is forecasted to grow to $4.78 trillion by 2029, a CAGR of 10.88%. While macroeconomic and geopolitical uncertainty bothered investors, Mastercard’s strong and diverse business model spurred growth in Q3 2023 and continues to position it for growth in the future. In Q3 2023, Mastercard reported $6.5 billion in net revenue and $3.2 billion in net income, YoY growth of 14% and 28% respectively. It also achieved an operating margin of 58.8%, 4.8% higher than in Q3 2022. Additionally, Mastercard’s ROA of 40.78% is much higher than the sector median of 1.13% and also higher than its closest competitor Visa’s ROA of 19.09%, showcasing the effectiveness of Mastercard’s management team.
Moreover, the company has been returning large amounts of capital to its shareholders. In addition to its dividend, which has been consistently growing since 2014 and currently yields 0.60%, Mastercard repurchased 4.8 million shares at a cost of $1.9 billion in Q3 2023. Then, in December 2023, Mastercard’s board approved another share buyback program worth $11 billion, effective right after the completion of its previous $9 billion program.
Verizon Inc. (VZ)
Verizon Inc. (NYSE:VZ) is a telecommunications company that provides users with cellular data and phone plans. It is a household name as the second largest telecommunications company. Up 1.9% YTD currently, it has a current price of $39.62.
Verizon has seen an impressive increase in cash flow, with an Operating Cash Flow of $37.74 billion and a Levered Free Cash Flow of $17.85 billion. a total of 24 analysts have given it a price target of $41.32, higher than its current valuation. It has high debt, with a debt/equity of 179.71%. However, with increased revenue, profit, and cash flow, the debt is expected to get paid off.
The telecommunications sector is forecasted to reach $3.10 trillion by 2030 at a CAGR of 6.2%. This provides ample room for growth. Additionally, the continued roll-out of a widespread 5G network and packages with companies like Walmart, Netflix, Apple, etc. offers consumers a viable alternative to competitors. A high dividend rate also entices investors to hold the stock.
The cash flow is expected to increase, with the debt decreasing. Further expansions and partnerships open the possibility of future growth. Coupled with being perceived as undervalued and having a high dividend yield, it becomes clear why Verizon is a stock you should invest in over some Magnificent 7 stocks.
Crowdstrike Holdings Inc. (CRWD)
Crowdstrike Holdings Inc. (NASDAQ:CRWD) is a leader in the cybersecurity space. It primarily sells subscriptions to its cybersecurity products, specializing in endpoint protection and cloud security. Trading at $298.66, Crowdstrike’s stock has exploded upwards by almost 181% in the past 12 months. The rally could still continue as Crowdstrike has 36 “Buy” ratings out of 46 analysts and no “Sell” ratings.
In the last quarter, Crowdstrike reported an ARR of $3.15 billion, a 35% increase YoY. While the company has been heavily growth-oriented, it still managed to be profitable for the last three quarters. Additionally, Crowdstrike has been improving its subscription gross margin as evidenced by its 78% GAAP subscription gross margin this quarter compared to 75% in the corresponding quarter of the prior year. These metrics combined with its D/E ratio of 0.386 show Crowdstrike’s strong top line, improving bottom line, and excellent liquidity. Magnificent 7 stocks are strong buys, but stocks like CRWD are also attractive.
Moreover, Crowdstrike’s recent acquisition of Bionic, a cloud security platform, helps it be successful in protecting its clients from cloud exploitation. Now offering a complete cloud security solution, Crowdstrike can take full advantage of the quickly growing cloud security market. The acquisition also rounds out the company’s offerings since Bionic’s capabilities are integrated into Crowdstrike’s Falcon platform. Consolidating multiple cybersecurity solutions into one platform is appealing to many customers and could help Crowdstrike expand its client base.
On the date of publication, Michael Que did not have (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.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
