Got $1,000? 3 Stocks to Buy Now While They're On Sale
There's never really a bad time to buy a good stock. But there are certainly better times than others to step into quality names. That's when they're down for reasons that aren't apt to last.
With that as the backdrop, here's a closer look at three stocks to consider buying while they're on sale. Given the growth prospects for each company, their shares are likely to recover sooner rather than later.
Uber Technologies
Uber Technologies (NYSE: UBER) is the top name in the ride-hailing business -- at least within the United States, where it controls roughly three-fourths of the market.
Launched as a crowd-sourced, pseudo-taxi service in 2010, the company has mainstreamed the once-weird idea of third-party drivers using their own vehicles to ferry other people around. Last year, it provided over 9.4 billion rides, generating more than $37 billion worth of sales in the process. Perhaps most importantly, Uber turned a little over $1.1 billion of that revenue into net income. Not bad, particularly for a business premise that plenty of people said would never fly.
The highest-growth days of the ride-hailing market are in the rearview mirror. That doesn't mean there's not more growth in store, though. Market research outfit Technavio expects the worldwide ride-hailing market to grow at an annualized pace of nearly 13% through 2029, jibing with numbers from Straits Research and Acumen Research & Consulting.
Where the market might be underestimating Uber, however, is on another front. Using its existing technology and network of contracted drivers, Uber is now delivering lots of online restaurant orders through its Uber Eats platform. The company's also getting its feet wet in the same-day retail-delivery arena, picking up and dropping off goods bought from brick-and-mortar stores' shopping websites.
Revenue stemming from this delivery business accounts for roughly 30% of its current top line, in fact, yet this may still only be scratching the surface of this business' potential. IMARC Group believes the same-day logistics market is set to grow by an average of 15% per year through 2032.
Uber stock's not been a great performer of late. It's down 16% from March's high, and still knocking on the door of new 52-week lows. Keep it in perspective, though. This pullback is mostly just a cooling off of a very big run-up from October's low. This year's and next year's anticipated revenue growth of more than 16% should turn shares around soon enough. Ever-improving profit margins are bolstering this brewing turnaround.
Alibaba
Alibaba (NYSE: BABA) -- often likened to Amazon -- was once on top of the world. The parent to China's online shopping malls Tmall and Taobao was firing on all cylinders. Founder and then-CEO Jack Ma was bigger than life. And investors couldn't get enough of the stock.
As is so often the case, though, time and size caught up with this company. Alibaba is now scrambling to cut its bloated costs. Layoffs have been heavy, and while neither has happened yet, plans to spin off its cloud computing arm and logistics business are still on the table as cost-culling measures.
China's economy has also struggled to shake off its pandemic-prompted slump worsened by Beijing's heavy-handed, lingering lockdowns. Let's also not forget that in 2020, Beijing began a brutal regulatory crackdown on most of China's major technology companies. Alibaba was no exception.
All this combined is why BABA shares are down 77% from their late-2020 peak, trading within sight of multi-year lows. The dry spell has lasted so long that many investors may now be struggling to remember a time when the stock's been worth owning.
The thing is, this overwhelming pessimism is precisely why now's the time to take your swing. What most investors may not be seeing is that China's slowly but surely working its way out of its economic malaise.
Although March's retail spending was disappointing, it was still up 3.1% from a very tough comparison to last March's retail sales surge of 10.6%. The country's first-quarter GDP growth of 5.3% topped expectations of 4.6%, and accelerated from its Q1 pace of 5.2%. Bank of America says China's full-year GDP should grow by 5%, while analysts believe Alibaba's 2024 top line is going to improve on 2023's tally by nearly 9%.
There's still plenty of work to be done. Investors, however, are underestimating how strong the tailwind is getting, and how much reach Alibaba still has.
DraftKings
Last but not least, add DraftKings (NASDAQ: DKNG) to your list of stocks to buy while they're on sale. OK, it's not a sharply discounted price. DraftKings shares are only down 18% from March's high. But that may be about as cheap as they're going to get. This stock's pullbacks have been relatively short-lived since the beginning of 2023, yielding to the bigger-picture gain that's been underway since then.
DraftKings is one of the U.S.'s most prolific sports betting apps. Started as a fantasy sports platform, it was already well-positioned to capitalize on the opportunity created by the Supreme Court's 2018 lifting of the federal sports-wagering ban. Since then, 38 states have officially legalized betting on sports, with 30 of those states permitting this wagering via the internet or a mobile app. More states and new internet-based betting permissions are in the works too, setting the stage for the industry's continued growth.
That's only part of DraftKings' growth story. The other part is customer cultivation. It takes time to reach and teach customers. And even once they're reached, they're not immediately as profitable as they'll eventually be.
The company's making progress here. Its per-customer acquisition costs have fallen more than 40% over the course of the past two years, improving gross profit margin rates in the process.
DraftKings also reports that revenue roughly quadruples between the first year and the fourth year its offerings are available within a particular state. These metrics should continue improving the longer the company operates, and the bigger it gets -- and it is getting bigger. This year's projected revenue growth of 31% is just a taste of what's likely waiting for DraftKings shareholders.
That growth is apt to persist for a long while too. Straits Research believes the global online sports betting market is poised to grow at an annualized pace of more than 11% through 2032.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Bank of America, and Uber Technologies. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
Got $1,000? 3 Stocks to Buy Now While They're On Sale was originally published by The Motley Fool
