Yahoo Finance 2 Beaten-Down Large-Cap Stocks to Buy for Long-Term Growth
Today’s episode of Full Court Finance at Zacks dives into where the stock market stands as we near the end of June and turn the page on the huge first-half rally. The bulls appear to be in control heading into the heart of the summer.
Instead of attempting to chase the handful of mega-cap tech stocks that have soared already, investors with long-term horizons might want to consider buying large-cap stocks still trading 30% to 50% below their record highs heading into July.
The bulls reasserted themselves on Thursday. The Nasdaq opened lower, but it only stayed red for a little while before buyers rushed in and turned up the heat in the afternoon, pushing the tech-heavy index to close nearly 1% higher. The solid day was driven by gains from Tesla, Amazon, and others. The S&P 500 eventually ended the session up 0.4%, after it opened lower and swung between small gains and losses.
The upbeat day ended a miniature skid and helps keep both indexes near 52-week highs. Investors likely want to keep a close eye on the 4,300 level for the S&P 500, as it might be a line the bulls have to hold as Wall Street enters the heart of the summer and more investors call for a mega-cap tech pullback.
That said, even if the S&P 500 and the Nasdaq experience a downturn it might be driven by profit-taking on Nvidia and others. On top of that, different areas of the market are finally gaining some momentum as more investors and money come in off the sidelines.
Investors who can stomach the possibility of more near-term risks might decide now is time to start buying beaten-down large cap names that trade miles below their highs even as Nvidia, Apple, and others break new ground. Remember, some of the best times to buy stocks is when seemingly no one else does.
Enphase Energy, Inc. (ENPH) is a technology firm that’s thrived as one of the largest makers of microinverter-based solar and battery systems in the world. Inverters are vital high-tech components in the solar ecosystem because they convert the DC power that solar panels produce into the AC power used in our homes and businesses. The solar energy market is well established in the U.S. and across many other countries. Plus, hundreds of billions of dollars are flowing into solar energy expansion as part of an evolving energy landscape.
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Enphase topped our EPS estimate once again in late April, but it provided downbeat guidance as it faces near-term setbacks in the U.S. ENPH stock has been crushed in 2023 based on its subdued outlook and overall slowing growth as it comes up against a very difficult-to-compete-against stretch that saw it soar from around $300 million in sales in 2018 to $2.33 billion in 2022.
Still, Zacks estimates call for Enphase’s revenue to climb from $2.33 billion to $3.10 billion in FY23, which would mark 33% sales growth and then post another 25% revenue expansion to reach $3.87 billion next year. Meanwhile, its adjusted quarterly earnings are projected to climb by 20% and 35%, respectively.
ENPH currently lands a Zacks Rank #3 (Hold) and its adjusted EPS outlook has held up rather well considering the thrashing the stock has taken—with its outlook for FY23 and FY24 still up from where they were last year.
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Enphase shares have soared roughly 2,200% in the last five years to double Tesla (TSLA) and Nvidia (NVDA). This staggering run includes a 50% fall from its early December 2022 records. ENPH is now trading around where it was at the end of 2020 and nearly 60% below its average Zacks price target. Enphase is also trading at a 76% discount to its highs at 33X forward 12-month earnings.
All that said, ENPH is hovering at a potentially worrisome level in the near term from a technical perspective, with the stock below both its 200-day and 50-day moving averages. Investors might want to hold off until we see how Enphase trades in the coming days and weeks. But if it finds support at its 200-week moving average (nearby chart) it could be poised to start mounting a comeback.
Public Storage (PSA) is one of the largest owners, operators, and developers of self-storage facilities on the planet, with nearly 3,000 facilities in the U.S. and almost two million customers. PSA is a REIT that’s been gaining momentum for years as Americans continue to buy more stuff. Public Storage grew its revenue at a steadily impressive pace over the last 20-plus years, including 22% sales growth in 2022 (+15% comps) and 17% in 2021.
Zacks estimates call for PSA to post another 7.4% revenue growth in FY23 and 5.2% in FY24, which would mark stronger expansion compared to the several-year stretch prior to Covid. And Public Storage’s adjusted FFO (which are essentially earnings for REITs) are projected to climb by over 5% during both years.
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PSA lands a Zacks Rank #3 (Hold) right now, with its bottom-line revisions stagnating recently. Public Storage’s FY23 and FY24 outlook does, however, remain solidly above where they were at the start of 2022. PSA flexed its financial firepower when it lifted its dividend by 50% back in February to help it yield 4.2% at the moment.
PSA shares have climbed 735% over the last 20 years to crush the S&P 500’s 350%. And Public Storage has climbed by 51% in the past three years to top the market’s 40% run. The outperformance includes the fact that Public Storage stock is down 30% from its April 2022 highs. PSA is currently trading 20% below its average Zacks price target. The stock is also sitting 20% below its own 10-year median and at a 40% discount to its highs at 16.8X forward 12-month earnings.
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Like Enphase, Public Storage is trading below both its 50-day and 200-day moving averages, as well as sitting underneath its 50-week. The stock might have to find support at its 200-week moving average soon. And if it does, some investors might want to start buying PSA shares.
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