May has mercifully arrived after a treacherous April for stocks. The major indices notched multi-week losing streaks, and the Nasdaq notably saw its worst month since the financial crisis of 2008.
The first trading day of May began with more declines and the S&P 500 touching an intraday 2022 low. However, the market sharply reversed and ended well off the lows. Yet investors remain understandably on edge.
There’s the war in Ukraine slogging on for another month, and with escalating tensions at that. Coupled with the Fed’s liquidity bubble potential popping, you have a double whammy of economic and geopolitical worries- never a good recipe for a bull market. As the Fed tightens monetary policy and confronts the hottest inflation in four decades, we could be on the cusp of drastic interest rate hikes. This month, a 50 basis point hike is all but set in stone, and subsequent 75 basis point hikes on tap for June and July are certainly being priced in.
Recession fears are justified, yet markets always tend to overreact and look forward. When markets have downturns, often there are opportunities at deep discounts. Two years ago, in March, the world looked like it was ending thanks to a novel virus shutting down the globe. When the market began sharply reversing, it was not like the reality on the ground was dramatically better. The market looked forward 12+ months down the road, priced in Fed liquidity, and anticipated a red-hot recovery. You would have seen massive gains if you bought the dip during this market crash.
For long-term investors interested in focusing on 3-5+ years from now, rather than solely the here and now, opportunities are sprouting up left and right with solid companies possessing strong balance sheets.
Apple Inc. (NASDAQ:AAPL) and Marriott International, Inc. (NASDAQ:MAR) are two stocks that fit this bill perfectly. These blue chips could have perfect positioning to chase upside from current dips while surviving market volatility. Better yet, these companies could have even more room to run based on institutional activity and analyst targets.
Apple Inc. (NASDAQ:AAPL)
Worried about Apple? Warren Buffet upped his stake by $600M last quarter on a dip… and would’ve bought more if it didn’t recover.
Although Apple is -13.55% below its all-time high as of May 2, 2022’s market close, there are many reasons why famed CNBC personality Jim Cramer says:
“you own Apple you don’t trade it.”
Apple is the most valuable company globally by market cap and remains a consumer products giant. Yet beyond the smartphones, computers, tablets, watches, and wearables that it designs, manufactures, and markets worldwide, it continues to generate revenues from its various subscription and application services. It is the blue chip of blue chips and should still see substantial demand despite inflation and supply chain concerns.
Apple is the type of stock you always want to pounce on when it sees declines. It has a virtually unbreakable balance sheet and cash flows that can sufficiently cover interest payments. It’s also immensely profitable and has seen astronomical returns over the past 5 years, especially relative to the indices and other large-cap tech competitors. Only Microsoft compares.
Coupled with a decent dividend and share buyback strategy, you have a stock built for consistent yields. Warren Buffett, for these reasons, invested another $600 million in Apple during Q1 2022, following a three-day stock pullback. And he would’ve bought more if the stock fell to an even deeper discount.
Who knows how much he’ll buy this quarter with this recent slide?
Despite the stock’s latest downturn, an overwhelming majority of analysts remain immensely bullish on AAPL. Based on 26 total ratings from the past three months, according to TipRanks, the general consensus is that Apple is a STRONG BUY. 21 rated it a buy, 5 a hold, and 0 a sell. The average price target is $191.04, with a high forecast of $215.00 and a low of $161.00. The average price target represents a 20.94% upside move from May 2, 2022’s close of $157.96.
Notably, on April 29, 2022, the following analysts maintained BUY or OVERWEIGHT ratings:
- Deutsche Bank: BUY, $200 price target
- Morgan Stanley: OVERWEIGHT, $195 price target
- JP Morgan: OVERWEIGHT, $200 price target
- Piper Sandler: OVERWEIGHT, $195 price target
BofA Securities analyst Wamsi Mohan has the highest price target at $215.00 due to multiple tailwinds on both hardware (new product cycles) and services (acceleration in services, growth in users, average sell prices, and increased penetration of installed base).
The Company’s year-to-date low and high are $150.10 and $182.71, respectively. On April 28, 2022, AAPL announced its 2022 second quarter earnings, which unsurprisingly shattered estimates and broke records. The Company posted a quarterly revenue record of $97.3 billion, up 9 percent year over year, and beating consensus estimates by $3.29B, as well as EPS of $1.52, beating estimates by $0.09. Services revenue also reached new all-time highs, and Apple in the process increased its dividend by 5 percent.
In typical Apple fashion, it also authorized $90 billion in share buybacks.
Marriott International, Inc (NASDAQ:MAR)
A hotel giant positioned for normalcy and a surge in travel demand.
Marriott’s stock performance slightly lagged behind many reopening and travel stocks over the last 12 months despite seeing some gains. However, 2022 has been a different story. It’s been a remarkably strong performer year-to-date despite the consistent threats of COVID and inflation. A hotel and leisure giant, Marriott International is one of the world’s largest hotel chains, with more than 7500 hotels and over 14000 rooms around the globe as of 2021.
With encouraging momentum despite the broader market’s downturn, Marriott is heading into tomorrow’s earnings announcement (May 4, 2022) and the second half of the year with solid prospects. As countries lift travel restrictions and learn to live with the coronavirus, the MAR stock could be exposed to substantial upside potential while maintaining its strong operations and profitability in the event economic headwinds cut into estimates.
Last quarter, Marriott International’s stock rallied into record territory after crushing Wall Street estimates. It beat EPS forecasts by a whopping $0.30 ($1.30 EPS) and revenue by an astronomical $439.67M ($4.45B in revenue). Furthermore, quarterly revenue rose 104.7% compared to the same quarter a year ago. Although EPS and revenue are expected to come in a little lighter this time, the odds could be in Marriott’s favor for more positive surprises. After all, in the last 4 quarters, Marriott has beaten EPS estimates, and in the 2 last quarters, beaten revenue estimates.
While the Nasdaq continues struggling through a brutal correction and other hotel stocks sputter, Marriott’s 2022 fortunes have differed. It is currently 2022’s 10th best performing Nasdaq stock and has risen 8.87% year-to-date, outperforming many competitors in the process.
The MAR stock is flashing bullish technical indicators too. BarChart gives the stock an 88% BUY score based on its 20 – 50 Day MACD Oscillator, 20 – 100 Day MACD Oscillator, 20 – 200 Day MACD Oscillator, 50 Day Moving Average, 50 – 100 Day MACD Oscillator, 50 – 150 Day MACD Oscillator, 50 – 200 Day MACD Oscillator, 100 Day Moving Average, 150 Day Moving Average, 200 Day Moving Average, and 100 – 200 Day MACD Oscillator.
Based on 13 total ratings from the past three months, according to TipRanks, the general consensus is that the Marriott stock is a MODERATE BUY. 4 rated it a buy, 9 a hold, and 0 a sell. The average price target is $181.50, with a high forecast of $210.00 and a low of $164.00. The average price target represents 2.35% of upside potential from its May 2, 2022, closing price of $178.14.
John D. Staszak, CFA, Securities Analyst: Consumer Discretionary & Consumer Staples at Argus, is the analyst who, on April 19, 2022, raised his price target to $210. Jefferies analyst David Katz that same day also reiterated a Buy rating and $208.00 price target. He focused long-term on the acceleration of business travel, potentially leading to peak earnings and a premium multiple rather than reducing the 1Q22 RevPAR and margin estimates.
The Company’s year-to-date low and high are $146.07 and $195.90, respectively.
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