August 1, 2022, Apple Inc. (NASDAQ:AAPL) and Etsy, Inc. (NASDAQ:ETSY)
The worst could be behind us. Following blowout earnings reports, these companies are the two best stocks to buy now.
Despite another 75 bps rate hike and a disappointing GDP reading revealing a likely recession, July closed as the best month the market’s seen since 2020. The hope is the worst is behind us as we charge into August with significant momentum and opportunities. Following blowout earnings reports, Apple Inc. (NASDAQ:AAPL) and Etsy, Inc. (NASDAQ:ETSY) could look like the best stocks to buy now.
Apple is one of the best stocks to buy now because it’s a stock you “own” and “don’t trade.” This has been a long-time mantra of CNBC personality Jim Cramer. Throughout its history, it’s consistently outperformed and shown resiliency. It appears to be doing so once again following an upbeat earnings report. As Apple signals that the worst is behind us, outstanding fundamentals and growth potential overrules recession concerns for this firm.
Then there’s the eCommerce platform Etsy. This pandemic-era darling saw its stock in free fall for much of the year after skyrocketing throughout 2020 and 2021. But, with renewed momentum and a strong earnings report, it’s angling to be another of the best stocks to buy now. As of December 31, 2021, it connected 7.5 million active sellers to 96.3 million active buyers; and had 120 million items for sale. With a renewed focus on customer experience, retention, and repeat sales, Etsy could continue building on its 54.78% surge since its June lows.
So enough talk. Let’s see what other reasons why these names are the best stocks to buy now.
Apple Inc. (NASDAQ:AAPL)
After blowing its latest earnings report out of the water, the world’s largest enterprise by market cap still has a double-digit upside.
What does Apple even do anymore? You could call it a tech company, but that ignores its consumer goods and services. It’s like referring to Amazon as only an eCommerce company. Doing so wholly ignores AWS, one of its most consistent revenue drivers.
The bottom line is that Apple will always be one of the best stocks to buy now, no matter the economic climate. It is the world’s most valuable stock by market cap. It remains a prominent player in the technology hardware, storage & peripherals industry.
Most of all, it is a long-term outperformer that’s seen significant momentum over the last month and a half.
So with renewed momentum and potentially clearing storm clouds, there are several reasons why AAPL sits as one of the best stocks to buy now.
Apple Just Clobbered its Q3 Earnings Report and Could Just Be Getting Started
Inflation, supply chain fears, and China COVID shutdowns have concerned Apple shareholders in 2022. But the worst could be behind us.
Apple surged Thursday (July 28, 2022) following better-than-expected Q3 figures and an upbeat forecast proclaiming that sales should “accelerate” this quarter.
Apple is one of the best stocks to buy now from that alone.
Apple reported EPS of $1.20 and topped consensus estimates of $1.14. Revenue also came in at $82.96 billion for the quarter, largely in line with analyst forecasts and a 1.9% year-over-year increase.
However, if you break down its revenue, the figures look more impressive.
- Revenue from the iPhone came in at $40.7B and accounted for nearly half of Apple’s total revenue.
- Revenue from iPhone sales increased 3% year-over-year, and Apple saw a “record” number of people switch over from Android throughout the quarter.
- Apple’s Services division saw revenue increase 12% year-over-year to $19.6B
- Over the last 12 months, the number of people paying recurring subscription fees grew 23% to 860M.
While Apple did not provide formal guidance, CEO Tim Cook and CFO Luca Maestri had investors cheering. Cook, for one, said he expects revenue to accelerate in September. He also said he hasn’t seen any adverse economic effects on iPhone sales and that the Company is continuing to hire. Maestri elaborated on these thoughts and said the situation on supply is improving and that he does not expect to see the same supply constraints as June’s.
It would make sense that earnings for Apple are expected to grow by 7.55% in the coming year. Net income is also projected to grow 5.3% and average 4.9% over the next 5 years, while revenue could see an 11.1% 5-year CAGR.
The Fundamentals Paint an Even Prettier Picture
Apple is also one of the best stocks to buy now because of its rock-solid balance sheet and fundamentals. A near-perfect 8 out of 9 Piotroski Score is an excellent way to start, as it provides a brief overview of the liquidity of Apple’s Balance Sheet, Profitability, and Operating Efficiency.
With cash flows that sufficiently cover interest payments, Apple also has outstanding margins reflecting its profitability and efficiency, including its
Helping its case as a fundamentally sound juggernaut, AAPL continues offering a consistently growing dividend. Its 0.57% dividend yield is ok, but it’s the growth potential we’re here for. It’s hiked its dividend for 11 straight years and recently bumped it up by 5%. With extremely low payout ratios under 16%, Apple’s dividend could grow 12.2% at a 9.1% 5-year CAGR.
Long-Term Buy Signals are Appearing
Looking at Apple’s stock from a technical perspective also makes it one of the best stocks to buy now.
Barchart notes Apple’s 20 Day Moving Average and 20 – 50 Day MACD Oscillator as short-term BUY indicators and its 50 Day Moving Average as a mid-term BUY indicator. However, Barchart is incredibly bullish on Apple’s long-term prospects. Three of its four long-term indicators are signaling BUY.
- 100 Day Moving Average
- 150 Day Moving Average
- 200 Day Moving Average
Analysts Still See a Double-Digit Upside for AAPL
Data from Tipranks reveals that 28 Wall Street analysts offered 12-month price targets for Apple in the last 3 months. AAPL currently has a high price target of $210.00, a low of $136.00, and an average of $180.07. The average price target represents a 10.81% upside from July 29, 2022’s closing price of $162.51.
Throughout July, many analysts have either initiated or boosted price targets well above AAPL’s average.
- Evercore ISI- Boosted price target from $180.00 to $185.00
- Raymond James- $185.00 price target
- Citigroup- Maintained BUY and boosted price target from $175.00 to $185.00
- Bank of America- $185.00 price target
- JPMorgan Chase & Co.- $200.00 price target
- UBS Group- $185.00 price target
- Wells Fargo & Company- $185.00 price target
AAPL’s year-to-date low and high are $129.04 and $182.94, respectively.
Etsy, Inc. (NASDAQ:ETSY)
After rallying 50+% from its lows, this eCommerce upstart looks reborn with a 60+% upside.
In some sense, when it comes to stocks, the law of gravity applies- “what goes up must come down.”
Etsy is a classic case of this.
As one of the sexiest stay-at-home pandemic players, the online retailer geared towards small businesses, artists, and entrepreneurs, once rocketed 927.55% from its pandemic-era low of under $30 a share to its late-2021 peak of $307.75. It then promptly lost almost 80% of its market value when it touched its 2022 low of $67.01.
Gravity.
However, primarily based on the earnings it just reported, growth prospects, and analyst upside, Etsy’s 54.78% surge since its June lows does not look like a fluke. Etsy is amid an impressive uptrend, potentially with its worst declines behind it, and at an attractive level 66+% below its highs.
It is one of the best stocks to buy now, and a deeper explanation of the above reasons makes it blatantly obvious.
The Stock’s Summer Rebound and Earnings Point to a Robust Comeback Story
We already did a bit of an overview on Etsy’s recent 54.78% rally since bottoming in June. Its Q2 earnings report from last week (July 27, 2022), though, was so good that it not only caused Etsy’s shares to rocket 10% during market hours. It helped bring up the entire beaten-down eCommerce sector, with stocks like Shopify benefitting.
The more the market shakes out, the clearer it appears the worst for Etsy is behind us and already baked into the stock price.
First of all, Etsy’s revenue came in at $585 million. While shaking off significant macroeconomic headwinds, it beat the consensus estimate of $556.85 and marked a 10.6% year-over-year increase.
Etsy’s CFO, Rachel Glaser, also noted that adjusted (non-GAAP) EBITDA increased by 16.7%. She further stated that Etsy’s highly variable cost structure drove a robust second quarter adjusted EBITDA margin of 28% and an operating cash flow of $125.8 million.
On the bottom line, Etsy’s EPS came in at $0.51 and beat consensus analyst estimates of $0.31 by $0.20.
With several growth initiatives to improve customer experience, retention, and repeat sales, this may only be the start of a historic recovery story. Etsy’s earnings could grow by 21.92% in the coming year, revenue could see a 5-year CAGR of 44.9%, and net income could grow 9.7%.
Outstanding Fundamentals Point to a Misunderstood Growth Stock
Etsy is indeed a misunderstood growth stock. While many may think of this stock as another Peloton or Zoom that caught heat just because of a global pandemic, Etsy’s underlying fundamentals are surprisingly strong.
First, management has been aggressively buying back shares. Cash flows can also sufficiently cover interest payments.
The asset-light nature of Etsy’s business has also bolstered its margins, such as its
Based on its Street-High Target and Recent Analyst Activity, ETSY Could Move 60+%
According to TipRanks, 20 Wall Street analysts offered 12-month price targets for Etsy in the last 3 months. While it has a low price target of $83.00 and an average of $115.50, representing an 11.36% upside from July 29, 2022’s $103.72 closing price, in reality, ETSY could have much more upside.
Notably, it has a street-high price target of $168.00, which points to a nearly 62% upside.
While some analysts aren’t as high on ETSY as others, some analyst activity since June sees Etsy’s upside closer to its high than its average.
- BTIG Research-Boosted target from $105.00 to $122.00
- Oppenheimer- OUTPERFORM rating and boosted target from $120.00 to $127.00
- DA Davidson- $146.00 price target
- Stifel Nicolaus- $125 price target
- JMP Securities-OUTPERFORM rating and $125.00 price target
ETSY’s year-to-date low and high at $67.01 and $224.73, respectively.
