Stocks for the Next Bull Market: Picking the right stocks in a bear market is one of the best ways to generate outsized returns when a new bull market begins.
Here are three stocks to should consider for the next bull market cycle.
Energy drink manufacturer Celsius Holdings (NASDAQ:CELH) has strong potential as a play on the movement for healthier food and drinks. The company’s energy drinks are marketed as more natural and healthier, appealing to consumers who are becoming more concerned with their health.
The standout feature of Celsius is its recent history of earnings surprises. In both of the last two quarters, the company has beaten earnings estimates by 200 percent or more.
Revenue growth has also been exceptionally strong this year, even as inflation and fears of a recession pummeled the consumer marketplace.
In Q1, Celsius achieved YoY growth of 167 percent, coming on top of 140 percent overall growth in 2021.
Over the next 12 months, Celsius has only modest upside potential. The median target price from eight analyst forecasts is $113.50, just 7.6 percent higher than the current price of $105.47.
This number may be skewed by more extreme targets at both the high and low ends of the spectrum, but investors shouldn’t expect massive short-term returns from this stock.
There could, however, be some short-term price activity if a rumored acquisition of Celsius moves forward. Large beverage manufacturers are increasingly looking for ways to appeal to health-conscious consumers.
Acquiring a brand like Celsius would allow a beverage giant like Pepsi or Coca-Cola to do this without developing new products. Rumors of an acquisition effort have not yet been confirmed, but Celsius appears to be a strong candidate for a larger company to pick up.
As a result, Celsius could benefit investors in multiple ways. If an acquisition offer materializes, shareholders who buy at today’s prices could be set up for a profitable arbitrage opportunity. If such a deal isn’t in the works, Celsius still has plenty of long-term potential based on its growth and earnings.
Tech stocks have taken a beating in 2022, and smart TV hardware and software maker Roku (NASDAQ:ROKU) is no exception. The stock is down about 65 percent YTD.
Unlike other companies connected to the world of streaming television, however, Roku has not lost users or seen its revenues shrink drastically.
In Q1, Roku actually added 1.2 million new users. It was also able to increase its revenue per user by more than a third.
Overall revenue rose by 28 percent, showing that Roku was gaining ground even as streaming providers like Netflix struggled.
Earnings and revenue both missed analyst expectations in Q2, though this is mostly due to macroeconomic factors that should eventually improve.
Roku now trades at only about 3.4 times sales, making it a decent value at its current price. If growth begins to pick up again as the economy eventually improves, Roku stock could regain a considerable amount of its former ground.
Like Celsius, Roku is unlikely to produce rapid returns for investors. The median target price for Roku is $82.50, just 4.4 percent above the current price of $79.03. This modest short-term potential, however, likely masks much better long-term prospects.
Roku does face some additional headwinds related to supply chain snarls, as fewer devices using its software are currently being delivered.
As global supply chains begin to normalize, those challenges will likely become less severe. This development could also support higher revenues, earnings and share prices.
Roku is a stock that could be a solid winner in the next bull market cycle. Following its sharp selloff, the stock appears reasonably cheap and the company itself seems to be on relatively solid footing. While it could be a bit slow to take off, Roku is likely a good stock to buy and hold for the foreseeable future.
eCommerce platform Shopify (NYSE:SHOP) has suffered more than most tech stocks this year, losing almost 70 percent of its value YTD.
The company is enduring a perfect storm of rising interest rates that work against high-growth tech stocks and high inflation that may suppress consumer spending. Nevertheless, Shopify could be a good stock to buy for an eventual recovery.
Shopify is still growing, albeit at a slower pace than it was at the height of the pandemic. In Q1, the company reported revenue growth of 22 percent and monthly recurring revenue growth of 17 percent.
Gross merchandise volume increased by 16 percent, and gross profit grew 14 percent. At the end of the quarter, the company also had a cash reserve of $7.25 billion, though this was down slightly from the previous quarter.
This favorable quarter was followed by 16 percent revenue growth in Q2. While this does point to slowing growth rates, it also shows that Shopify still has steam left in it.
Shopify is also trading at its lowest price in five years at just 8 times sales. While still fairly high, the company’s growth potential makes this a reasonable value. Assuming the stock returns to trading closer to its recent historical range, investors who buy today should see a significant return.
Shopify maintains a decent moat as a result of being the best-known eCommerce platform for small and medium-sized businesses.
Several enterprise-scale businesses, including Whole Foods, Kraft Heinz and Hyatt Hotels, also use Shopify’s platform to power their online businesses. As a result, potential competitors would have a very difficult time catching up to Shopify.
Although it is struggling with earnings, Shopify maintains a favorably low debt level. At present, the company’s debt-to-equity ratio stands at just 0.10. This leaves Shopify room to borrow money for future research and development without spending an excessive amount to service its debts.
A final factor in Shopify’s favor is the range of services it is currently building out for its customers. The company is creating a fulfillment network, facilitating cross-border sales and even extending loans to merchants.
With this suite of new offerings, Shopify should be able to increase its revenue from customers by acting as an end-to-end service provider for small businesses.
Like Celsius and Roku, Shopify will likely take some time to bounce back. The median analyst price target for Shopify is $40, down 4.6 percent from the current $41.93 trading price.
Shopify appears to be a good option for buy-and-hold investors looking for a long-term play on eCommerce during the next bull market. While it may take quite some time for the company to recover from its current headwinds, Shopify is a stock that is likely to perform well when the market recovers.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.