Multi-decade-high inflation, supply chain issues, surging COVID-19 cases, and increasing jobless claims have been causing immense volatility in the stock markets lately. Major benchmark indexes have retreated significantly this month, raising concerns over the potential length and depth of the correction.
In this environment, investing in fundamentally sound mega-cap stocks is considered a safe strategy because these stocks usually withstand market fluctuations better than shares of smaller companies. Furthermore, these companies’ dominant market positions accord their financials some resilience even in adverse economic conditions.
Despite the possibility of a continuing market weakness, Wall Street analysts expect mega-cap stocks Amazon.com, Inc. (AMZN), NVIDIA Corporation (NVDA), The Walt Disney Company (DIS), salesforce.com, inc. (CRM), and PayPal Holdings, Inc. (PYPL) to deliver a than 40% gain in the coming months. Therefore, we think it could be worth adding these stocks to one’s watchlist.
Amazon.com, Inc. (AMZN)
With a market capitalization of $1.47 trillion, AMZN in North Seattle, Wash., is a multinational technology company that is an online retailer of consumer products and subscriptions, operator of Amazon Web Services (AWS), one of the biggest cloud platforms in the digital computing space, and offers compute, storage, database, analytics, machine learning, fulfillment, advertising, publishing, and digital content subscriptions. It also offers personalized shopping services, web-based credit card payment, and direct shipping to customers.
On Jan. 10, 2022, AMZN’s Amazon Web Services, Inc. (AWS) announced the general availability of Amazon Elastic Compute Cloud (Amazon EC2) Hpc6a instances, a new instance type that is purpose-built for tightly coupled high-performance computing (HPC) workloads. Powered by Advanced Micro Devices, Inc.’s (AMD) 3rd Gen AMD EPYC processors, these Hpc6a instances deliver up to 65% better price-performance than similar compute-optimized Amazon EC2 instances. AMZN expects to witness high demand for these Hpc6a instances from organizations that rely on HPC.
AMZN’s total net sales for its fiscal 2021 third quarter, ended Sept.30, 2021, increased 15.3% year-over-year to $110.81 billion. As of Sept. 30, 2021, the company had $29.94 billion in cash and cash equivalents.
Analysts expect the company’s revenue to increase 21.8% year-over-year to $470.32 billion in its fiscal 2021, ended Dec. 31, 2021. It surpassed the consensus EPS estimates in three of the trailing four quarters. AMZN’s EPS is expected to grow at a 36% rate per annum over the next five years.
The stock has declined 16.3% in price over the past month and closed yesterday’s trading session at $2,809.88. All 30 Wall Street analysts rating the stock have rated it a Buy. The stock’s $4,150.83 average price target indicates 43.6% upside potential.
NVIDIA Corporation (NVDA)
NVDA designs and manufactures computer graphics processors, chipsets, and related multimedia software used in the gaming, professional visualization, data center, and automotive markets. The Santa Clara, Calif–based company’s products are sold to OEMs, ODMs, system builders, add-in board manufacturers, retailers/distributors, Internet and cloud service providers, mapping companies, and other ecosystem participants. It has a market capitalization of $582.43 billion.
On Jan. 24, 2022, NVDA announced that technology conglomerate Meta Platforms, Inc. (FB) selected NVDA’s NVIDIA DGX A100 systems to be installed in FB’s AI supercomputer–The AI Research SuperCluster (RSC)–to build better AI models and progress toward developing metaverse. The new AI supercomputer uses 760 NVIDIA DGX A100 systems as its compute nodes, and 6,080 NVIDIA A100 GPUs are linked on an NVIDIA Quantum 200Gb/s InfiniBand network to deliver 1,895 petaflops of TF32 performance. FB plans to expand to 16,000 GPUs to deliver a whopping five exaflops of mixed precision AI performance. NVDA is looking forward to a long-term partnership with FB.
NVDA’s total revenue for its fiscal 2022 third quarter, ended Oct. 31, 2021, increased 50.3% year-over-year to $7.10 billion. The company’s non-GAAP gross profit came in at $4.76 billion, representing a 53.8% year-over-year improvement. Its non-GAAP income from operations came in at $3.39 billion for the quarter, indicating a 69.9% rise from the prior-year period. NVDA’s non-GAAP net income was $2.97 billion, up 62.1% from the year-ago period. And its non-GAAP EPS increased 12.5% year-over-year to $1.17. The company had $1.29 billion in cash and cash equivalents as of Oct. 31, 2021.
The $4.34 consensus EPS estimate for its fiscal year 2022 ending Jan. 31, 2022, represents a 73.6% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. Analysts expect NVDA’s revenue to rise 60% year-over-year to $26.68 billion. And its EPS is expected to grow at a 39.4% per annum rate over the next five years.
NVDA’s shares have declined 21.2% in price over the past month and ended yesterday’s trading session at $233.72. Of 25 Wall Street analysts that have rated the stock, 23 have rated it a Buy, while two rated it Hold. Analysts expect the stock’s price to hit $359.17 in the near term, representing 53.7% upside potential.
The Walt Disney Company (DIS)
As one of the top entertainment companies worldwide, DIS in Burbank, Calif., operates through two business segments—Disney Media and Entertainment Distribution; and Disney Parks, Experiences, and Products. The company engages in film and episodic production and distribution activities, and operates television broadcast networks, studios that produce motion pictures, and direct-to-consumer streaming services. It sells branded merchandise through retail, online, and wholesale businesses and develops and publishes books, comics, and magazines. It has a market capitalization of $250.24 billion.
On Oct. 28, 2021, ViacomCBS Inc.’s (VIAC) ViacomCBS Networks International (VCNI) business division entered agreed to acquire a majority stake in Fox TeleColombia & Estudios TeleMexico, the acclaimed Spanish language content producer, from DIS and its founding family. Through this transaction, VCNI will gain access to Fox TeleColombia & Estudios TeleMexico’s studio operations in Colombia and Mexico and many hours of library content. The transaction is expected to help the companies gain more market reach in the coming months.
DIS’ revenues for its fiscal 2021 fourth quarter, ended Oct. 2, 2021, increased 26% year-over-year to $18.53 billion. The company’s pre-tax income from continuing operations came in at $290 million, versus a $580 million loss in the prior-year period. Its net income was $159 million for the quarter, versus a $710 million net loss in the prior-year period. DIS’ EPS was $0.09, compared to a $0.39 loss per share in the year-ago period. The company had $15.96 billion in cash and cash equivalents as of Oct. 2, 2021.
The $3.81 consensus EPS estimate for its fiscal year 2022, ending Sept. 30, 2022, indicates an 88.6% rise from the prior-year period. Analysts expect the company’s revenue to be $73.58 billion for the same fiscal year, representing a 24% rise from the prior year. DIS’ EPS is expected to grow at a 37.7% rate per annum over the next five years.
DIS stock has declined 10.5% in price over the past month to close yesterday’s trading session at $137.46. Of 22 Wall Street analysts rating the stock, 15 have rated it a Buy, and seven rated it Hold. DIS’ average price target of $195.35 represents 42.1% upside potential.
salesforce.com, inc. (CRM)
With a $219.69 billion market capitalization, San Francisco’s CRM provides enterprise cloud computing solutions that focus on customer relationship management to businesses and industries worldwide. Its solutions include sales force automation, customer service and support, marketing automation, digital commerce, community management, analytics, and a cloud platform for building custom applications.
On Jan.13, 2022, CRM announced new partnerships to power the future of commerce. The addition of PayPal Holdings, Inc.’s (PYPL) PayPal should enable sellers to use Salesforce Payments to reduce checkout friction and drive sales. Built on Commerce Cloud by ISV partner XCentium, CRM’s Salesforce B2B Commerce for wholesale apparel and fashion companies supports preseason ordering and automated interactions across self-service and sales teams. Hosted by Alibaba Group Holding Limited’s (BABA) Alibaba Cloud, Salesforce Social Commerce provides tools needed by retailers to evolve with China’s ever-growing commerce ecosystem and easily integrate with digital commerce systems. CRM looks forward to helping retailers create fast, connected, and highly-personalized shopping experiences.
CRM’s total revenues for its fiscal 2022 third quarter, ended Oct. 31, 2021, increased 26.7% year-over-year to $6.86 billion. The company’s gross profit came in at $5.02 billion, representing a 24.7% rise from the year-ago period. Its non-GAAP income from operations came in at $1.36 billion for the quarter, up 26.6% from the prior-year period. It had $4.75 billion in cash and cash equivalents as of October 31, 2021.
Analysts expect the company’s revenue to increase 24.2% year-over-year to $26.40 billion for its fiscal 2022, ending Jan.31, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. CRM’s EPS is expected to grow at a 10% rate per annum over the next five years.
Over the past month, CRM’s shares have declined 11.9% in price to close yesterday’s trading session at $223.03. Twenty three of 26 Wall Street analysts rating the stock have rated it a Buy, and three rated it Hold. The $337.87 average price target represents 51.5% upside potential.
PayPal Holdings, Inc. (PYPL)
With a $190.54 market capitalization, San Jose, Calif-based PYPL operates as a technology platform and digital payments company that enables customers and merchants to execute digital and mobile payments worldwide. The payments platform allows consumers to transfer and withdraw funds from their bank accounts and hold balances in their PayPal accounts in various currencies. It also offers gateway services that enable merchants to accept payments online with credit or debit cards and digital wallets.
On Jan.13, 2022, PYPL and CRM partnered to provide global enterprise merchants access to PYPL’s checkout solutions through the PayPal Commerce Platform when integrating through Salesforce Payments. By offering a variety of payment methods, PYPL is looking forward to gaining reach to a broader customer base and helping increase conversion rates.
For its fiscal third quarter, ended Sept. 30, 2021, PYPL’s net revenues increased 13.2% year-over-year to $6.18 billion. The company’s non-GAAP net income came in at $1.32 billion for the quarter, marking a 3.5% year-over-year improvement. Its non-GAAP EPS improved 3.7% year-over-year to $1.11. The company had cash and cash equivalents of $7.78 billion as of Sept.30, 2021.
The $4.62 consensus EPS estimate for its fiscal year 2021 ending Dec. 31, 2021, represents a 19.1% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. Analysts expect PYPL’s revenue to rise 18.2% year-over-year to $26.68 billion in the same fiscal year. And PYPL’s EPS is expected to grow at a 20.5% rate per annum over the next five years.
PYPL has declined 15.5% in price over the past month and ended yesterday’s trading session at $162.17. Of 33 Wall Street analysts that have rated the stock, 26 have rated it a Buy, while six rated it Hold. Analysts expect the stock’s price to hit $254.58 in the near term, representing 57% upside potential.
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AMZN shares were trading at $2,815.12 per share on Tuesday afternoon, down $75.76 (-2.62%). Year-to-date, AMZN has declined -15.57%, versus a -7.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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