If you experience the pain of missing out GameStop stock’s incredible rise, do not get it right. There are many good investment opportunities out there, and you do not have to expose yourself to the risk associated with chasing short-term pressure mania which is likely to be a short-lived game.
With that in mind, we asked three Motley Fool contributors to highlight a company that has the potential to deliver stellar returns. Read on to see why they identified Glu Mobile (NASDAQ: GLUU), Match group (NASDAQ: MTCH), en Applied materials (NASDAQ: AMAT) as stocks ready to crush the market.
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This small-cap stock could be a big winner
Keith Noonan (Glu Mobile): If you are looking for exposure to the video game industry, or just stocks that can deliver the potential to deliver tremendous performance, Glu Mobile stands out as one of my top picks. The publisher has a market capitalization of approximately $ 1.6 billion and trades at 17.5 times this year’s expected earnings and 2.6 times expected sales. It looks very cheap in this range, and even moderate success in the future may be enough to send the stock significantly higher.
Glu has a collection of franchises for video games aimed primarily at casual video games. These properties include lifestyle genre entries such as Design House and Desire fashion, licensed known game Kim Kardashian: Hollywood, a sports franchise MLB Tap Sport Baseball. Although these games are free, Glu earns money by having players spend on items and currencies in the game. The game maker also extends the life of its titles with regular content updates.
Management expects that simply releasing content updates for its current range of games will be enough to make these bookings between 8% and 10% higher this year. These prospects indicate that the company has an impressively long life for its core franchises, and Glu also plans to launch four new intellectual properties this year. If even one of these new games becomes a hit, expect Glu’s valuation to rise.
Even better, a relatively solid core range and the potential for robust performance of upcoming games is not the only reason to like Glu. The company has a strong cash position and is looking at acquisition targets that could accelerate growth. It’s also on the doorstep with the pressure to integrate global e-commerce stores into video games. Glu is by far the most flashy name in the gambling industry, but he has several ways to achieve big wins, and the stock is still valued cheaply.
The love connection
Joe Tenebruso (Match group): Humans are social beings, and the coronavirus pandemic has been keeping us apart for far too long. Fortunately, thanks to promising vaccinations from people like Modern, Pfizer, and maybe Johnson & Johnson, we may soon be nearing the end of the COVID-19 crisis.
All this holds up well for Match Group. The leading provider of dating applications is likely to see a new demand for its wide range of relationship building products, which are available in 40 languages in countries around the world. His crown jewel is Tinder, the most downloaded and best revenue app in the world.
More than ten million people already subscribe to Match Group’s products. This figure has risen steadily over the past few years, fueled by the turbulent growth of Tinder, and it is likely to rise even higher as the health crisis subsides.
In addition, Match Group’s recurring revenue and strong cash flow production put the company on a solid financial footing, reducing risk for investors. Over the first three quarters of 2020, Match Group’s revenue increased by almost 16% to $ 1.7 billion. Its operating and free cash flow, meanwhile, rose 11% to $ 519 million and $ 486 million, respectively.
Management expects the company’s growth to accelerate in the coming quarters, with revenue up 19% to $ 650 million in the fourth quarter. It looks like this love-filled growth story will enjoy a boom in the post-pandemic, which is now a great time to pick up stocks.
Applied material shoots on all cylinders
Jamal Carnette (Applied material): Instead of being a disappointing retailer of video games, how about investing in a business that helps move the world to the next generation of technology? The Internet of Things, 5G connectivity, and artificial intelligence need chips, and Applied Materials provides the critical support and equipment disc makers need to keep silicone out. Shares may not triple figures in 2021 as in many of these fads, but a 70% annual return is nothing to mock.
Applied Materials shares have continued to rise since the company reported a top and bottom line for the fourth quarter. The company’s larger and more profitable semiconductor systems division (66% of total sales) increased net sales by 33% year-on-year, increasing its heavily noted gross margin to 1.9 percentage points and free cash flow by 58% higher than the previous year.
Look for Applied to perform even better in 2021, as management was strong on a number of fronts. First, the company had revenue of $ 4.95 billion at the midpoint of the first quarter, significantly higher than the consensus estimates. This is possibly even too light as the fourth quarter was affected by a licensing requirement imposed by the government on a China foundry customer, who is apparently on track to iron out. Finally, the company’s backlog set a record at the end of the year, indicating a significant supply of business in 2021. If you look beyond the fashion stocks and concentrate on the future, you see that Applied Materials has a runway for growth in 2021 and beyond.