If you’re feeling the pain of losing GameStop incredible increase in shares, don’t fix it. There are plenty of big investment opportunities out there, and you don’t have to take the risk of chasing the short-squeeze craze that will likely end up being a short-lived game.
With that in mind, we asked three Motley Fool employees to highlight a company with the potential to offer stellar returns. Keep reading to see why they identified Glu Mobile (NASDAQ: GLUU), Match Group (NASDAQ: MTCH)and Applied Materials (NASDAQ: AMAT) like stocks that are about to crush the market.
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This low capitalization stock can be a big winner
Keith Noonan (Glu Mobile): Whether you’re looking for exposure in the video game industry or just stocks that have the potential to deliver incredible performance, Glu Mobile stands out as one of my top options. The publisher has a market capitalization of about $ 1.6 billion and trades about 17.5 times this year’s expected earnings and 2.6 times its expected sales. It appears to have a very low value in this range, and even moderate future success may be enough to send the stock significantly higher.
Glu has a collection of video game franchises that are primarily aimed at casual video game players. These properties include lifestyle gender entries, such as Design Home and Covet Fashion, licensed celebrity game Kim Kardashian: Hollywoodand sports franchise MLB Tap Sports Baseball. While all of these games are free, Glu makes money by making players spend on in-game items and coins. The game creator also extends the life of your titles with regular content updates.
Management expects that simply launching content updates for its current line of games will be enough to increase bookings by 8% to 10% this year. That outlook suggests that the company is seeing impressive longevity for its major franchises, and Glu also plans to launch four new intellectual properties this year. If at least one of these new games is a success, Glu’s rating will skyrocket.
Better yet, a relatively robust core line and the robust performance potential of upcoming games are not the only reasons to like Glu. The company has a strong cash position and is looking for acquisition targets that can accelerate its growth. It is also ahead of the curve with its effort to integrate global e-commerce stores with video games. Glu is far from the most striking name in the gaming industry, but it has several avenues for big wins and stocks continue to be valued cheaply.
The loving connection
Joe Tenebruso (Correspondence group): People are social creatures, and the coronavirus pandemic has kept us apart for a long time. Fortunately, thanks to the promising vaccines of people like Modern, Pfizer, and maybe Johnson & Johnson, we will soon be approaching the end of the COVID-19 crisis.
All of this bodes well for the Match Group. The leading provider of dating apps is likely to see renewed demand for its wide range of relationship building products, which are available in 40 languages in countries around the world. Her crown jewel is Tinder, the most downloaded and highest grossing dating app in the world.
More than 10 million people already subscribe to Match Group products. That number has steadily increased in recent years, fueled by Tinder’s torrid growth, and is likely to increase even further as the health crisis subsides.
In addition, Match Group’s subscription-based recurring revenue and robust cash flow production put the company on a solid financial footing, thereby reducing risks for investors. In the first three quarters of 2020, Match Group’s revenue grew by almost 16%, to $ 1.7 billion. Its operating and free cash flow, however, increased 11% to $ 519 million and $ 486 million, respectively.
Management expects the company’s growth to accelerate in the coming quarters, with revenue increasing by 19%, to $ 650 million in the fourth quarter. This love-filled growth story looks set to enjoy a post-pandemic boom, which is a great time to acquire some stocks.
Applied Materials is firing on all cylinders
Jamal Carnette (Applied Materials): Instead of a bankrupt video game retailer, how about you invest in a company that is helping to take 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 that chip makers need to continue producing silicon. Shares may not rise by three digits in 2021 like many of these fashion names, but a 70% one-year return is nothing to scoff at.
Applied Materials’ shares have continued to rise since the company reported a fall in the top and bottom lines in the fourth quarter. The company’s largest and most profitable semiconductor systems division (66% of total sales) increased net sales by 33% year-over-year, raising its grossly observed gross margin to 1.9 percentage points and free cash flow to 58 % compared to the previous year.
Look for Applied to continue showing superior performance in 2021, as the administration has been optimistic on several fronts. First, the company targeted first-quarter revenue at $ 4.95 billion at the midpoint, significantly higher than consensus estimates. This is likely to be very light, as the fourth quarter was impacted by a licensing requirement imposed by the government on a foundry customer in China that appears to be on the way to being eliminated. Finally, the company’s order book reached a year-end record, pointing to a significant business offer in 2021. If you look beyond fashion stocks and focus on the future, you will see that Applied Materials has a lead growth in 2021 and beyond.