Potential Recovery for Underdog Stocks: AMD, Comcast, and Realty Income
While most investors have enjoyed a profitable year so far, not all stocks have joined the party. Approximately one-third of U.S. stocks are down as 2024 progresses. Many need to address their challenges before rebounding, but some of these laggards could still outperform the market next year.
Advanced Micro Devices (NASDAQ: AMD), Comcast (NASDAQ: CMCSA), and Realty Income (NYSE: O) are three notable stocks trading lower this year, which might transform from underperformers to high performers in 2025. Let’s delve into what makes these stocks potential candidates for recovery.
1. Advanced Micro Devices: Down 11% in 2024
The surge in artificial intelligence (AI) has heightened the demand for AI processors, propelling some companies to impressive gains. Despite this momentum, AMD has struggled to regain its footing in early 2024. Currently, it is among just eight stocks with market caps exceeding $200 billion that are down this year.
AMD is positioned well to benefit from the ongoing AI boom. Its data center division reported a remarkable revenue increase of 122% in its latest quarter, contributing $3.5 billion out of a total $6.8 billion in revenue.
However, not all is smooth sailing for AMD. The gaming sector has experienced a significant 69% decline in revenue over the past year, while its embedded segment recorded a 25% reduction. Nevertheless, this downturn does not suggest that AMD is irrevocably stalled; instead, its overall business continues to grow at a vigorous pace.
Image source: Getty Images.
AMD showed a 22% revenue growth in the third quarter, marking its most significant increase in two years. While some analysts predict slight slowdowns in the AI sector, they anticipate an overall growth rate of 27% for 2025.
Moreover, profitability has surged, more than doubling in the last quarter, indicating that the troubled segments aren’t dragging down the profits. With a forward price-to-earnings ratio of 26, AMD could present a bargain if it maintains over 20% growth in the coming years.
2. Comcast: Down 11% in 2024
Comcast’s shares fell nearly 10% recently, adding to its struggles this year. The media giant warned it expects a loss of more than 100,000 broadband subscribers this quarter, a significant increase in loss compared to the total of the first half of the year and following an additional decline of 87,000 in the third quarter.
This trend is troubling. Comcast’s Xfinity cable television service has steadily diminished as customers choose streaming services, while the broadband connectivity service was expected to be a dependable revenue source. The company attributes this quarter’s struggles to two major hurricanes in the Southeast and increasing competition from cheaper wireless options.
Despite these challenges, Comcast is not a stock to overlook. Its film Wicked has become one of the year’s biggest hits, with a sequel expected next November. This could generate another $5 billion in revenue, following last year’s sale of its Hulu stake.
On the theme-park front, the new Epic Universe theme park is anticipated to open in May, potentially boosting Comcast’s revenue from its attractions, which currently represent a small fraction of its overall business. Additionally, the company offers a reliable dividend, consistently increasing it since it was reinstated in 2008.
3. Realty Income: Down 2% in 2024
Seeing Realty Income’s stock dip even slightly this year is surprising, especially given its history. Known for its strong performance, it’s hard not to notice the slight decline in its share price.
What makes this real estate investment trust (REIT) a standout? Realty Income boasts a diversified portfolio of 15,457 properties across 90 distinct industries. Focusing on reliable, recession-resistant tenants, it maintains a high occupancy rate of 98.7% as of September.
Rather than distributing quarterly payments like many REITs, Realty Income sends out dividends every month. With a history of 108 consecutive quarters of increasing dividends, it has garnered a strong reputation among investors.
Looking ahead, Realty Income anticipates a 5% rise in adjusted funds from operations in 2025. This indicates potential continued dividend growth in the near future. With current interest rates declining, its 5.6% yield now appears particularly appealing to income-focused investors.
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Rick Munarriz has positions in Realty Income. The Motley Fool has positions in and recommends Advanced Micro Devices and Realty Income. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
