Investing Opportunities: Three Stocks Poised for Growth in a Tough Market
With the S&P 500 and Nasdaq Composite near record highs, many investors might hesitate to add new stocks to their portfolios. The famous investor Warren Buffett advised to “be fearful when others are greedy and greedy when others are fearful,” and currently, a sense of greed has led many stocks to high valuations.
Yet, if you dig a little deeper, you can find some bargain stocks trading at attractive prices given their growth potential. Let’s explore three of these companies—Lumen Technologies (NYSE: LUMN), Applied Materials (NASDAQ: AMAT), and Opendoor Technologies (NASDAQ: OPEN)—which could see significant gains in the coming years.
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1. Lumen Technologies: From Struggles to Potential
Lumen Technologies, formerly known as CenturyLink, faced serious challenges at the start of 2024. For five straight years, its revenue fell, and it became unprofitable over the last two years, even suspending its dividend in 2022. The company ended its latest quarter with $18.1 billion in long-term debt and negative free cash flow.
Instead of venturing into the wireless sector like many telecoms, Lumen focused on expanding its wireline business with new fiber plans and enhanced cloud services. While it anticipated modest growth that would sustain dividends, a decline in its business wireline segment outweighed gains from consumer fiber.
In June, Lumen’s stock dropped below $1 but has rebounded to around $6 in the past six months due to several AI connectivity agreements, including one with Microsoft‘s Azure, generating $8.5 billion in contracts thus far. Although challenges remain, Lumen’s enterprise value of $22.8 billion suggests it trades at less than twice this year’s sales. A successful shift in strategy could see its stock climb as AI demand rises.
Applied Materials is a leader in supplying equipment for semiconductor manufacturing, servicing a diverse range of customers in chipmaking markets. Growth accelerated during the pandemic as chipmakers increased capacity to address supply chain disruptions but slowed recently due to macroeconomic challenges and stricter export rules with China.
In fiscal 2024, which ended in October, the company reported only a 2% rise in revenue and a 7% increase in adjusted earnings per share (EPS). However, analysts anticipate a 9% and 10% growth in revenue and adjusted EPS, respectively, for fiscal 2025, driven by rising demand for AI, energy-efficient, and denser memory chips. This growth is significant for a stock trading at only 17 times forward earnings.
Despite concerns over its reliance on China, which accounted for 37% of sales in fiscal 2024, Applied Materials has managed similar challenges in the past. Investors may see a worthwhile opportunity if the company grounds itself amidst regulatory scrutiny.
3. Opendoor Technologies: A Resilient Market Player
Opendoor is the largest “iBuyer” of homes in America, making quick cash offers, renovating properties, and relisting them on its marketplace. This capital-intensive model thrives in a robust housing market with low interest rates. However, its AI-driven approach can lead to inaccurate pricing of homes.
In 2021, Opendoor’s growth picked up as pandemic restrictions eased and the housing market boomed but faced challenges in 2022 due to increasing renovation costs. Rising interest rates subsequently cooled the housing market, leading Zillow and Redfin to exit the iBuying sector in 2022. Opendoor’s revenue fell by 55% in 2023, with expectations for an additional 27% decline this year.
Despite these downturns, analysts expect Opendoor to rebound as interest rates ease and market conditions improve. With lesser competition, the company could reclaim its dominance in the iBuying sector, projecting a 22% revenue increase in 2025 and 29% in 2026. Currently trading at under one time this year’s sales, its stock may rise as challenges subside.
A Potential Second Chance in the Market
Investors often worry they’ve missed opportunities to acquire promising stocks. However, there may be new chances emerging.
Our experienced analysts occasionally issue a “Double Down” stock recommendation—indicating a company expected to surge soon. If you think you’ve missed investing, this might be the time to consider buying before circumstances change.
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $348,112!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,992!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $495,539!*
Currently, we’re releasing “Double Down” alerts for three exceptional companies, presenting a timely opportunity for investors.
See 3 “Double Down” stocks »
*Stock Advisor returns as of December 9, 2024
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Applied Materials, Microsoft, and Zillow Group. The Motley Fool recommends Opendoor Technologies and Redfin and offers the following options: long January 2026 $395 calls on Microsoft, short February 2025 $10 calls on Redfin, and short January 2026 $405 calls on Microsoft. 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.
