Where are we now? A question that takes so much to answer when it comes to assessing the stock market.
While many folks around me have been busy planning trips out of Singapore for the December school holidays, some friends have been asking me what I am looking at, given the current sea of red we’ve seen over the past two months.
Year to date, we’ve seen the S&P 500 Index losing more than 27.5% between the peak and trough in 2022.
Image Source: Moomoo trading and research platform
With an anticipated rate hike on 2 November and the continued impact of the war between Russia and Ukraine, market watchers are pricing in higher interest rates, higher inflation, and a looming recession.
This may mean we have to brace ourselves for more impact as we approach the end of year holiday season.
Despite these worries I have drawn up three potential US stocks that I would add should I have an extra S$5,000.
Tesla (NASDAQ: TSLA)
The last time I wrote about Tesla, it was prior to its 2Q2022 results release.
While I do not track companies in my portfolio closely, the continued hit that its stock price has taken has not gone unnoticed.
Year to date, Tesla’s share price has dropped by 45.2%, much more than the S&P 500 index’s fall of 23.3%.
In 2Q2022, total revenues rose 42% year on year to US$16.9 billion, and net income grew 98% year on year to US$2.26 billion.
The better performance was attributable to increased average selling prices of the vehicles and also higher growth in vehicle deliveries.
Growth in other parts of Tesla’s business also helped bring the total revenue contribution up.
As delivery and production numbers play a big role in Tesla’s revenue and net income, the recently released 3Q2022 production numbers of the company made me quite excited.
In 3Q2022, Tesla produced over 365,000 vehicles and delivered over 343,000 vehicles. The production numbers of 3Q2022 were 53.9% more than that of 3Q2021’s 237,823.
3Q2022’s delivery numbers also rose 42.4% compared to 3Q2021’s 241,391, underscoring Tesla’s commitment to achieving 50% average annual growth in vehicle deliveries.
Source: Tesla 3Q2022 production and delivery numbers, Tesla 3Q2021 earnings
Tesla will release its 3Q2022 earnings after market close on 19 October 2022.
Apple (NASDAQ: APPL)
It’s barely a month since Apple unveiled the iPhone 14 at its Far Out event.
Alongside its staple iPhone, the event also unveiled new add-ons to its “Wearables, Home and Accessories” segment (i.e. AirPods and the iWatch).
As much as I do not like the pricing of these new products as a consumer, the investor in me knows this is Apple’s continued plan of ecosystem inclusion and retention.
Year to date, the largest contributor to the S&P 500 index has seen its shares drop 21.4%.
In 3Q2022, Apple’s total net sales was up marginally by 1.9% year on year to US$83 billion, while net profit slipped 10.6% year on year to US$19.4 billion.
Weakness in foreign currencies relative to the strong US dollar had an unfavourable impact on all its Products and Services net sales for 3Q2022.
What caught my attention for 3Q2022 was how Apple’s Services revenue increased 12% year on year to US$19.6 billion.
Services revenue consists of contributions from offerings such as AppleCare, its cloud services, advertising, and digital content. For 3Q2022, Services revenue made up 23.6% of Apple’s total sales.
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Source: Apple 3Q2022 revenue and gross profit margin breakdown
Additionally, the 3Q2022 gross profit margins for Services segment stood at 71.5%. This is more than twice the gross profit margin for its Products’ segment of 34.5%.
Apple will be releasing its 4Q2022 earnings in the evening of 27 October 2022.
Zoom Video (NASDAQ: ZM)
Year to date, Zoom has seen its share price lose close to 60% of its value.
The communications giant, like many other tech counterparts, had fallen from grace.
However, a company’s share price is not always a good barometer of its future potential.
Following the results released for 1Q2023, Zoom has seen momentum continue building in its financial numbers.
In 2Q2023, Zoom’s revenue continued to grow, rising 8% year on year to US$1.1 billion.
However, 2Q2023’s net income plunged 85.6% year on year to US$45.7 million in the same period.
Although this looked like a sharp fall, a deeper look revealed that this was mostly attributed to much higher marketing expenses.
Marketing expenses rose 47.7% year on year in 2Q2023 to US$400.4 million. This is very much in line with the aggressive push Zoom is taking in its growth strategy.
In fact, 2Q2023 highlights Zoom’s fifth straight quarter where revenue exceeded one billion US dollars.
Zoom’s efforts to target more enterprise customers have not gone unnoticed.
In 2Q2023, Zoom’s number of enterprise clients grew 18% year on year to 204,100.
Additionally, Zoom’s number of customers contributing more than US$100,000 in trailing 12-month revenue also rose 37% year on year to 3,116 in 2Q2023.
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Source: Zoom’s 2Q2023 earnings release, Enterprise customers breakdown
Zoom is expected to report 3Q2023 earnings on 28 November 2022.
Final Thoughts
The three stocks mentioned above have all fallen in line with the broader market.
Looking at their businesses and tracking the progress through business developments, it doesn’t take much to understand the moats these companies possess.
As these companies have shown their ability to continue growing despite the odds, I will continue to allocate my capital to these three names whenever an opportunity comes around.
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Disclaimer: Kent Lee owns shares of Tesla, Apple, and Zoom Video.
