There are no certain things in the stock market, but the proven strategy of buying high-quality stocks at reasonable prices and holding this position for years gives you the best chance for success. The odds are tipped even further in your favor if you can score these stocks at seriously low prices.
Two stocks cheap enough to double are telecom giants AT&T (NYSE:T) and freelance platform Fiverr (NYSE: FVRR).
AT&T
AT&T is a company that gets no credit from investors. After a disastrous series of failed media acquisitions, the company divested these non-core assets and refocused on its core telecoms business. Wireless and fiber are the two pillars of AT&T’s business, and both are consistently gaining subscribers.
Mobility services revenue rose 3.3% in AT&T’s first quarter, thanks to a combination of subscriber growth and slightly higher revenue per user. The company added 349,000 net postpaid phone subscribers, continuing a long streak of consistent growth. Postpaid phone churn remained low at just 0.72% as subscribers stayed with AT&T.
AT&T’s fiber revenues rose 19.5% year over year in the first quarter, offsetting declines in traditional landline services. The company expects to reach 30 million locations through its fiber network by the end of 2025, and now sees a way to increase that number to 45 million in the long term. Outside of its existing service areas, AT&T may sell fiber services to customers served by Gigapower, a joint venture with Black rock.
Despite AT&T’s investments in its wireless and fiber networks, the company is on track to generate between $17 billion and $18 billion in free cash flow this year. With a market cap of about $124 billion, the price-to-free cash flow is around 7.
Combine free cash flow growth over the next few years and some valuation expansion, and it’s not hard to see how AT&T stock could double. While investors wait, a dividend yield of over 6% is the icing on the cake.
Fiverr
Freelance platform Fiverr is at an interesting crossroads as artificial intelligence technology rapidly develops. On the one hand, many types of services that Fiverr offers could potentially be replaced by AI. Think voiceover work, logo design and writing.
On the other hand, using AI technology effectively to do useful things is a skill in itself. While demand for some types of jobs may decline in the age of AI, higher value jobs that combine AI with the human touch could ultimately generate more volume through Fiverr’s platform.
Fiverr expects AI to be a long-term growth driver, alongside business solutions and complex services. A tough hiring environment has slowed Fiverr’s growth, with revenue up just 6% year-over-year in the first quarter and the number of active buyers down 6%. However, the company sees better days ahead.
An example of how AI is already proving to be positive is the demand for chatbot development services. By deploying generative AI-powered chatbots to perform some customer service tasks, companies can potentially save money and reduce the time it takes to reach resolutions. Fiverr saw “significant demand” for chatbot development in the first quarter.
Fiverr is a profitable company that generated positive GAAP net income in the first quarter. Based on the company’s 2023 free cash flow, the stock trades at a price-to-free cash flow ratio of around 12.
With Fiverr shares down as much as 92% from their pandemic-era peak and trading at a discounted valuation, the stock could rise if the company can successfully accelerate its growth into 2025 and beyond.
Should You Invest $1,000 in AT&T Now?
Consider the following before buying stock in AT&T:
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Timothy Green has positions in AT&T. The Motley Fool holds positions in and recommends Fiverr International. The Motley Fool has a disclosure policy.
On Course to Double: 2 Bargains to Buy Now was originally published by The Motley Fool
