A great way to achieve success in the stock market is to look for companies that not only have great long-term prospects, but, more importantly, have near-term catalysts that can drive their stock prices higher.
Here are two promising stocks that will deliver great returns in the coming years.
1. Semiconductor manufacturing in Taiwan
Taiwanese semiconductor manufacturing (NYSE: TSM) enjoys a lucrative position as one of the leading chip foundries. Last year, the company posted a net profit of nearly $27 billion on revenue of $69 billion. The high profit margin reflects a substantial competitive position based on its commitment to the production of high-quality chips, which has attracted the company’s sales Nvidia, Advanced micro devicesand other semiconductor companies.
TSMC makes a variety of chips used for everything from smartphones to data centers. Demand for artificial intelligence (AI) chips in the data center is the hot topic right now, while other markets using TSMC chips are experiencing weak end-market demand. In the first quarter, the company’s revenue decreased by 5% compared to the fourth quarter.
Still, the stock is close to new highs. The shift to AI-optimized servers in the data center market is a key growth catalyst for TSMC, while another catalyst could emerge later this year as the PC and smartphone markets continue their recovery.
Specifically, TSMC is benefiting from strong demand for Nvidia’s graphics processing units (GPUs) used for AI training. The Wall Street consensus expects the company’s earnings per share to grow 22% annually over the next few years, which also assumes an eventual recovery across all of TSMC’s end markets.
TSMC offers above-average growth prospects at an average valuation. The stock is currently trading at a reasonable price-to-earnings (P/E) ratio of 24, so investors should see market-beating returns even from these highs. By the time TSMC clicks on all cylinders again, the stock will likely trade at a higher price-to-earnings ratio.
2. Uber Technologies
Uber Technologies (NYSE:UBER) has become a force in the global transportation market. The platform includes more than 7 million drivers and couriers. The company sees double-digit growth in the right metrics (travel, monthly active customers and revenue), but the stock could also offer substantial upside if earnings start to grow.
Uber is seeing strong demand in its mobility business, including ride-hailing. The number of trips grew by 21% year-on-year in the first quarter. Management is expanding access to Uber by adding more restaurants to the platform, in addition to expanding into areas like grocery delivery, while keeping costs in check.
The stock’s recent dip provides investors with a great starting point to start a position or buy more shares. In the first quarter, Uber turned a year-ago operating loss into operating profit. It sets off a strong trend of profitable growth, which is a catalyst for the stock.
The Wall Street consensus expects Uber’s profits to grow 45% year over year. If Uber achieves estimated earnings per share of $4.30 in 2026, and the stock still trades at the current price-to-earnings ratio of 32, investors should realize returns similar to the company’s earnings growth.
Should You Invest $1,000 in Semiconductor Manufacturing in Taiwan Now?
Consider the following before buying shares in Taiwan Semiconductor Manufacturing:
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John Ballard has positions in Advanced Micro Devices and Nvidia. The Motley Fool holds positions in and recommends Advanced Micro Devices, Nvidia, Taiwan Semiconductor Manufacturing, and Uber Technologies. The Motley Fool has a disclosure policy.
2 Growth Stocks With Big Potential in 2024 and Beyond was originally published by The Motley Fool
