Let the S&P500Rising valuations and record levels convince you that all or even most stocks are expensive right now – that’s far from the case. There are a number of stocks trading at significantly lower valuations, which can make them an attractive buy, especially if you plan to hold on for the long term.
Three stocks to buy on sale today that have promising growth prospects include: Tesla (NASDAQ: TSLA), Snowflake (NYSE: SNOW)And Shopify (NYSE: STORE). This is why investing $5,000 in these stocks could be a good move right now.
1.Tesla
Electric vehicle (EV) manufacturer Tesla used to be a $1 trillion company. Today its valuation is just under $600 billion. There are plenty of reasons to be bearish on the company: margins are shrinking, competition is heating up and the shares still aren’t cheap, with prices trading at more than 45 times previous earnings.
But there are also plenty of reasons to remain optimistic. Tesla is a big name in the EV market, which could position it for success amid the industry’s growth despite the cheaper options out there. The strong brand that it has built up over the years could mean something for its more expensive vehicles Apple‘s brand has done for its higher-end phones, to ensure demand remains resilient even as competition increases.
It is also possible that interest rates will fall next year. Under more favorable economic conditions, consumer demand may strengthen, leading to better results for Tesla.
Tesla’s sales fell 9% in the first three months of 2024, totaling $21.3 billion. And even though profits fell 55%, the company still made a decent profit of $1.1 billion, which was a respectable 5% of sales. It won’t be an easy road for Tesla by any means, but with shares down 27% this year, it could be an intriguing option for contrarian investors.
2. Snowflake
An even worse performing stock than Tesla this year is Snowflake. The data storage stock has suffered unexpected setbacks after CEO Frank Slootman announced his retirement earlier this year. Sridhar Ramaswamy, who previously worked at AlphabetGoogle-owned Google acquired it, but investors have nonetheless remained bearish on Snowflake’s stock.
A change in CEO could ruffle some feathers as investors try to gauge what that could be Real mean for the company. But Snowflake remains a promising tech stock to buy. In its first quarter fiscal 2025 results ended April 30, the company’s revenue totaled $828.7 million and increased 33% year over year. And Snowflake expects growth of up to 27% for the current quarter.
As more companies require data storage solutions and artificial intelligence analytics, Snowflake can continue to benefit from high demand. The only thing that awaits the company is that it remains unprofitable, and that does entail a risk. But the company is generating positive free cash flow, which is a good sign that it can continue to reinvest in its growth and long-term prospects.
I think investors overreacted to the CEO change earlier this year, and that may make Snowflake an undervalued buy right now.
3. Shopify
Shopify is the best-performing stock on this list, even though shares are down 16% this year. The stock has been rising lately as investors likely realize the value the asset has, especially over the long term and as economic conditions improve.
In the first three months of the year, Shopify reported revenue of $1.9 billion, which rose 23% year over year. The company also posted an operating profit of $86 million, which was a significant improvement from the operating loss of $193 million in the same period last year.
As a big name in e-commerce, Shopify has firmly established itself as a top player in the industry. It has proven that it can even compete with a giant like Amazon. Remarkably, the two companies have even partnered and will be able to offer Shopify merchants a ‘Buy with Prime’ option in their stores.
With a market cap of less than $90 billion, Shopify is a stock that could become much bigger in the future. Investing in it now while it’s on sale can be a great move for growth investors.
Should You Invest $1,000 in Tesla Now?
Before you buy shares in Tesla, consider this:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Tesla wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $830,777!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Shopify, Snowflake, and Tesla. The Motley Fool has a disclosure policy.
Do you have $5000? These 3 Growth Stocks to Buy Now was originally published by The Motley Fool
