Key Points
One industry called for a significant chunk of all jobs added to the economy in the last reports, but three stocks take the podium.
Backed by analyst projections and a more significant macro trend, these names could be the best potential additions to your growth watchlist.
With rising price targets and earnings projections, these names have nowhere to go but up.
5 stocks we like better than Royal Caribbean Cruises
The United States economy has pumped out two consecutive quarters of real GDP growth because it is still very positive even after you adjust for inflation. This is good for stocks but better for certain stocks, such as those exposed to the consumer discretionary cycle. Speaking of which, here’s where the cycle is headed.
Now that the FED has rolled out its intentions to begin cutting rates through 2024, up to six rate cuts are projected, and cheaper money can spark a new wave of consumer spending. Now, what better place to spend cheaper money after a roller coaster of 2023? How does the leisure and recreational space sound?
Perhaps this is why the industry has attracted a decent chunk of all the jobs added to the economy last month, but more on that later. What you need to know is that stocks like Carnival Co. NYSE: CCL, Royal Caribbean Cruises NYSE: RCL, and even Norwegian Cruise Line NYSE: NCLH could soon come into the crosshairs for investors hungry for an upside.
Making sense of it
In the past month, the economy has added – and created – up to 199 thousand jobs, according to the latest employment situation reports. Of all those jobs, forty thousand were headed to the leisure and hospitality industry, representing 20.1% of all jobs added.Making up a significant amount of all the economic employment activity should draw your attention to the space, specifically to stocks that promise above-average prospects for this coming year. Because money will become cheaper due to lower interest rates, growth will become the number one thing investment dollars will be after.
The relationship is simple and accurate across every cycle. The rate of interest a currency commands essentially determines its value, among a thousand different factors, but stick to this logic for now. Lowering interest rates could reduce the value of the Dollar, whose index has already declined from roughly $106.0 to $102.0 today.
What happens next is that you need more of the same dollar to buy the same goods and services you used to buy before (inflation). So, professional investment managers need to earn their fees, and the first way to ensure that happens is to beat inflation and the value of the currency.
Now, knowing that cheaper money and financing rates could trigger a new wave of consumer spending and activity, a theory that the leisure and hospitality industry is definitely preparing for judging by the number of jobs it added, you need to know that the average EPS growth for the space stands at 23.8% for the next twelve months.
Your job now is to find the outliers here, promising you even better growth. Don’t worry, the homework has been done for you here:
X on the map
Analysts have woken up to these trends and the new reality for the industry, which is why paying attention to their earnings growth projections is critical this time around. Remember, you need to find stocks with EPS growth rates higher than 23.8% in this space.
With a respective target of $142.0 and $155.0 a share, these analysts are pointing to upsides of 20.9% and 31.9% from where the stock is trading today, talk about growth.
Carnival doesn’t fall too far off the same tree since analysts have slapped a 38.8% EPS growth projection for this name. Current price targets landing on an average of $20.4 a share, 24.8% higher than today’s prices. However, analysts at Barclays NYSE: BCS and Macquarie see the stock going to $24.0 and $22.0, respectively, for a much higher upside.
Last but not least, Norwegian Cruise Line calls for the most aggressive jump in earnings out of the industry, where analysts are boldly pointing to an 87.2% jump in the next twelve months. While most price targets fall on an average of $19.0 a share (which is 9.9% higher than today), one analyst is betting ahead of the curb.
Once again showing its awareness of the industry’s comeback, Tigress Financial delivered a price target of $32.0 a share for this stock. At this prediction, there is an implied upside of 84.7%.
Connect the dots on these trends just like these analysts did, and your portfolio could potentially benefit from multiple rallies all at once.Before you consider Royal Caribbean Cruises, you’ll want to hear this.MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and Royal Caribbean Cruises wasn’t on the list.While Royal Caribbean Cruises currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.View The Five Stocks Here MarketBeat has just released its list of 20 stocks that Wall Street analysts hate. These companies may appear to have good fundamentals, but top analysts smell something seriously rotten. Are any of these companies lurking around your portfolio? Find out by clicking the link below.Get This Free Report
