Not every stock worth watching is necessarily worth owning ... at least not yet. Sometimes investors just have to wait and see how a particular story pans out before taking the plunge. Sometimes the pick will be well worth the wait.
With that as the backdrop, here's a closer look at three companies lots of investors have on their radars, but not necessarily in their portfolios. They're all compelling prospects, and a well-grounded bull market could be just the thing that lights a fire under them.
1. Upstart
If you've been following the Upstart (UPST 2.76%) story at all then you likely know shares cratered last week. Why? Last quarter's numbers were disappointing. Revenue of $135 million was down 14% year over year for Upstart's third fiscal quarter of 2023, missing estimates of $140.3 million. The adjusted per-share loss of $0.05 was bigger than the loss of $0.02 per share analysts were modeling. Guidance for the quarter now underway was also a bit of a letdown.
There's a nuance worth noting here, however, that's going largely ignored. That is, while revenue continues to dwindle, the pace of this decline is slowing. Upstart's losses have also been well-curbed for a couple of quarters now. If it can just catch even the slightest of tailwinds (like the ones created by sustained economic growth), its top and bottom lines could take a clear and firm turn for the better.
Why's that? It's the nature of the company's business.
In simplest terms, Upstart is an alternative credit bureau. There was a time when more familiar credit bureaus like Equifax and TransUnion were the best option available to lenders looking to determine the creditworthiness of a potential borrower. But that's not the case any longer.
In this new age where a mountain of digital data exists about, well, everyone, there are more effective ways to figure out how likely it is someone will repay a loan. Upstart uses artificial intelligence to turn all of this data into actionable information. It's also a lending middleman, although that's a secondary piece of its business at this time.
The thing is, the technology works! Upstart says its approach ultimately results in 53% fewer defaults at the same approval rate. The company just needs an economic environment that inspires more borrowing in order to thrive like it was thriving a couple of years back.
2. Ubiquiti
Ubiquiti (UI 0.44%) isn't a household name, but there's a good chance you or someone living in your household relies on a product it makes without even realizing it. The company manufactures a variety of wireless data connectivity solutions ranging from Wi-Fi antennas to networking switches to security cameras, and more. These are things consumers and corporations alike spend money on when times are good.
Yes, the networking market is dominated by Cisco Systems, and the wireless cameras and door locks market is dominated by Amazon's Ring and Blink brands. But Ubiquiti enjoys a couple of strategic advantages, one of which is super-simple management of its customers' employee access credentials. Another is its UniFi cloud gateway, which is a plug-and-play solution that doesn't also require the purchase of an expensive software license to power it. With the costs of necessary technologies like cybersecurity and data center hardware forever on the rise, it's nice to sidestep at least one expense.
And Ubiquiti shares may not even need a full-blown bull market or an economic rebound to kick-start rising shares. The analyst community expects top-line growth of 11.4% this fiscal year to be followed by 4% growth next year. Earnings are projected to grow at an even faster clip, from $6.80 per share last year to $8.82 this year to a per-share profit of $10.69 next fiscal year. The stock is very reasonably priced at less than 12 times this year's forecasted earnings.
3. JPMorgan Chase
Finally, add JPMorgan Chase (JPM 0.06%) to your list of stocks to watch as potential bull market buys.
JPMorgan is one of the country's biggest banks (as measured by assets), serving consumers and institutions with a variety of services ranging from checking to investments to corporate fundraising.
The stock's just been a so-so performer of late, up 7% for the past 12 months but down 9% from July's peak. Investors are worried the economy is too weak for the bank to do well. And to be fair, that's not a completely unreasonable worry. Corporate and investment banking revenues were down year over year in its recently ended fiscal Q3, and while overall revenue was up 22% year over year. The bulk of that growth is the result of higher interest rates rather than selling more products and services.
Don't be too discouraged by the way its revenue mix is changing, though. The current lull isn't the new norm.
Take its capital markets business as an example. While it's been a slow year for initial public offerings (IPOs), Goldman Sachs notes that investors' risk appetites for IPOs are surprisingly improving, founded on growing expectations of lower interest rates and a so-called "soft landing" for the global economy.
Moreover, Goldman's Co-Head of Private Equity Michael Bruun further believes the public offering market will start perking up as soon as next year. Discovery Capital Management's Portfolio Manager Jon Redmond quantifies this prospect, explaining at an investor conference, "According to our models, there's 1,200 private companies right now that by the end of 2024 will run out of cash." A bull market will not only bolster demand for these IPOs, but it will also inspire companies themselves to tap public markets for cash.
Of course, the wealth effect created by a bull market drives demand for other banking services like mortgage loans and investing -- areas that have also been lackluster for JPMorgan recently.
