The S&P 500 headed into bear market territory this week. The benchmark has dropped 21% this year. Investors worry the latest inflation data may prompt the Federal Reserve to lift interest rates even more than expected. This may not be the most enjoyable time to sit down and look at your portfolio's performance, but don't worry. Today's situation is temporary. And while it's hurting even the strongest companies right now, they will bounce back and even thrive over the long term.
This means today is actually a great time to invest. You can pick up companies with great prospects on sale. And this is across industries. Let's take a look at three market leaders -- in e-commerce, electric vehicles, and robotic surgery -- that fit the bill.
1. Amazon
Amazon (AMZN 1.30%) has reported rising revenue and profit over the past few years -- and those numbers have reached well into the billions of dollars. But that positive momentum screeched to a halt earlier this year. Higher inflation and supply chain issues weighed on earnings. And Amazon reported decreases in operating cash flow and operating income in the first quarter.
The e-commerce giant may continue to struggle as long as these issues persist. But there are three pieces of good news. First, Amazon is working to manage costs it can control. And that means about two-thirds of incremental costs, the company said in its most recent earnings call. At the same time, Amazon's profit-driving cloud computing business still is rapidly growing. Amazon Web Services (AWS) posted double-digit gains in sales and operating income in the first quarter. This business isn't as sensitive to the challenges that have weighed on Amazon's e-commerce operation. And finally, while today's woes may hurt e-commerce today, higher inflation and supply chain problems won't last forever.
Amazon shares have dropped about 37% since the start of the year. But revenue hasn't declined nearly as much.
And Amazon is trading at 117 times forward earnings estimates -- that's down from more than 175 back in April. This looks like a steal considering Amazon's long-term prospects.
2. Tesla
Tesla (TSLA 1.85%) has reached important milestones over the past year or so -- even as chip shortages weighed on its production capacity. Last year, it reported record vehicle deliveries of more than 936,000. And in the first quarter, the company reported record revenue, vehicle deliveries, and operating profit. Add to that an operating margin of more than 19% and it was a pretty solid quarter.
Tesla also recently started delivering from two massive new factories in Austin, Texas, and Berlin, Germany. These facilities are expected to further boost delivery levels in the future.
What's next for Tesla? The company aims for 50% average annual vehicle delivery growth over a "multiyear" timeframe.
Of course, some challenges may rock the boat in the near term. CEO Elon Musk said the company had a "very tough quarter," Electrek reported on June 12, citing leaked emails from Musk to employees. Musk spoke of supply chain and production challenges in China.
At the same time, a rising interest rate environment isn't the best news for vehicle makers. Rising interest rates make it more difficult for individuals to secure loans.
All of this means Tesla shares may not soar overnight. But the company's market position, strong growth so far, and increased production capacity bode well for the future.
So now looks like a great time to get in on the Tesla story. The stock has dropped about 38% this year. And Tesla is trading for 52 times forward earnings estimates -- that's compared to more than 90 just three months ago.
3. Intuitive Surgical
Intuitive Surgical's (ISRG 2.21%) near-term performance will have a lot to do with the coronavirus situation. That's because a new wave of hospitalizations could halt non-essential surgeries. And that sort of move weighs on Intuitive's revenue. Intuitive generates revenue not only through selling robotic surgical systems, but also through selling the accessories and instruments needed for each surgery. When a procedure is postponed or canceled, Intuitive loses out.
Concerns about the coronavirus situation have weighed on Intuitive recently. But here's the good news: This is a temporary issue. A potential increase in hospitalizations could postpone surgical revenue or even delay installations of new surgical robots for a time. But when the problem eases, Intuitive's picture is bright.
The company holds more than 79% of the robotic surgery market, according to BIS Research. Most surgeons train on Intuitive's flagship Da Vinci robot -- so it's unlikely they'll want to switch over to a new system. And Intuitive has steadily grown its installs and earnings. In the first quarter, the company reported an install base of 6,920 systems.
What about valuation? Intuitive today trades for about 39 times forward earnings -- down from more than 70 at the start of the year. Considering the long-term outlook for this company, that looks like a bargain.
