Stock prices have been creeping up since plummeting earlier this year, which is a relief for investors. However, the market remains volatile, providing opportunities to buy on the dip before a rebound. Walt Disney (DIS 0.16%), Wayfair (W -1.94%), and Home Depot (HD 0.74%) are great stocks you can still buy on sale now.
Lots more magic in the making
Disney is still recovering from the pandemic more than two years after sales plunged as its parks closed. But in the third quarter (ended July 2), sales surpassed 2019 numbers, coming in at $21.5 billion, a 26% increase over last year. It's also strengthening profitability, with earnings per share (EPS) of $0.77 in the second quarter, up from $0.50 last year.
These results were from a combination of factors, notably a robust presence at parks and experiences as well as Disney's powerful streaming networks. After generating no revenue from parks due to closures for several months, the parks have proven remarkably resilient as happy vacationers return in droves. Sales from the parks and experiences segment were up 70% over last year, and Disney is investing in new rides, ships, and other experiences to expand its Disney-themed experiences.
Meanwhile in the streaming world, Disney has overtaken Netflix with the highest number of paying subscribers at 221 million, with 152 million of them signing up for Disney+. It's still launching in new markets and expecting 230 million to 260 million Disney+ subscribers by 2024, by which time it expects Disney+ to break even.
Disney's assets, particularly its large content library and popular film studios, provide it with the means to generate revenue on multiple fronts. These include theater releases, streaming, traditional media, attractions, products, and more. The diverse model drives a money-making cycle and helps the company stay on top of its industry. As sales and profits continue to improve, the stock should eventually catch up. Disney shares are down 27% this year, but investors should enjoy years of gains.
The next phase of growth is coming
Wayfair took the furniture world by storm when it launched in 2011 as an online purveyor of quality goods. As a completely online retailer with much of its products "drop shipped" directly from manufacturer to customer, it was asset-light and profitable.
But growth has dried up in the current atmosphere. The second quarter was a disaster, with a 15% year-over-year sales decline and a net loss of $378 million. Active customer count decreased 24%, and orders per customer decreased as well.
Some bright spots were average order value, which increased from $278 to $330, and repeat customers accounting for 78.6% of orders, up from 75.6% of orders last year.
Yet, the operating environment is very difficult right now. The stressors include supply chain problems as well as matching accelerated growth from the beginning of the pandemic, which is severely slowing down as people go back to stores. Inflation is also an issue as customers cut down extra spending on large, expensive products.
But the market is huge, and while Wayfair is struggling now, it's well-positioned to get back to growth. It sees a market opportunity that could reach $1.2 trillion by 2030, of which it has only a tiny fraction at $14 billion in trailing 12-month sales. Wayfair has strong brand recognition as well as a digital system designed with technology that helps customers envision products in their home.
It's not a surprise that Wayfair stock is down 74% this year. But it may have bottomed out, as the stock has been up and down around this price for the past several months. As soon as there's good news, Wayfair stock may start to climb again. And the long-term picture looks rosy.
A recession-proof home improvement machine
Home Depot continues to post phenomenal performance despite global economic challenges. That began with high growth during the early stages of the pandemic, when customers were focused on the home, as Home Depot offered a superior omnichannel mix of physical stores and a robust digital network. It has continued even as inflation has become the norm and people have started spending outside the home, and also as it faces tough year-over-year comps and as the housing market sours.
In the 2022 second quarter (ended July 31), sales increased 6.5% over last year to $43.8 billion. EPS rose from $4.53 last year to $5.05 this year, despite increased costs and supply chain pressure.
Home improvement projects remained a prime growth generator despite slowing sales in some departments, such as seasonal items. Management said there was a healthy backlog of projects to power sales through the rest of the year as well. In the meantime, it's beefing up its logistics systems and distribution networks, as well as improving its pro services to solidify relationships and drive loyalty.
Home Depot stock is down 28% this year, and the shares trade at 18 times trailing 12-month earnings, its lowest valuation in at least 10 years outside of the 2020 crash.
HD PE Ratio data by YCharts
It also pays a growing dividend that yields 2.5% at the current price. This is a no-brainer stock that offer stability, income, and high gain potential.
