Steep rises in inflation since last year have been tough on both consumers and companies, and reduced spending has resulted in weak earnings reports this month. However, consistently easing inflation could mean that now is a prime time to buy cheap stocks that have the potential to soar once macroeconomic headwinds subside.
The consumer price index rose 4.9% in April, easing after hitting a high of 9.1% in June 2022. The improvement is especially encouraging for consumer-reliant companies hit hard by economic declines. For instance, Amazon (AMZN -0.10%) suffered substantial losses in its e-commerce segments last year. Yet its average 12-month price target from professional analysts of $138 reflects vast potential, projecting a 25% stock rise.
So, looking for a bargain? Here are three high-growth stocks that are on sale now.
1. Amazon
Amazon has been hit particularly hard over the last year. Its North American and international segments reported nearly $10.6 billion in operating losses in fiscal 2022. The company has worked to combat these losses with job cuts totaling 27,000, dozens of warehouse closures, and sunsetting projects like its telehealth service, Amazon Care.
These moves have gradually begun to pay off, aided by easing inflation. The first quarter of 2023 brought Amazon's North American segment back to profitability and handed its international segment a marginal improvement. But slowing profit growth in the company's cloud platform, Amazon Web Services, was a low point of the quarter.
However, easing inflation will likely allow the company's e-commerce and cloud segments to flourish over the long term when consumers and businesses feel able to spend more freely. Amazon's attractive 12-month price is proof of its potential, making its stock a bargain amid an economic downturn that won't last forever.
2. Disney
Like Amazon, Disney (DIS 1.18%) has had a challenging few years. First, the company endured park and theater closures during the COVID-19 pandemic. Then economic headwinds became detrimental to its streaming efforts, and Disney+ shed 4 million subscribers in the second quarter of 2023. The repeated hits led the company's stock to slip more than 10% in the last five years.
However, events of the past five years are unlikely to repeat, so its investors hope the company is back on a growth path. Disney shares climbed 35% over the last decade despite recent hurdles, making it a solid long-term investment.
Disney continues to deliver popular content, with Avatar: The Way of Water generating $2.2 billion in February to become the third-highest-grossing film of all time. Meanwhile, Guardians of the Galaxy Vol. 3, released on May 5, is on pace to surpass $520 million in its second weekend.
Despite Disney's recent difficulties, revenue grew 13% year over year to $22 billion in Q2 2023, and operating income hit $3.3 billion. An improving economic environment, along with a planned price hike in its streaming business this year, additional layoffs, and multiple blockbusters on the way, could be positive developments for Disney's stock.
The entertainment giant's growth potential is reflected in its average 12-month price target of nearly $126, which projects stock growth of 37%. As a result, now is an excellent time to take advantage of this bargain growth stock.
3. Comcast
Comcast (CMCSA 0.32%) is perhaps best known for its cable and broadband businesses, which suffered amid linear declines and have made the company seem like a risky investment. However, its gradual transition to wireless services and content production over the years made it a company to watch. As the home of NBCUniversal, Comcast has seen increasing success at box offices and its theme parks.
The company boasts a content library of lucrative brands such as Jurassic Park, Back to the Future, Fast & Furious, and the animation studio Illumination. The latter was responsible for last month's smash hit, The Super Mario Bros. Movie, which earned $1 billion 26 days after its launch.
The box office success comes after Comcast opened Super Nintendo World areas at its Universal Studios theme parks in Japan and California, which will likely see increases in attendance after the film's release. If the company can time a potential sequel with its planned opening of Super Nintendo World in Florida in 2025, the theme parks could become true rivals to Disney parks.
In Q1 2023, Comcast earned about $30 billion in revenue, beating analysts' forecasts by $350 million. That complements a forward price-to-earnings ratio of 11, which suggests the company's stock is trading at a major value and that Comcast is an incredibly compelling investment right now.
