Stock prices can fall for many reasons in the short term, but if you can identify a company with long-term growth opportunities still intact, you could profit handsomely off the market's impatience.
As we approach the end of the year, now's a good time to consider adding some promising value stocks to your portfolio. Here's why two discounted stocks -- Carnival (CCL -0.66%) and Etsy (ETSY 0.34%) -- are good picks for next year and beyond.
1. Carnival
Carnival is the largest cruise operator in the world, with over 90 ships that host almost 13 million guests annually. Cruises are in high demand, as consumers take advantage of the value gap between cruise and land-based vacations. However, the stock is down 72% from where it traded five years ago. There are a few reasons this could be the buying opportunity of a lifetime for this leading cruise brand.
The business looked like a mess during the pandemic, but the company's growth opportunity is attractive. The gap between cruise pricing and land-based vacations is a near-term catalyst for growth. Carnival's revenue is on pace to grow 76% this year, based on consensus estimates and is expected to grow another 13% next year.
Strong demand is pushing profits up. Earnings per share (EPS) were deep in the red a few years ago but are improving significantly along with revenue. Analysts expect adjusted EPS to reach $0.91 in 2024.
Carnival has a long-term opportunity to grow as it raises prices. This will go a long way to strengthen profitability and pay down debt the company took on to get by during the pandemic. Carnival's expanding fleet, geographic diversification, and pricing power are great reasons to consider buying shares right now.
2. Etsy
With the holiday shopping season in full gear, it's an ideal time to consider this leading online marketplace. Etsy's share price tumbled well off its highs last year as it struggled to deliver satisfactory growth amid a high inflationary environment. The good news is that investors can buy the stock at a modest forward price-to-earnings ratio of 17. This is a discount to the average stock and could set the stage for market-beating returns.
The company's third-quarter update showed revenue up only 7% year over year, mostly driven by growth in services, such as Etsy Ads, but Etsy has a key advantage that can drive better growth over the long term.
While Wall Street is worried about competition from Temu and other Chinese marketplaces, these concerns reveal a misunderstanding of Etsy's brand. Etsy sellers go out of their way to please, such as writing handwritten notes to build a personal connection with buyers.
Additionally, Etsy's attention to detail adds up to a superior browsing experience to the competition. New features like the "Etsy's Pick" badge help customers quickly identify items that Etsy recommends based on the seller's reputation for offering quality merchandise and customer service. It's features like these that can explain why Etsy gained market share in the last quarter across the top four retail categories, including apparel and jewelry.
Finding big winners in the stock market is sometimes about looking beyond a company's current situation to see what others don't. Etsy is a unique brand operating in a $5 trillion global e-commerce market. The stock's current valuation seems to undervalue its potential.
