To start the year, the S&P 500 (^GSPC 0.28%) fell by as much as 19% at its low on April 8, amid the uncertainties surrounding sweeping changes to U.S. trade policy via tariffs. Fast-forward to now, and a resilient economic backdrop, supported by strong corporate earnings, has propelled the large-cap stock benchmark to an incredible 26% rebound, already back to a near all-time high.
I believe there are several reasons for investors to stay bullish and expect the market to deliver further upside. Here are some of my favorite stocks to buy right now.
Image source: Getty Images.
1. Carnival
Carnival (CCL 1.56%) (CUK 1.66%) stock soared following a better-than-expected fiscal third-quarter earnings report. For the period ended May 31, the cruise line giant reported record revenue of $6.3 billion, climbing 9% year over year and propelling adjusted earnings per share (EPS) to $0.35 -- more than triple the $0.11 result from last year.
With historic pandemic-era disruptions now a distant memory, Carnival is capitalizing on an ongoing industry renaissance, with data suggesting that this form of vacation travel is as popular as ever.
Efforts to optimize its fleet and enhance financial efficiency are paying off, with the company posting multiple operating records. The expectation is for these trends to continue. The launch of Celebration Key, a new private island destination opening in July, and the delivery of three new ships by 2028 should drive further profitable growth.
Where Carnival stock shines is through its attractive valuation, trading at a forward price-to-earnings (P/E) ratio of 14 times -- marking a deep discount to cruise line rival Royal Caribbean and its earnings multiple closer to 19.
CCL PE Ratio (Forward) data by YCharts
In my view, even with shares up 59% over the past year, as of this writing, Carnival remains undervalued and positioned to consolidate its industry leadership position. Initiatives to improve yields and repay debt through accelerating cash flows should support a higher valuation premium as a tailwind for further upside in Carnival stock.
2. Dollar Tree
Dollar Tree (DLTR -0.62%) is staging a compelling turnaround after a challenging few years. Resilient demand from budget-conscious shoppers, alongside cost-cutting measures across its network of more than 9,000 locations in the U.S. and Canada, have bolstered its earnings outlook.
In the first quarter (for the period ended March 31), net revenue climbed 11.6% year over year, including a solid 5.4% increase in comparable sales. Company management has highlighted how its stores are seeing a growing number of upper-income households as part of their core customer base, seeking out deals on its wide range of merchandise.
The recent $1 billion sale of its underperforming Family Dollar brand to a private equity group, set to close later this year, provides a significant cash infusion, positioning Dollar Tree to strengthen its financial foundation and drive future growth.
Wall Street has cheered these developments, sending the stock 31% higher year to date as of June 26. With Dollar Tree shares still down 42% from their all-time high, I believe the rally may just be getting started as Dollar Tree continues to execute its operational transformation.
3. Dell Technologies
Shifting from retail and leisure to cutting-edge artificial intelligence (AI) infrastructure, Dell Technologies (DELL -0.22%) is a hidden gem.
While the company is recognized for its diverse portfolio of consumer and commercial computing devices, Dell's AI-optimized servers and data center solutions are standing out. These are the enterprise-scale hardware systems that integrate all the necessary power, storage, cooling, and software components critical to running the latest GPU-based AI chips from Nvidia or Advanced Micro Devices.
In the first quarter, the Infrastructure Solutions Group posted a 12% revenue increase for the period ended May 2, with an order backlog that has reached $14.1 billion, capitalizing on what management described as unprecedented demand from the AI market. The impact on profitability is even more impressive, with Dell targeting full-year adjusted EPS growth around 15%, reflecting the growing contribution of the company's newfound focus on high-margin AI solutions.
Trading at a forward P/E of 13 with a 1.7% dividend yield, Dell Technologies is an undervalued leader in the AI revolution, making it an attractive addition to diversified portfolios with strong long-term return potential.
