It remains a tale of two markets. Some stocks have wind in their sails and are soaring to all-time highs. But others are paddling along and stuck at 52-week lows. In this market, a rising tide is not lifting all boats. Fundamentals and financial results continue to drive performance in the current market. Companies that beat targets with their earnings and have catalysts at work are seeing their share prices rise sharply.
Conversely, companies that miss earnings estimates and lack any catalysts are being punished and their share prices sent downward. This requires investors to be savvy with their stock picking among publicly traded companies.
Let’s examine the four best stocks to buy and the three best stocks to sell this month.
Stocks to Buy: Apple (AAPL)
Apple (NASDAQ:AAPL) has been ignited by the company’s long-awaited artificial intelligence (AI) strategy. After initially dropping 2%, the stock rallied 7% higher the day after the AI strategy was unveiled. It hit close to its all-time high. The stock’s big move comes after Chief Executive Officer (CEO) Tim Cook announced a revamped Siri digital assistant and the addition of OpenAI’s ChatGPT technology to future iPhones.
Investors initially seemed concerned that Apple’s AI approach focused too much on consumers rather than on enterprise customers. However, sentiment quickly changed after several analysts who cover the company issued bullish reports. Those comments indicated that the AI strategy is likely to lead Apple’s billion users to upgrade to next generation iPhones. And this will create a huge sales boost for the technology giant.
Currently, Apple stock is up 12% on the year and looks to have its mojo back.
Eli Lilly (LLY)
Pharmaceutical giant Eli Lilly (NYSE:LLY) appears to have a new blockbuster drug coming to market. A panel of independent advisors to the U.S. Food and Drug Administration (FDA) recommended Eli Lilly’s new Alzheimer’s drug called “Donanemab.” This clears the way for the medication to receive regulatory approval later this year. Donanemab will give Eli Lilly another potential blockbuster drug at a time when it is seeing brisk sales of its Zepbound weight loss medication.
Once approved, Donanemab will be only the second Alzheimer’s drug of its kind that’s available in the U.S. Their rival Biogen (NASDAQ:BIIB) has a treatment called “Leqembi. Donanemab is viewed by many in the medical profession as a milestone in the treatment of Alzheimer’s. Decades of efforts failed to develop medicines that can fight the disease. In a unanimous vote, 11 members on the FDA panel said data on the Alzheimer’s drug shows that it is effective at treating patients in early stages of the disease.
Thus, LLY stock has risen 94% in the past 12 months and is currently near an all-time high.
CrowdStrike (CRWD)
CrowdStrike Holdings’ (NASDAQ:CRWD) stock is on a tear after the company issued strong Q1 financial results. Also, its stock is being added to the benchmark S&P 500 index. In a little more than a week, CRWD stock has risen 15%, bringing its year-to-date (YTD) gain to 56%. The stock has now risen an incredible 500% over the past five years! Clearly, it distinguishes itself as the leading cybersecurity concern.
Therefore, news of the S&P inclusion lifted CRWD stock as exchange-traded funds (ETFs) and mutual funds that track the index are forced to buy shares of the company. The S&P 500 nod comes after CrowdStrike reported Q1 EPS of 93 cents. This is far above the 89 cents expected among analysts. Revenue totaled $921 million, ahead of estimates of $905 million. CrowdStrike’s free cash flow stood at $322.5 million, up 42% from a year ago.
All the good news makes CrowdStrike one of the best stocks to buy now.
The Gap (GPS)
Another stock that has rallied hard based on its strong financial results is retailer The Gap (NYSE:GPS). Following a string of better-than-expected prints, GPS has increased an incredible 175% over the last 12 months. Yet, its shares still trade under $30. Also, the company’s valuation sits at 15 times forward earnings estimates. The stock pays a dividend of 15 cents a share per quarter, giving it a yield of 2.24%.
In late May, Gap stock jumped 23% higher after the clothing retailer reported stellar Q1 financial results and raised its full-year guidance. Gap CEO Richard Dickson has undertaken a turnaround strategy that is clearly working. Dickson has said that his management team is focused on brand storytelling, celebrity endorsements and positioning the Gap at the centre of culture.
Stocks to Sell: UiPath (PATH)
A stock that investors should stay far away from is software company UiPath (NYSE:PATH). Recently, shares of the troubled tech company fell 30% in a day after it was announced that the CEO had departed. UiPath, which makes robotic process automation software, said that CEO Rob Enslin resigned on June 1 and has been replaced by company co-founder Daniel Dines. Before this year, Dines had served as co-CEO of UiPath.
Enslin’s resignation comes as UiPath’s stock has declined 84% since the company went public in 2021, including a 50% YTD drop. Additionally, the company’s Q1 financial results were revealed. Despite beating Wall Street forecasts on the top and bottom lines, UiPath lowered its full-year guidance. The company says it expects revenue of $1.405 billion to $1.41 billion. That is significantly down from previous guidance that called for $1.55 billion to $1.56 billion in sales. Moreover, analysts have been downgrading PATH stock in recent weeks.
Target (TGT)
Among retailers, Target (NYSE:TGT) continues to struggle. TGT stock is up only 2% this year. The discount department store’s share price fell 10% after it posted mixed Q1 financial results and said that consumers are buying fewer discretionary items. Target reported EPS of $2.03 versus $2.06 that was forecast on wall Street. The latest print marked the first time since November 2022 that Target missed profit expectations.
Revenue in Q1 totaled $24.53 billion, slightly edging estimates of $24.52 billion. Target’s sales were down 3% from a year ago. Customer traffic, which includes online and in-store shopping, fell 1.9% in Q1. In addition, the average amount that customers spent per visit declined 2%. Same-store sales decreased 3.7% as shoppers bought fewer items such as apparel and products for the home.
To attract price sensitive consumers, Target has relaunched its loyalty rewards program. Also, it announced price cutbacks on thousands of items, including milk and diapers. It remains to be seen if the strategy will help Target moving forward.
Shopify (SHOP)
E-commerce company Shopify (NYSE:SHOP) is having a bad year.
The company’s stock plunged 18% after it reported a surprise loss for its fiscal first quarter. SHOP stock is down 14% on the year. The company shocked markets when it announced a loss of 21 cents per share. That was much worse than a profit of 9 cents that was the consensus expectation of analysts. Revenue in the quarter totaled $1.90 billion, which topped Wall Street estimates of $1.83 billion.
The surprise financial loss was blamed on the sale of Shopify’s logistics business and related fees that the company incurred on the sale. Looking ahead, Shopify said that for fiscal Q2, revenue will grow at a high-teens percentage rate year-over-year (YOY). Wall Street was looking for a fiscal Q2 sales increase of 19%. SHOP stock remains 63% lower than its all-time high reached in November 2021 when the market last peaked.
On the date of publication, Joel Baglole held a long position in LLY. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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