What is going on guys nick here, back with another video! 2022 is here, and I spent
the past week looking through the finances of a lot of different companies looking for
undervalued stocks. After all of that work, I found you guys 7 high upside stocks that
you can buy and hold in 2022.
So the first company on this list is no surprise if you've been following my channel, it's
Visa.
Visa stock had a brutal second half of 2021, dropping from $250 per share all the way down
to $190 towards the end of November. The drop came after Visa's revenue and earnings
disappointed wall street.
They've faced some financial pressure over the past two years with slower revenue and
profit growth than they've seen in the past. However, after looking further into the cause, the
drop-off is due to a lack of international transaction revenue. Which is earned when
someone visits a foreign country and pays using their Visa card. Visa charges a foreign
transaction fee, and because there's been less international travel because of covid,
they're just missing this segment right now. As travel returns, this area will return very
quickly.
On top of this, the rest of Visa's segments have seen very solid growth consistent in
the past. So Visa's core business is still doing very well.
If we look at Visa's revenue and net income, we can see just how insane a money-making
machine this company is. Over the last year, while earning $24B in revenue, the company
has earned $12B in profits, one of the most insane profit margins of any mega-cap company
that I've seen.
When we look at their forecasted earnings, we can see while things have been a little
down lately, growth is returning in 2022 going forward.
When we look at their revenue growth, we can see over the next couple of years its projected
to be somewhere between 12 and 17%. Which using my P/E calculator, 12% growth comes
out to a fair pe value of 27, and 17% growth comes out to a fair P/E value of 42.
When we chart these multiples out compared with their forecasted earnings per share,
we can see by 2023 visa has an upside between $265 per share, to $412, which is a low end
upside of 22%, and a high end upside of 90%.
Stock #2!
Sticking with Fintech, Corner the payment market by adding to your visa stock, its buddy
Mastercard.
Now the same issues that have hurt Visa, the cross-board transaction decline, is the same
issue that Mastercard has been dealing with. And like Visa, as international travel does open
back up, we'll see both of these company's finances return to the insane growth of the
past.
Now there are plenty of people out there discussing all of the big macroeconomic risks, like inflation,
the labor shortage, and supply chain issues. But both Visa and Mastercard are pretty protected
from these risks. They make their money by charging fees to merchants when people use
their cards, not by loaning money or selling products. The only thing you have to worry
about as a visa or Mastercard shareholder is making sure people continue to make transactions
using their MasterCards.
Now when we look at MasterCard's revenue and net income, we can see a business just as
impressive as Visa. We see the same very high profit margins, we see the dip in 2020 due
to the lack of cross-boarder transactions, but we also see over the last year, Mastercard
has made back a lot of that decline.
When we look at Mastercard's forward earnings, we can see that they're projected to do very
well going forward and maintain their historical growth.
Looking at their revenue and net income, we can see they're actually projected just slightly
higher numbers than Visa, with 23% growth by the end of 2021, and then a still very
strong 19 and 16% growth by 2023.
I think a fair growth rate for Mastercard is between 15% for the low end, and 20% for
the top end. This gives Mastercard a fair value between 35 for the low end, and 55 for
the high end.
Compared with Mastercards' forward earnings, this puts MasterCards upside by 2023, as low
as $453 or 25% upside from today's $360 per share. And as high as $712 per share or 97%
upside!
Stock #3! It's Qualcomm. Now Qualcomm was beaten up
through most of 2021. But before I get to that, let me just explain what Qualcomm does
for anybody who doesn't know. Qualcomm has been the leader of the smartphone chip market
for a long time. On top of chip sales, they also license out their designs for other companies
to use.
Now like I said, Qualcomm has been beaten up through most of 2021, and the stock fell
quite a bit in the first half of the year. Qualcomm has slowly been losing market share
to MediaTek in the smartphone chip business and is now 2nd to MediaTek after they took
a lot of market share from Qualcomm in the low and mid range smartphone chip business. On
top of this, Qualcomm has lost one of their major customers apple over the past few years
as Apple has started to build its own iPhone and iPad chips in house. Currently, Qualcomm
supplies the iPhone modem chips, but Apple acquired a modem business for $1B from intel
so its likely Qualcomm will lose the iPhone modems eventually, too. And by 2023 they expect
to only supply about 20% of the modem chips used in iPhones.
However, Qualcomm hasn't just sat by watching their market dominance erode. They've been
working to diversify the business outside of smartphone chips. In 2021 alone, they
first bought NUVIA for $1.4B to boost their Data Center chip business, and Veoneer for
$4.5B. Veoneer is one of the largest software and sensor makers used by automakers to build
autonomous driving systems. So this helps give access to the automotive chip market.
Recently Qualcomm announced even after all of the negative news about the smartphone
chip business, it still expects to grow its chip business by 12% per year. Qualcomm expanded
into the growing smart appliance chip business, and over the past year brought in $5B. By
2024 Qualcomm expects this to grow to $9B.
When we look at their revenue and net income, we can see how the company was very up and
down, with revenues declining from 2014 to 2018. However, the past year has seen the
company really turn things around hitting Record revenues.
The current Wallstreet estimates see the business continuing this growth hitting $45B in revenue
and almost $14B in profits by 2024.
When we look at Qualcomm's growth we can see they currently are expected to continue growing
by at least 7%. I think a fair estimate for their company is to continue growing at around
7% for the bottom end and 10% for the top end.
This gives us a low-end fair P/E value of 17, and a top-end fair P/E value of 22.
When we chart this out. By 2024, that gives's Qualcomm a low end upside estimate of $212
per share or 14%, and a high end range of $275 or 48% upside in just 3 years.
Stock #4 Chipotle!
Now Chipotle has had a pretty wild decade. Back in 2015 the stock was plummeting after E.
coli outbreaks continued to hit the store. Customers, including myself, who treated chipotle like
a cult, were avoiding the restaurant. Eventually, chipotle's founder Steve ells who had run
the company since 1993, was forced out and Brian Niccol came over from Taco Bell and
took over the business.
Since recovering from the e coli outbreaks, the stock has been on fire, rising from $300 in
2018 to $1770 per share.
Now when covid hit, a lot of businesses really struggled to adapt. For some fast food stores,
the response was obvious, put all the focus on the drive through. But chipotle doesn't
have drive throughs so that wasn't really an option. Instead, they started pushing
customers to digital orders, where customers could place orders online, and then choose
delivery or pick up.
And chipotle has pulled this off very well. At this point, half of chipotles sales come from
digital sales, and on top of this, chipotle has continued to open new restaurants with
opened 124 new stores in 2021. However this is short of their goal to open 200 stores
announced at the beginning of the year.
When we look at chipotle's revenue and net income, we can see the giant scar the e Coli
outbreak left. Not only did it take 3 years for them to be able to match their prior revenue,
their profits still hadn't passed 2015 numbers until just this year.
But when we look at their forecasted earnings, we can see the business is still projected
very impressive growth, hitting just shy of $10B in revenue and 1B in profits by 2023.
When we look at their revenue growth, we can see 2021 saw all the way up to 26% growth,
but revenue is projected to slow to just 13% by 2023. However, when we move over to net
income growth, we can see that chipotle is forecasted to completely blow away these revenue
numbers with 30 and 27% growth.
I think the bottom end growth rate to value chipotle should be a little shy of these net
income numbers. So for the bottom end growth rate I think 20% seems reasonable. And for
the top end growth rate 25%.
A 20% growth rate comes out to a fair P/E value of 55, and a 25% growth rate comes out
to a fair P/E value of 82.
When we look at Chipotle's valuation forecast out to 2023, we can see they have an upside
of at least $2300, or 30%, and a top end valuation estimate of $3441, or 94% upside.
Stock number 5!
VMWare. VMWare is a little different of a buy than the companies before. This stock
sold off way too far, and even with it's relatively slow growth, it should come back up much higher
than the current share price.
In 2015, Dell acquired VMware as a part of a massive $58B deal after dell acquired EMC.
In April of 2021, Dell announced it was going to spin off VMWare. The agreement called for
VMware to pay a special cash dividend around $28 per share, with about $9.5B going back
to Dell. Dell will also keep VMWare technology access for the next 5 years.
Now what is VMware exactly? Well, they are one of the pioneers in virtual computers where
users are able to log into a computer, and access a virtual computer running on a server,
from anywhere. This means that you could have an office in one city, and have a separate
computer at your house, and operate on the same exact desktop from your office or at
home without carrying around a computer.
On top of these virtual computers, they also help companies with some of the cloud structure
companies need to safely and securely operate these systems.
Now when we look at their revenue vs net income, we can see the company has shown very steady
and constant growth, but profits are a little more up and down. However, they are still
pretty consistently going in the right direction.
When we add in their forecasted growth, Wallstreet expects pretty solid revenue and net income
over the next 3 years. VMWare is expected to grow from 12B in revenue and 2B in profits
over the past year, to 15B in revenue, and 3.4B in profits by 2024
When we look at their revenue growth we can see we should expect them to maintain a steady
high single-digit growth% going forward, and when we move over to their net income growth,
we see just slightly higher percentages, except for 2023.
So I think a low end growth rate of 7% seem pretty appropriate for VMware, and a high
end growth rate of 12% also makes a lot of sense. This gives us a fair P/E value between
17-27 for the company
When we look at this valuation charted out, we can see there currently isn't a lot of
upside by the end of 2022 or 2023, we do see by 2024 the VMware having 19% upside for the
low end range, and for the top end 90% upside.
Stock #6!
Ok so this is a stock that I actually recommended in my first ever, stocks to buy now video,
and if you had bought then, you would be up 53% since then.
But if you didn't no need to worry, because the stock still has a lot of upside. And that
stock is CVS.
CVS is a powerhouse in the pharmacy market. Approximately 1 out of every 4 Americans get
their prescriptions filled through CVS.
At the end of 2017, CVS purchased Aetna, a health insurance company with the goal of
creating a more vertically integrated health care company. Basically, CVS wants to take
advantage of owning both the insurance company and the pharmacy filling prescriptions by
reducing the cost to fill these prescriptions.
On top of this, CVS operates about 1,100 minute clinics where customers can quickly and conveniently
walk in to see a doctor for common illnesses.
CVS stock price rise is mostly due to a solid increase in its earnings. When we break down
the business by segment to see where they're increasing, its a little hard to see because
their margins are so big. So let's fix that by zooming into just see up to $10B. So here
we can see that each segment is a little different.
The Pharmacy business is the most consistent grower of each segment, and their health care
business has actually fallen slightly from 2020. Their retail division, which I think
a lot of people consider an afterthought, is actually the biggest profit generator,
but only by a slight amount
If we look at CVS past decade of revenue and earnings, we can see revenue has shown very
steady and constant profit and revenue growth. However, CVS does have very small profit margins.
While they brought in 285B in revenue over the past year, they only took in $7.5B in
profits.
When we add in their forecasted earnings, we can see both revenue and profits are expected
to increase. By 2023 the expectations are for CVS to grow to 318B in revenue, and 11.7B
in profit.
When we look at their revenue growth, we can see it's not the craziest growth stock out
there, with the next few years expected to grow between 8 and 4%.
If we use these growth rates to value CVS, a growth rate of 4% comes out to a fair P/E
value of 13, and our top-end growth rate of 8% comes out to a fair P/E value of 19
Looking at these values charted out, CVS currently has a 2023 upside of at least $116 or 12%
upside, to $170 per share or 63% upside. I think at the current price, CVS is trading
around its current fair value at $103 per share.
Stock #7 Ok and last but definitely not least on this
is Ford Stock. Now I actually just made a whole video on this stock a few weeks ago.
Ford over the past 10-15 years has really under performed, and by that I mean the stock
price has not just under performed, but it's actually been falling. In 2020 Ford got a
new CEO, Jim Farley, who to me comes across as a guy who really loves cars and has put
some of this focus back into the business.
Ford has really moved their focus to EVs with an all electric Mustang, as well as an all
electric F-150, which they actually had to stop taking pre-orders on because they want
to make sure they can meet the demand with the chip shortage.
Speaking of the chip shortage, if you haven't heard, most businesses are having trouble
getting computer chips needed to build products.
And this has really hit new car production. It's driven the cost of new cars up along
with used cars, so there's not a lot of alternatives if you need a new car.
Ford has responded to the chip shortage by prioritizing the production of it's more profitable
cars. Aside from just selling more profitable cars, they've also been selling more electric
vehicles, which have higher profit margins as well.
Looking at ford's revenue vs net income, we can see 2020 has taken a huge chunk of revenue
from the business. And while in 2019 Ford broke even, and in 2020 they took a slight
loss, during the past year, even with much less revenue, they're showing a profit, brining
in 134B in revenue and just under $3B in profits.
When we look at their forecasted revenue and earnings, we can see they are projected to
show pretty considerable revenue growth, and continue to grow their profits all the way
to almost $10B in profits by 2023.
When we look at their revenue growth, we can see that ford is growing much faster recently
than they have in the past, with 14 and 13% growth forecasted over the next few years.
However, I do think because ford is an older car company I don't think it's that likely
they maintain this high rate of growth.
I think to value ford we should use the historic growth rate I've used to value them at 3%
growth. For the top end growth rate, I think 8% growth is pretty fair.
This translates to a low end fair P/E value of 12, and a top end fair P/E value of 19.
Looking at this valuation charted out, we can see that today's share price of $20 ford
has a lot of upside. By 2023, ford is projected to be worth $28 per share or 37% upside, and
by 2023 ford has an upside of $45, or 117% upside.
Ok, guys, so that's the video just to recap all the companies and today's prices, so if
you're watching this in the future, you can see the deals
you missed.
And as always thanks for watching!