The stock market has rebounded in 2023 following a year marked by rate hikes that pulled everything much lower. Leading indexes fell dramatically with the S&P 500 shedding 18.25% of its value. Hikes pounded the tech-heavy Nasdaq which fell by more than 30% during the same period. The emergence of AI, along with slowing rate hikes, has catalyzed a rebound in the markets in 2023. However, major indexes haven’t reached their 2021 highs. With inflation falling and rate hikes nearly over there’s reason to believe that the markets- and stocks could surge past their high marks in 2021. Let’s dive into a few of the top stocks to watch before new peaks.
Stocks to Watch Before New Peaks: AMD (AMD)
I’ve been saying the same thing about AMD (NASDAQ:AMD) stock for the past few weeks. If you’ve read my articles during that period, this will be a bit repetitive. That said, it remains true and serves as a logical basis for prices to move upward: AMD is not that far behind its main rival, Nvidia (NASDAQ:NVDA).
The reason to believe that this is true lies in research recently released by MosaicML, a machine learning firm that was recently acquired by Databricks. MosaicML undertook extensive testing of the second-most powerful chips from AMD and Nvidia in relation to their AI prowess.
The result was particularly inspiring for AMD champions: Its chips are nearly as fast as those from Nvidia. Further, AMD’s relative strengths in software development are particularly relevant to AI. The software has been identified as an area from which rapid AI improvements will emerge. It all points to the idea that AMD could run much higher. AMD hit $154 in 2021 and currently stands at $111.
Stocks to Watch Before New Peaks: Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) stock traded roughly $5 higher at its 2021 peak from its current price. You may be tempted to believe that those higher prices are logical given that it was one of the major firms to produce a Covid-19 vaccine. The logic is that revenues spiked on its approval and that Johnson & Johnson lacks a similar catalyst at the moment.
While it’s true that there is no similar catalyst for the firm at the moment, there’s a simple reason to believe in JNJ shares. Johnson & Johnson’s revenues reached $94.94 billion in 2021. In 2023, they’re expected to eclipse $100 billion. Is that astronomical growth by any stretch of the imagination? No, not all. However, it does prove that JNJ is bigger than it was even when it had a Covid-19 vaccine. The other vaccine winners, Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) will have far smaller revenue bases in 2023 than each did in 2021, respectively.
JNJ is the most stable of the bunch. Its revenues will be greater in 2023 than in 2021. Thus, its price-to-sales ratio is more attractive at the moment. Add in JNJ’s dividend and the choice gets even easier.
Stocks to Watch Before New Peaks: Coca-Cola (KO)
Coca-Cola (NYSE:KO) shares traded for $60 at their peak in 2021. KO stock currently trades for $62.50 so it has actually surpassed its 2021 highs. Nevertheless, it remains worth considering at this point.
The firm released second-quarter earnings on July 26 which were very strong. Those earnings showed that sales remain very strong, growing at 6% with organic revenue growing at 11%.
That allowed management to raise its full-year forecast for organic revenue growth to between 8-9% from a previous 7-8% in 2023. The results come as Coca-Cola has raised prices even as consumers are already dealing with inflation that erodes their purchasing power. It indicates that demand remains very strong overall.
It’s difficult to find much fault in Coca-Cola’s execution and results even if you feel they could have given consumers a break in pricing. Shareholders are certainly happy. EPS increased by 34%, reaching $0.59. KO stock’s dividend is a bonus and yields nearly 3% currently.
Alphabet (NASDAQ:GOOG,GOOGL) currently makes a lot of sense as a stock investment. The search giant just released second-quarter earnings that were much better than expected and should galvanize a period in which share prices rise.
Revenues for the quarter reached $74.6 billion, ahead of the $72.9 billion Wall Street had been expecting. That earnings beat will be consequential for investors over the coming weeks and months. The beat led to strong income growth of 14.79%(1) which was another bright spot for the firm.
Revenue growth reached 7% on a year-over-year basis down from 13% a year earlier. Slowing growth rates should matter but I’d argue they’re less of a concern due to the overall trajectory. Alphabet is expecting more than $300 billion in sales this year which is a turnaround from the $283 billion in 2022. Search, advertising, Cloud, and other bets are all growing and as rate hikes stop GOOG stock is in a strong position overall relative to its 2021 peak prices.
Meta Platforms (META)
Investors should consider riding the upward momentum in Meta Platforms (NASDAQ:META) stock. The fundamental case underpinning that idea is very solid. That’s where we’ll start.
Here’s what I particularly like about META shares currently: Even though the firm’s revenues grew in both the last 3 months and the last 6 months, net income did not. It decreased on a year-over-year basis during the most recent 6 months. However, it increased on a year-over-year basis during the latest 3-month period on a year-over-year basis. That suggests that Meta Platforms is doing much better now and that a real turnaround is in effect.
That’s true despite the fact that Reality Labs’ losses are getting bigger. Ad revenues and its Facebook and Instagram apps have rebounded. That’s very important to the overall narrative for Meta. The economy looks to have dodged the worst outcomes of rate hikes at this point. That should inspire businesses to spend more on ad revenue and continue to bolster META shares in the process.
Albemarle (NYSE:ALB) has emerged as one of the more important EV stocks over the past few years. Its position is secured in the sector. Lithium demand is expected to grow. Those factors are powerful and have led Albemarle to make bold projections that should have investor interest piqued.
Before I get into that, let me quickly note how rapidly Albemarle is growing. In Q1, revenues grew by 129% reaching $2.6 billion while net income rose by 389%. Even though prices were not stable those results proved that lithium demand is massive on EV sales that aren’t weakening.
Let’s get back to those projections. Albemarle increased its 2030 lithium demand forecast by 15% over its previous expectations early this year. The company anticipates increasing demand through 2030 paired with a supply shortfall. The economic takeaway is clear: Prices are going to rise over the long term. Current prices make for a good entry point.
Microsoft (NASDAQ:MSFT) shares recently tested new all-time highs of $350 before quickly falling to $330. I think the market has got it wrong: MSFT stock is worth $350 per share. The decline is an opportunity.
The reason to believe so is simple: Microsoft traded at $330 in 2021, a year in which the company reported $168 in sales. It could eclipse $240 billion in sales this year. Thus, its price-to-sales ratio clearly favors the notion that share prices could burst above $350 moving forward.
Why shouldn’t investors believe that idea? After all, Microsoft has made massive strides in AI. It is finding new revenue streams therein. Office 365 AI integrations are the latest news on that front. Time will tell how that goes. In any case, Microsoft is now a better firm than it was back in 2021 when it traded at a similar price. It’s a very simple, logical argument, and simple, logical arguments are often very powerful.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.