Stock markets saw a significant drop on Monday, August 5. Of course, this is no reason for long-term investors to panic. Technically, we are still in a bull market, and whether or not stock prices continue to fall, the drop could create opportunities to snap up shares of great discount companies. Which companies should investors invest in while they are down?
Here are two worthy candidates: Apple (NASDAQ: AAPL) And visa (NYSE: V)Find out why these two companies are likely to be long-term winners, regardless of short-term market performance.
1.Apple
Apple shares fell about 5% on Monday. That doesn’t sound like much considering it’s a stock worth more than $3 trillion, tens of billions of dollars. Apple’s performance has been rather volatile for much of the year. The company didn’t fare well in the first five months due to several headwinds, including weak iPhone sales in China, disappointing financial results, an antitrust lawsuit and a perceived failure to keep up with its tech peers in the artificial intelligence (AI) race.
However, the company’s shares have recovered in recent months, thanks in part to the company’s AI announcements during its developer conference in early June. How will things pan out for the tech giant by the end of the year? Nobody knows for sure, and for long-term investors, this question is not of particular interest. However, the company’s prospects remain bright. That’s the most important thing. First, Apple’s financial results have improved.
In its most recent reporting period, the third quarter of fiscal 2024, which ended June 29, Apple’s revenue rose 5% year over year to $85.8 billion. Earnings per share (EPS) of $1.40 was an 11% increase from the same period last year. Revenue in the high-margin services segment rose 14.1% year over year to $24.2 billion. Second, Apple has shown that it is not out of the AI race yet. The company’s nifty new AI features – which it calls Apple Intelligence – will be available to iPhone users (starting with the 15 Pro) and several of the company’s other devices.
Apple has never tried to be first to market. The company has a knack for taking existing technologies and putting its own spin on them. This slow and steady strategy has served the company well. Third, Apple has more than 2.2 billion devices in its installed base, which provides significant long-term monetization opportunities. Apple benefits from strong competitive advantages, including switching costs (it’s not easy to leave its ecosystem), one of the strongest brands in the world, and the network effect within its App Store, because the more app developers it has, the more attractive it is to customers and vice versa.
In short, while Apple may not be growing as fast as it has over the past decade, it remains an excellent technology stock to buy and hold.
2. Visa
Visa fell along with the overall market on August 5, but that’s in line with the company’s performance for the year. Visa has failed to keep up with the broader stocks since the start of 2024; its shares are currently up just 0.32% year-to-date. Visa’s performance was largely due to lower-than-expected consumer activity, which led to weak financial results. But that’s no reason to panic. Visa’s payment network facilitates credit card transactions.
Visa earns a fee every time a customer swipes a card with its logo on it. If consumer spending falls, its stock will suffer. Despite these headwinds, Visa still has plenty of room to grow, as odd as that may sound at first. The company’s business – and its branded credit cards – may seem ubiquitous, but cash, checks and other payment types that Visa can eat up still account for a huge volume of payments.
The company recently estimated that there is a $20 trillion opportunity ahead. How does that compare to its current ecosystem? During its fiscal year 2023 (which ended September 30, 2023), the company’s payment volume grew 6% year-over-year from $12.3 trillion. So if Visa can make solid progress and capture a large portion of that $20 trillion opportunity, its financial results should continue to improve. And there are good reasons to believe that’s exactly what can happen. Visa has no notable competitors other than MasterCard.
This duopoly is unlikely to be toppled anytime soon. The two companies benefit from a network effect. The more merchants there are in Visa’s payment ecosystem, the more attractive it is to consumers. The same is true in reverse. Yes, Visa will sometimes run into problems, as it has this year, and that is true of every company in existence. However, when you look at the company’s long-term prospects, Visa’s performance this year represents an excellent opportunity to buy its stock.
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Prosper Junior Bakiny does not own any of the stocks mentioned. The Motley Fool owns and recommends Apple, Mastercard, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
2 Stocks to Buy During a Stock Market Sell-Off was originally published by The Motley Fool
