With the fourth quarter of 2024 officially arriving, some investors may already be looking ahead to 2025. However, that’s still three months out, and investors shouldn’t squander the opportunity to pick up shares of some stocks that look like great values.
If you’re looking to buy stocks this October, I think you’ll be hard-pressed to find better picks than these three.
Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC, is one of the world’s most important companies. It manufactures custom chips for nearly every big tech player and is a key reason why artificial intelligence (AI) technology is advancing rapidly.
It offers the most advanced chip technology available on the market and already has new designs in the pipeline that will introduce more capabilities than ever before.
Because of its neutral position as a chip manufacturer, it is slated to benefit from the general trend toward more powerful digital devices. This is why management believes it will grow revenue at a compound annual rate of 15% to 20% over the next several years.
It’s rare for a company that size to deliver that level of growth, but the environment is shaping up for TSMC to do that. If it delivers on that projection, then it’s a no-brainer buy if the stock can be purchased at a fair price.
The stock is trading at 28 times forward earnings, so it’s not cheap, but it’s still at a reasonable level at which investors can expect solid market outperformance over the long term.
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is better known as Google’s parent company. The Google family of products is quite large, and it generates huge revenue from this family through ads. With ad revenue making up about three-quarters of Alphabet’s total revenue in the second quarter, it’s a critical part of the investment thesis.
Ad revenue rose 11% in Q2, which is solid growth considering how mature this business is. The profits from ads allow Alphabet to fund its AI research, which has created one of the best generative AI models available, Gemini. While this platform hasn’t been monetized well yet, it has been integrated into several of Alphabet’s ad products, which keeps it on top of the game for the best places to advertise.
Alphabet also has a thriving cloud computing business, Google Cloud. Cloud computing has seen an uptick in usage as companies look for ways to find computing power to train their AI models. Renting this computing power instead of outright buying it is a far less cash-intensive process, and it is a reason why Google Cloud is excelling.
Overall, Alphabet’s revenue rose 14% in Q2, and earnings per share (EPS) rose 31%. These phenomenal results should give Alphabet a premium over the market. However, Alphabet is fairly cheap and trades for only 21 times forward earnings versus the S&P 500 index’s 23 times forward earnings.
This is a significant value investing opportunity, making Alphabet a screaming buy.
While the market has done well since 2022, PayPal Holdings (NASDAQ: PYPL) has been a disastrous investment. The stock has fallen nearly 60% although it has risen about 20% in the past two months.
PayPal is a textbook turnaround story as it has a fairly new CEO and is focused on cost-saving initiatives. There is a lot to work with at PayPal as it is still posting healthy 8% revenue growth and grew its payment volume by 11% to $417 billion in Q2. However, the market is convinced that PayPal is a failing company, which is why it trades at such a cheap valuation.
PYPL PE Ratio data by YCharts
PayPal’s management is taking advantage of this incredible value and using much of its cash flow to repurchase shares. This boosts PayPal’s EPS growth and is the primary reason why PayPal’s EPS rose 17% in Q2.
Management also boosted its fiscal-year 2024 guidance, increasing its EPS target from $3.65 to $3.93. This indicates that the company turnaround is going strong and that PayPal’s stock may be on the brink of a huge bull rally.
Even though the turnaround has started, PayPal still offers plenty of value, making it a great stock to consider buying in October.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet, PayPal, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, PayPal, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: short September 2024 $62.50 calls on PayPal. The Motley Fool has a disclosure policy.
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