In 2024, with expectations of interest rate cuts and assuming no significant systemic risks arise within the year, investors are poised for a relatively optimistic outlook.
Three star stocks have garnered significant attention.
NVIDIA $NVIDIA Corp(NVDA)$
Nvidia has historically presented three long-term opportunities with gains exceeding fivefold.
1. After 2016, NVIDIA took over two years to surge from around six dollars to $67 (adjusted). However, by the end of 2018, it experienced a sharp 53% decline within three months.
2. In March 2020, amid the COVID-19 pandemic, Nvidia initiated its second explosive rally, witnessing a tenfold increase from its lowest point to its peak by October 2021. This surge was fueled by the generous liquidity injection post-pandemic, coupled with strong demand for Nvidia graphics cards for Ethereum mining.
3. The current rally is attributed to the technological wave in artificial intelligence, propelling Nvidia as a leader in AI chip stocks. The stock has surged from a low of $108 to nearly five times its value.
While there may be a potential 30% upside for investors looking to buy NVIDIA now, it is important to note that it is not a cheap stock and lacks a sufficient safety cushion.
TESLA $Tesla Motors(TSLA)$
Tesla is the most liquid and actively traded individual stock in the U.S. stock market, consistently occupying the top one or two positions in terms of stock turnover. As a favourite among retail investors, what challenges and opportunities will Tesla face in 2024?
1. Starting in 2024, the U.S. has adjusted tax credits for electric vehicles. The U.S. aims to encourage electric vehicle manufacturers to source at least 50% of minerals and 60% of components from the U.S. or friendly nations. Failure to meet these criteria results in a reduction of the tax credit from $7500 to $3750, or no credit at all. However, individuals not subject to taxation can still benefit from tax credits. This is a challenge faced by other automotive manufacturers in the industry, and its impact on Tesla is expected to be minimal.
2. Tesla’s Cybertruck is expected to start regular delivering data in 2024. Pickup truck sales account for 20% of new vehicle sales in North America, making the popularity of electric pickups foreseeable. The primary challenge lies in the supply side, with difficulties in processing the stainless steel body, challenging new structural batteries, and increasing production volume. In the initial stages of production, without economies of scale, the cost per vehicle is higher than the selling price, resulting in losses. This will impact Tesla’s financial statements in two key areas: gross margin, as a negative gross margin for the pickup would lower overall gross margin levels, and net profit, as profitability only begins when production reaches a certain scale. This was evident around 2020 when Tesla transitioned from losses to consecutive profitable quarters as vehicle deliveries surged.
3. In 2024, Tesla may continue to reduce prices, further lowering gross profit margins. The potential decline in crude oil prices in 2024, reducing the cost of fuel-powered vehicles, may force electric vehicle prices to decrease to maintain a competitive edge.
4. However, Full Self-Driving (FSD) automation, AI, and robotics will continue to be key factors distinguishing Tesla from ordinary car manufacturers.
Historically, Tesla has experienced active trading, with sharp rises and falls each year. In 2020, it saw a remarkable surge of 743%, followed by a 49% increase in 2021, a sharp decline of 65% in 2022, a doubling in 2023, and an overall upward trend.
The target price for 2024 is estimated at $300, with the potential to exceed $350 if the overall market is bullish. In the event of significant risks, Tesla may drop below $200, presenting a buying opportunity.
COSTCO
Costco has recently experienced a significant surge, outpacing even the momentum of technology stocks.
1. Costco has multiplied fivefold in six years, without significant discounts in between. Even in 2020, during the sudden outbreak of the pandemic and market downturn, Costco proved to be exceptionally resilient.
2. As a large retail chain, Costco is defensively positioned within the industry.
3. In 2024, Costco is highly likely to increase its membership fees, which would be a significant positive, transforming its valuation from overvalued to reasonable.
From 2024 to 2025, Costco’s target price is $1000. Any significant pullback in its stock should be worth monitoring.
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