3 Blue-Chip Stocks to Buy for April 2022
1. Visa (V)
Outside of the tech space, these next two companies have been some of the best performers over the last decade. Visa (NYSE:V) and MasterCard (NYSE:MA) run what I like to call a “toll booth” on transactions.
There’s a secular trend that’s been underway for years, as consumers transition from cash and check to credit and debit. Additionally, the rise of online and digital sales has only fueled this move, as consumers obviously find it easy to shop.
Specifically, with these two businesses, investors have been quick to critique the valuation by pointing out that Visa stock trades at more than 17 times its trailing 12-month revenue. In the past, this valuation has also been an issue. Even during generous market periods, that’s a rich valuation for many growth stocks. However, in those instances, investors aren’t taking profits into account for the growth stocks, because many don’t have any. And in the case of Visa, it’s incredibly profitable.
Overall, the company sports gross profit margins of almost 80% and net profit margins of 51.6%. These metrics aren’t back to the pre-pandemic highs just yet, but they are inching in that direction now. Therefore, it makes a great option among the top blue-chip stocks to buy.
2. Apple (AAPL)
I refer to Apple (NASDAQ:AAPL) as having one of the best business models in the world. It runs the razor/razor blade model, but at an incredible premium.
The razor/razor blade model is premised on the idea of getting the razor into customer’s hands — even if that means giving it away at cost (or less) — so that they will continue to buy razors from you, which is the real money maker.
Rather than give away its razors though — in this case, that’s iPhones, iPads, Macs, etc. — Apple charges a hefty premium. They mark these devices up in price to the point where they alone generate an enormous business for Apple.
So, what then is the razor blade portion of the business? Services.
Last quarter, overall revenue grew 11%, while Services revenue grew almost 24% YOY. Not only is it outpacing the company’s Products revenue in terms of growth, and overall revenue growth, but Apple’s Services unit is more than twice as profitable as its Products business. And that is the main catalyst that people need to understand.
3. Nvidia (NVDA)
As one of the greatest companies in the market as well, Nvidia (NASDAQ:NVDA) caters to multiple end-markets that are enjoying long-term secular growth. Some of those end markets include:
Datacenter, cloud computing, supercomputing, artificial intelligence and machine learning, graphics, gaming, autonomous driving and automotive, drones, robotics, the metaverse and more.
Moreover, when you look at those markets, it’s pretty clear to see the trends. Do customers want faster computers, better graphics, and more responsive gaming and control (for drones, robotics, autonomous driving)? Do they want faster cloud-based applications and are they generating more data?
The answers to these questions all point to more demand for Nvidia’s products In turn, it’s the main reason I believe this firm will eventually command a $1 trillion market cap.
Comments
$NVIDIA Corp(NVDA)$ are earnings forecast good? NVIDIA Corporation - Hold
Market proprietary data indicates that NVIDIA Corporation is currently rated as a Zacks Rank 3 and we are expecting an inline return from the NVDA shares relative to the market in the next few months. In addition, NVIDIA Corporation has a VGM Score of C (this is a weighted average of the individual Style Scores which allow you to focus on the stocks that best fit your personal trading style). Valuation metrics show that NVIDIA Corporation may be overvalued. Its Value Score of D indicates it would be a bad pick for value investors. The financial health and growth prospects of NVDA, demonstrate its potential to underperform the market. It currently has a Growth Score of B. Recent price changes and earnings estimate revisions indicate this stock lacks momentum and would be a lackluster choice for momentum investors.
$Visa(V)$
The darling blue-chip stock Visa (V) is showing signs of fatigue much like it's counterparts in the Stock Market. Visa’s stock (NYSE: V) has decreased 17% YTD, as compared to the 23% drop in the S&P500 over the same period. Further, at its current price of $185 per share, it is trading 29% below its fair value of $261 – Trefis’ estimate for Visa’s valuation. The company outperformed the street expectations in the third quarter of FY2022 (FY Oct-Sept), with net revenues (revenues minus client incentives) increasing 19% y-o-y to $7.3 billion. The growth was primarily driven by a 51% jump in international transaction revenues, followed by an 8% rise in data processing, and a 13% increase in service revenues. The segments benefited from improvement in the key metrics – nominal payments volume (up 14%), the number of processes transactions (up 16%), and cross-border volumes (up 38%). Overall, the net income increased 32% y-o-y to $3.4 billion.
Apple is seeking to shift some of its production out of China. While the move could reduce the long-term risks of overdependence on China for the tech giant, it will be a costly process which is likely to take several years with significant political risks.
Apple (ticker: AAPL) has told its suppliers to step up plans for assembling products elsewhere in Asia, particularly India and Vietnam, The Wall Street Journal reported over the weekend, citing people involved in the discussions.
$NVIDIA Corp(NVDA)$
3 Analysts Weigh In on NVDA Stock
In separate notes to investors, three analysts recently discussed the outlook of NVDA stock with this backdrop in mind. Stating that “Nvidia remains on track to hit supply/demand equilibrium in the second half of 2022,” Piper Sandler analyst Harsh Kumar expects the company to buy back a significant amount of its shares, according toThe Fly. Kumar maintained a $350 price target and a “buy” rating on the shares.
Taking a more bearish view was Deutsche Bank’s Ross Seymore. Although the demand for semiconductors is likely to remain strong, investors will probably continue to be worried about a “cyclical slowdown/correction,” the analyst stated. He trimmed his price target to $255 from $285 and kept a “hold” rating on the chipmaker.
$Apple(AAPL)$
Latest News
Apple's value chain in China, an emblem of the country's global role as a source of labour and assembly, has been hit hard by strict lockdowns in Shanghai and neighbouring provinces, raising the risk that the US tech giant may accelerate a shift of its operations away from China, say analysts.
While it is hard to put an exact figure on the losses resulting from the disruption to transport and production along Apple's extensive value chain in China, chief financial officer Luca Maestri told a conference call on Thursday that Covid-19-related lockdowns and a chip shortage would reduce the company's revenue by up to US$8 billion in the June quarter.
Maestri said this was "substantially larger than" the impact in the previous quarter and also warned about the likely knock-on effect of reduced consumer demand in China due to lockdowns.
$NVIDIA Corp(NVDA)$
1. On Wednesday, Nvidia said in an SEC filing that the US government controls sales of high-performance AI chips for servers, the A100 and H100, to China and Russia. The export control might lead to $ 400mln losses in 3Q.
2. On Thursday, $NVIDIA Corp(NVDA)$ said the US government will allow it to continue developing its H100 artificial intelligence chip in China.
After the news, $NVIDIA Corp(NVDA)$ once fell to $132.70 (share price dropped over 10% in one day), and closed at $139.37.