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Even with the latest 25 basis point hike, the stock market seems to have digested the news and many anticipate that this is the last rate hike before the Federal Reserve chooses to pause. The interest rate is just slightly above the inflation rate, and the distresses in the banking sector have caused additional tightening due to changes in loan policy. Still, Core CPI remains very sticky at 5.6% and if that continues to rise, we may very well see one more hike to a terminal rate of 5.5%. Many are looking to “millionaire stocks” to save their investing portfolio.
Yes, some solid businesses are trading for a bargain in the stock market, but buying them at the trough can return multibagger gains when the market inevitably delivers a strong comeback. With millionaire stocks, we’re looking for well-established products with good retention rates so that it can ride out the a potential recession on the horizon.
We’ll be looking at these three names:
Polestar Automotive (PSNY)
Polestar Automotive (NASDAQ:PSNY) is a Swedish electric vehicle (EV) maker that has remained under the radar despite its better standing among its competitors. For example, the company has been beating its delivery targets, while other similar competing names like Lucid (NASDAQ:LCID) and Rivian (NASDAQ:RIVN) have struggled. Polestar’s vehicle delivery count reached 51,500 cars, up 80% year-on-year. That’s higher than its 50,000 target and the company expects to sell approximately 80,000 cars this year. To put this into context, better-known competitors Lucid and Rivian wish to produce 14,000 and 50,000 vehicles in 2023.
Still, I would note that Polestar is burning significant cash. If it does not secure additional funding this year, there will be a cash crunch. But looking at the fundamentals here and comparing them to its competitors (who have raised significant cash), securing more funding shouldn’t be an issue for Polestar.
Analysts are somewhat mixed here with 2 “buy” and 2 “hold” ratings. The average upside here is 64.56% in one year, with a $6.50 target. I believe PSNY could reach much higher if it continues to outperform deliveries and secure more funding.
Shopify (SHOP)
Shopify (NYSE:SHOP) delivered quite the surprise in Q1, posting a surprise net income of $68 million and strong sales growth of 25%. It also delivered guidance stating that the company expects 2023 revenue growth to remain near 25% and that it expects to achieve free cash flow profitability for each quarter of 2023.
Accordingly, Wall Street has generously rewarded the company for its cost-cutting measures. SHOP is up around 25% within 24 hours of the earnings release, and if Netflix (NASDAQ:NFLX) and Meta (NASDAQ:META) provided any clues, it is likely that SHOP stock too will be carried higher as it will be slashing a fifth of its workforce.
Snap Inc (SNAP)
Snap Inc (NYSE:SNAP) is yet to make any substantial moves to the upside like many of its peers. That’s because the company is seeing negative sales growth while its cost-cutting measures have yielded little results in terms of reducing losses.
Indeed, this company may not snap back to profitability anytime soon, but it has a lot of room for growth in the long run. Its average revenue per user is still around a third of Meta’s (a tenth if you only consider North America), and the user base is still relatively small. But if its management can capitalize on the massive addressable market, SNAP will drive substantial returns by 2025. It also has a younger user base, which is a key advantage.
All things considered, a resurgence in ad revenue should make the company profitable by 2025. Another catalyst is a TikTok ban, and Snapchat is the closest replacement that most young people use today. I see both of these catalysts driving growth for Snap in the long run, despite near-term hurdles.
On the date of publication, Omor Ibne Ehsan 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.