10 Stocks to Watch in Q3 2024

The stock and bond markets had a rough start to the second quarter of 2024, as expectations for interest rate cuts by the U.S. Federal Reserve diminished due to persistently high inflation.

However, by the last days of Q2 2024, inflation expectations began to look more positive and aligned with the goals of U.S. monetary authorities. Investors grew more confident that the Federal Reserve would move to cut interest rates in September, which contributed to the S&P 500 closing up 14.5% at the end of June 2024 compared to the start of the year.

Now, as Q3 2024 begins, the main question facing investors revolves around which stocks are currently the most and least attractive. This was answered in a report by Bloomberg, reviewed by Sky News Arabia’s Economy section, which revealed a list of 10 companies whose stocks should be watched in Q3 2024 to assess the opportunities or risks they may face during this period.

According to Bloomberg, the ten companies highlighted by their analysts cover various sectors and are as follows:

With no scheduled release date for a successor to Nintendo’s Switch console, it seems unlikely that the gaming company will meet the consensus expectations for its hardware segment in the fiscal year 2025, which began in April.

Given the relatively small number of new games in Nintendo’s pipeline, forecasts indicate that profits will fall short by about 10 percent in the fiscal year 2025, while sales are expected to decline by approximately 27 percent. This will cast a shadow over Nintendo’s stock in the upcoming period.

THK

The growing interest in all things related to artificial intelligence is likely to boost investment in electronics and semiconductor production. This uniquely benefits Japan’s THK Company, which controls about 50 percent of the global production of rails that operate high-precision chip manufacturing equipment, leading to improved company revenues.

Galaxy

Galaxy Entertainment Group is an investment holding company that operates in the management of casino gaming, hospitality services, and related services. It operates through the following segments: gaming and entertainment, construction materials, and corporate management and treasury.

Revenue growth and market share for Galaxy Entertainment Group are expected to accelerate in the second half of 2024, thanks to its recent expansion in Macau, China. This expansion will provide an increasing array of activities related to gambling and concerts. As a result, Galaxy’s operations are expected to see significant growth during the summer holiday season. Forecasts indicate that the company will achieve a 26 percent increase in sales in the upcoming period.

Diageo

The leading global position of spirits manufacturer Diageo in the Scotch and tequila markets, which together account for nearly 40 percent of the company’s revenues, is likely to drive sales growth exceeding 5 percent in the fiscal year 2025. Additionally, increased spending on marketing and new product offerings will help persuade consumers to switch to higher-priced products. Diageo’s strategy is expected to result in approximately 2 percent growth in sales in the near future.

SAP

Cloud-based products account for approximately two-thirds of software company SAP’s sales, with purchase orders for these products likely to jump by 20 percent more this year.

The resurgence in spending on SAP’s cloud products bodes well for the German company to achieve broader growth in 2025, with sales improving by 10 percent or more.

SAP’s second-quarter results are expected to show cloud business growth of over 25 percent, with the potential for further acceleration in the third quarter.

Sandvik

Sandvik is a Swedish engineering company specializing in products and services for mining and rock drilling, rock processing platforms, and metal cutting and manufacturing.

Sandvik generates more than half of its revenue from mining companies, which are expected to increase capital expenditures in the second half of 2024. Sandvik’s biggest gains will come from gold and copper mining companies, where it holds a leading market share.

Major Australian mining companies, such as BHP, are likely to reveal strong capital expenditure budgets when they release their results in August 2024, providing a boost to Sandvik’s business outcomes.

Corning

As the largest American manufacturer of optical fiber cables, Corning has benefited from the surge in building artificial intelligence data centers and the U.S. stimulus package, which will increase demand for these types of cables. Corning’s revenue growth is expected to accelerate by 20 percent or more through 2025.

Nike

New products like the standout Pegasus running shoe, along with the expansion of the Air franchise, are expected to boost revenues for the giant sportswear company Nike.

Alongside major sporting events like the Olympics and other key sports events, Nike’s third-quarter results in 2024 could be positive after two years of disappointing earnings.

The upcoming Paris Olympics in July and August, along with the ongoing UEFA European Football Championship, are likely to provide momentum for Nike’s latest product launches.

RH

RH management holds expectations for revenue growth of over 8 percent during 2024, which appears overly optimistic to observers. With furniture sales comprising two-thirds of RH’s revenue, the risk of RH not reaching sales targets puts pressure on the company.

HCA

Like other hospital operators in the United States, HCA may face shrinking profit margins due to rising wages, increased prices for goods and services, and slowing demand for healthcare. Profit growth in the third quarter of 2024 and into 2025 is likely to fall below estimates by approximately 10 percent.

Why these stocks specifically?

George Khoury, Head of Research and Education at CFI, in an interview with Sky News Arabia’s Economy section, explains that a significant portion of the stocks highlighted in Bloomberg’s report with a positive outlook are related to artificial intelligence or tools used in its manufacturing. Companies producing services or equipment in this field are expected to see increased demand for their products due to the widespread adoption of artificial intelligence. Even Nike has benefited from artificial intelligence; their standout Pegasus running shoe is a product of this technology, utilized to create a distinctive product in terms of quality and performance. This clearly indicates the beginning of artificial intelligence being used in the design of consumer products.

Khoury adds that the report also noted stocks associated with the casino and gambling industry, reflecting some investors’ inclination towards risk-taking. He points out that investors’ risk appetite has increased significantly in the past two years, especially considering that a substantial portion of investment or trading funds are borrowed, explaining the record levels of credit card debt in America. Additionally, excessive greed associated with public spending contributes to the rise in spirits stocks, as consumers live a lavish lifestyle despite their inability to afford it, supported by credit cards.

The trend of stock indices during the third quarter of 2024?

According to Khoury, the United States is steadily moving towards starting a path of interest rate cuts during the third quarter of 2024, which is now more expected compared to the second quarter of 2024. The main reasons for this direction lie in the gradual decline in inflation, although not at the levels desired by the Federal Reserve. Another supporting factor is the subdued economic conditions in the U.S., as indicated by the Services Purchasing Managers’ Index (PMI) from ICM, job data, and unemployment rates, showing the economy is nearing contraction. Khoury notes that the possibility of even a single interest rate cut this year would boost consumer morale and confidence in the United States, potentially triggering strong buying momentum in the stock market supported by artificial intelligence, technology companies, and luxury products.

Bubble on the horizon

Khoury concluded, anticipating that positive sentiments would surround the stock market during the third quarter of 2024. However, he cautioned that during the first and second quarters of 2025, there might be signs indicating that we are heading towards a bubble.