In July, the Federal Reserve Chair Jerome Powell, states “given the resilience of the economy recently [we] are no longer forecasting a recession.” However, analysts and economists are shifting their outlook even more optimistically, with Tom Lee, Fundstrat’s head of research, suggesting that the economy is poised for an expansion. He presents the notion of five “green shoots” in the economy, indicating an upcoming expansion:
- A robust job market
- Decreasing inflation expectations
- Declining rent costs
- Treasury Secretary Janet Yellen expressing greater optimism
- Reduced stock market volatility
This bodes well for investors as it signifies the potential for the market to experience significant growth. This moment is an opportune time to invest in these undervalued sleeper stocks for long-term returns.
Sleeper Stocks: Synchrony Financial (SYF)
Synchrony Financial (NYSE:SYF) is a consumer financial services company that offers corporations and consumers credit products, loan services, and banking.
SYF stock is currently valued at $32.28, which is down -0.34% YTD. 18 analysts have a positive outlook for SYK stock, predicting a 12-month median to high forecast of $38.50 to $55.00 or a 19.3% to 70.4% upside.
The financial services market is currently valued at $25.51 trillion in 2022 and is expected to reach $58.69 trillion by 2031 at a 9.7% CAGR during the period. According to the International Monetary Fund World Economic Outlook in 2021, financial services comprise about 24% of the global economy, and the other 76% rely on financial services.
Synchrony financials have been stable and robust over the past years, with 2022 revenue at $12.5 billion, up 14.54% from 2022’s $11.67 billion. The forward EPS growth is currently at 31.26%, demonstrating a high probability of long-term growth. It has a 246.19% difference from its sector median of 9.03%, and its net income margin is 31.83%, which is higher than the sector median of 25.78% (as of writing).
Primary growth drivers for Synchrony are its contracts with Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY), and PayPal (NASDAQ:PYPL). These partnerships guarantee a stable income flow to support its operations and facilitate growth. That metric is now a significance that has grown more apparent in today’s market with the surge in e-commerce.
Synchrony’s ongoing digitalization enhances its efficiency and reach, enabling the company to serve a broader spectrum of individuals and consumers. This is advantageous in light of the thriving e-commerce sector. Plus, it has also led to a significant rise in cashless transactions, bolstering the appeal of Synchrony’s products among both partners and consumers.
Investors should purchase SYF stock due to its robust financials and strong position in the e-commerce sector. I believe SYF is one of the best sleeper stocks to buy.
Alaska Air Group (ALK)
Alaska Air Group (NYSE:ALK) is an American air service that connects American cities and other North American countries through reasonably priced airfare.
Despite ALK stock being down 4.86% YTD, financials are steadily growing and will provide subsequent growth to ALK. Alaska Air posted significant figures for Q2 2023, with revenue of $2.84 billion growing 6.77% YoY and beating analyst expectations by 2.53%. Net income of 240 million grew 72.66% YoY, and a diluted EPS of $1.86 increased by 61.76% YoY. The latter beat analyst expectations by 10.95%.
Recent staff shortages due to COVID-19 pandemic-related reasons have all led to the global airline industry delaying or canceling commercial flights. However, with domestic and international tourism to business transportation consistently growing, the industry is shaping out to recover nicely. Job leads are growing at a 25.5% CAGR from 2022-2027, and the U.S. domestic market is bringing in $279.6 billion in annual revenue.
Alaskan Airlines has identified its future growth catalyst in its 2023 and 2024 initiatives, which focus on improving the customer experience. The airline has allocated $2.5 billion for enhancing the hub airport experience. It also has a promise of guaranteeing a 5-minute lobby time for customers. This customer-centric investment is expected to yield significant benefits for the company. By improving the hub airport experience, Alaskan Airlines aims to make travel more convenient for passengers. This results in reduced boarding and transit times and increased operational efficiency. This—in turn, will lead to cost savings and improved customer loyalty. The commitment to a 5-minute lobby time sets Alaskan Airlines apart and offers travelers a more convenient travel experience.
Based on a report by Yahoo! Finance, 11 analysts have projected a median price target of $63.36 for ALK stock over the next 12 months. The range of estimates varies from $50.00 to $75.00. ALK stock is a recommended purchase for September 2023. The company’s investment in enhancing customer experience will strengthen its reputation. But most importantly, it will improve customer retention, and increase competitiveness in the airline industry. Ultimately, it results in higher profits for the company.
With that in mind, I believe ALK is one of the best sleeper stocks.
Citigroup Incorporated (C)
Citigroup Incorporated (NYSE:C) is an investment bank and financial services company. The financial services industry is valued at $23.3 trillion in 2021 and is forecasted to grow at a 7.4% CAGR to $33.3 trillion in 2026 and $45.1 trillion in 2031 from a 6.3% CAGR. The increasing demand for fast and real-time fund transfers and the adoption of blockchain technology drive growth. This is well reflected in the growth of C stock. Yahoo! Finance reports 25 analysts having a 12-month price target on C stock to range from $43.00 to $95.00, with the mean averaging at $54.12.
Citigroup and Amazon have recently collaborated to introduce a new payment option for Citi cardholders. This new option allows Citi credit card members to pay monthly installments when using Amazon Pay for purchases over $50. Citi Flex Pay, offering 0% APR on 3, 6, and 12-month installment plans, is now available through a digital wallet. This eliminates the need for the customer to create new accounts or retrieve forgotten passwords during checkout. Citigroup’s payment options are now more flexible, benefiting retailers and shoppers integrated directly into Amazon Pay. This collaboration will undoubtedly lead to long-term success, growth, and increased financials for Citigroup.
C Stock’s partnership with Amazon for a new payment option offers unparalleled convenience. This makes it one of the must-have sleeper stocks.
On the date of publication, Michael Que 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.
