7 Blue-Chip Stocks That Can Triple in the Next 24 Months

  • Arm Holdings (ARM): ARM has a big addressable market for AI-enabled CPUs and continued growth in license and royalty revenue.
  • Barrick Gold (GOLD): With gold likely to trade around $2,600 an ounce, the company is positioned to boost cash flows.
  • Tesla (TSLA): Multiple surprises might be on the cards that can help boost deliveries growth.
  • Keep reading to discover more blue-chip stocks set to triple!
blue-chip stocks set to triple - 7 Blue-Chip Stocks That Can Triple in the Next 24 Months

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Blue-chip stocks are generally associated with slow and steady returns. However, there can be exceptions when blue-chip stocks move like growth stocks. Nvidia (NASDAQ:NVDA) is a good example, with the stock having surged by 217% in the last 12 months. The focus of this column is on similar blue-chip stocks set to triple in the next 24 months.

I believe there are two key reasons for ballistic returns in blue-chip stocks in quick time. First, the stocks are trading at a deep valuation gap due to temporary headwinds. When these headwinds wane, the stock surges. Further, there is a big addressable market for a particular product or service that changes the entire growth outlook for the company. The rally in Nvidia was largely driven by the growth potential of AI.

With this overview, let’s talk about seven blue-chip stocks set to triple in quick time with a focus on the industry or business catalyst.

Arm Holdings (ARM)

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Arm Holdings (NASDAQ:ARM) is a relatively new listing that holds immense potential. After listing at $51 in September 2023, ARM stock surged to highs of $164 in February. A meaningful correction has followed, and ARM stock trades at $108. In my view, this is a golden opportunity to accumulate.

As an overview, Arm Holdings is a developer and licensor of central processing unit products and related technologies. The company claims its CPUs have enabled advanced computing in over 99% of the world’s smartphones.

For Q3 2023, Arm reported 14% year-on-year (YoY) growth in revenue to $824 million. That was the company’s highest-ever quarterly revenue, with growth driven by license as well as royalty revenue upside. Further, Arm Holdings is on track to report annual free cash flows of more than $1 billion.

An important point to note is that Arm has moved away from general-purpose CPUs to products catering to specific industries. The company offers AI-enabled CPUs for mobile, consumer electronics, IoT, automobile and cloud & networking. Therefore, the addressable market is significant, and royalty revenue will continue to swell. With the stock relatively undiscovered, it’s a good time for exposure.

Barrick Gold (GOLD)

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I believe gold mining stocks are positioned to surge higher, and Barrick Gold (NYSE:GOLD) is among the undervalued names to consider. My view is underscored by the point that GOLD stock trades at an attractive forward price-earnings ratio of 15.8.

An important point to note is that gold is already trading above $2,300 an ounce. Further, analysts expect the precious metal to touch $2,600 an ounce. If this scenario holds true, gold mining stocks will likely skyrocket on the back of higher realized sales prices.

For 2023, Barrick reported adjusted EBITDA and operating cash flow of $5.5 billion and $3.7 billion, respectively. If gold trades above $2,500 an ounce, it’s likely OCF will be more than $4.5 billion.

That will translate into higher dividends and share repurchases. Additionally, credit metrics will improve, and GOLD stock will be re-rated. It’s, therefore, a good time to buy the stock before the big rally from a valuation gap.

Tesla (TSLA)

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It’s said that the best time to buy quality ideas is when sentiments are bearish. That holds true for Tesla (NASDAQ:TSLA) stock, which has a reputation for making big comebacks. Year-to-date, TSLA stock has declined by almost 30%. In my view, the negatives of competition and macroeconomic headwinds are discounted in the stock.

In May 2023, Elon Musk indicated that the company is working on two new products. These have the potential for combined sales of five million cars annually. The markets might be in for some surprises in the coming quarters as more is revealed on these products.

Elon Musk also indicated that higher interest rates have been impacting sales growth. With multiple rate cuts likely in the next 12 to 18 months, I expect deliveries growth to accelerate.

Another point worth mentioning is that Tesla has been looking to build a $25,000 car. Low-price cars can have a big impact on sales in emerging markets like Southeast Asia and India. With plenty of surprises likely, TSLA stock can surge from oversold levels.

Vale (VALE)

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Among asset classes, industrial commodities are the most undervalued. Within the industrial commodity space, Vale (NYSE:VALE) is trading at a deep valuation gap. To put things into perspective, VALE stock has delivered capital gains of 10% in the last five years. At a forward price-earnings ratio of 6, the stock seems poised for a big breakout rally.

An important point to note is that with the possibility of rate cuts, I expect industrial commodities to surge. That will be positive for Vale, and it’s worth noting that iron ore has already been trending higher.

For Q1 2024, Vale reported the highest iron ore production since 2019. For the quarter, copper and nickel production growth was also robust.

On the financial front, Vale reported free cash flow of $2 billion for the quarter. If commodities trend higher, the company is positioned to report an annual FCF close to $10 billion. That will ensure dividends sustain. Additionally, the balance sheet will likely remain strong, even after factoring in the potential payment for the dam disaster.

AT&T (T)

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AT&T (NYSE:T) is another depressed stock that might be poised for a big breakout rally. After remaining sideways for the last 12 months, T stock trades at a forward price-earnings ratio of 7.7. Further, the stock offers a robust dividend yield of 6.5%. Considering financial and business metrics, the stock seems to be trading at a deep valuation gap.

The first positive to note is that the company’s operational trend has been encouraging. That includes growth in subscribers coupled with upside in average revenue per user. Between 2018 and 2023, AT&T has invested more than $140 billion in its U.S. wireless and wireline networks. These investments will continue to ensure the company’s operational trend remains positive.

The second important point to note is that AT&T has guided for free cash flow of $17 to $18 billion for 2024. Healthy FCF will ensure dividends and deleveraging. AT&T is on track to achieve its leverage target, and as credit metrics improve, T stock will likely trend higher.

Panasonic Holdings (PCRFY)

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Panasonic Holdings (OTCMKTS:PCRFY) stock has been depressed, and the reason is because of negative sentiments for the EV sector. I, however, see this as an opportunity to accumulate. With PCRFY stock trading at a forward price-earnings ratio of 7.3, the upside can be significant once industry sentiment reverses.

One catalyst for a change in sentiment is potential rate cuts. Expansionary monetary policies will likely support accelerated growth for the EV sector. As one of the largest manufacturers of EV batteries, Panasonic is positioned to benefit.

Of course, that’s not the only reason to be bullish. Panasonic has ambitious capacity expansion plans through 2031. That will translate into steady revenue growth coupled with EBITDA margin expansion. At the same time, the company is focused on innovation. It partnered with Sila Nanotechnologies to purchase next-generation nano-composite silicon anode material for EV lithium-ion batteries. This will likely help boost the energy density of batteries by 25%.

Occidental Petroleum (OXY)

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If Warren Buffett is buying a stock from a cyclical industry, it’s not worth ignoring. Occidental Petroleum (NYSE:OXY) has, therefore, been in the limelight this past year. However, with oil remaining subdued, OXY stock has remained largely sideways. I see that as a good opportunity to accumulate before the energy stock surges higher.

Among the positives, Occidental reported an operating cash flow of $2.4 billion for Q1 2024. If oil trends higher after rate cuts, the annual OCF potential will likely be close to $10 billion. That positions Occidental for dividends, share repurchases and deleveraging. It’s worth noting that Occidental regained its investment grade rating last year. Those positive factors are yet to be discounted in the stock.

From an asset perspective, the company’s proved reserves increased to four billion barrels of oil equivalent at the end of 2023. Last year, the reserve replacement ratio was 137%. A quality asset base with an attractive break-even ensures long-term cash flow visibility.

On the date of publication, Faisal Humayun did not hold (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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/7-blue-chip-stocks-that-can-triple-in-the-next-24-months/.

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