Investing wisely requires understanding a company’s fundamentals, ensuring a sound foundation for potential growth. This August, three stocks stand out in the consumer discretionary, technology and financial services sectors, each poised for significant gains.
In consumer discretionary, a leading global fast-food chain has shown resilience through strategic pricing and strong brand loyalty, maintaining robust growth despite economic challenges. Its effective strategies make it a prime candidate for future market rallies. In technology, a tech giant leading in AI-driven services is set to capitalize on the increasing demand for advanced tech solutions. Continuous innovation and high customer adoption underscore its market adaptability and growth potential.
Finally, a key player thrives on solid consumer spending and cross-border transactions in financial services. Strategic realignments and tech integration bolster its competitive edge, positioning it for substantial appreciation. These companies represent stability and growth, making them ideal undervalued stocks.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) is a global fast-food giant known for burgers, fries and its golden arches. Recently, global comparable sales decreased by 1%, with sales dropping across all segments (Q2 2024). Despite the declines, consolidated revenues increased by about 1% in constant currencies, marking high brand loyalty and sharp revenue management.
Indeed, the company’s digital footprint within the industry is unmatched and growing. McDonald’s has built one of the world’s largest loyalty programs. There are 166 million members and a mark of reaching 250 million members. The insights from engaged loyal customers drive digital market share gains and enhance McDonald’s personalization capability.
Moreover, strategic menu price increases offset declining guest counts. In the U.S., restaurant execution and digital growth positively impacted results. These strategies showcase McDonald’s adaptability. The company reported nearly $6.5 billion in consolidated revenues for the quarter. Systemwide sales to loyalty members were over $26 billion for the trailing 12-month period. Quarterly sales to loyalty members were approximately $7 billion, which emphasizes the importance of the loyalty program.
Overall, strategic pricing and loyalty programs help sustain revenue and position McDonald’s as one of the top undervalued stocks.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is a leading technology company specializing in software, cloud services and AI. Azure AI services have seen a solid increase in customer adoption, with customers exceeding 60,000 (+60% annually). The average spend per customer continues to grow, reflecting Azure’s market value.
Moreover, the Azure OpenAI Service is widely used to access models like GPT-4. Leading companies across various sectors enhance their operational efficiencies with it. Microsoft’s AI offerings extend to Models as a Service, which provides API access to third-party models. The number of paid customers for this service has more than doubled quarter-over-quarter, which indicates a high demand for Microsoft’s AI solutions.
Further, high-profile companies like Adobe (NASDAQ:ADBE) and Palantir (NYSE:PLTR) leverage these AI services. This points to the broad market applicability and sharpness of Microsoft’s AI and cloud tech. The Microsoft Intelligent Data Platform’s user base grew 50% year-over-year (YoY). Microsoft Fabric, an AI-powered next-generation data platform, has over 14,000 paid customers, reflecting a 20% quarter-over-quarter increase. Microsoft’s Azure AI services have seen substantial growth. Many high-profile companies are adopting innovative models to increase their operational edge.
Overall, Microsoft’s continuous tech advancements and market adaptability make it a high contender among top undervalued stocks.
Mastercard (MA)
Mastercard (NYSE:MA) focuses on global payments and technology. Healthy consumer spending drives Mastercard’s success. Cross-border volume growth is vital, with the company seeing a 17% YoY increase. This growth stems from travel and non-travel-related spending increases, indicating Mastercard’s ability to capitalize on global consumer behavior shifts. Mastercard has made organizational changes to enhance long-term growth. These changes include realigning regional operations and payment services.
Additionally, the company optimizes resources and invests in high-growth markets. This strategic move aims to deliver positive operating leverage. Mastercard focuses on growth markets with high cash levels and expands acceptance in new verticals. The company emphasizes value-added services like data analytics, fraud prevention and cybersecurity.
Further, these services contribute significantly to growth. AI integration into products enhances competitive edge and efficiency. Value-added services revenue grew 19% YoY. Tokenized transactions surpassed $22 billion in early 2024, up 49% YoY. Moreover, Click to Pay transactions more than doubled YoY, reflecting the growing adoption of secure payment solutions. Mastercard benefits from high consumer spending and cross-border growth. The resurgence in travel boosts these transactions, and strategic realignments support further growth.
To conclude, tech integration and value-added services enhance Mastercard’s competitive edge and position it among the undervalued stocks in August.
As of this writing, Yiannis Zourmpanos held a long position in PLTR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
