Academy News TOP 3 stocks in January 2024

TOP 3 stocks January 2024

Published: 02.02.2024

Stocks Pfizer

Wondering where to look for volatility in the stock markets for speculation? Our regular roundup of the top 3 most traded stocks among Purple Trading clients for the month of January will give you a hint.

Nikola shares - last chance before the crash?

Nikola shares have long been one of the most popular among Purple Trading clients. Looking at the volatility that accompanies this "penny stock" one cannot be surprised. Yet as recently as last summer, Nikola Corp appeared to be due for a rebound from the bottom. At that time, Nikola signed contracts to supply its trucks to several companies. In addition, the company announced several new partnerships in hydrogen supply and fuel infrastructure.

Investors were also pleased with moves that helped the automaker strengthen its financial position. Nikola announced it will sell its hydrogen center in Arizona to Australia's Fortescue Future Industries to reduce its capital expenditures and raise additional cash. The rise in share price also brought Nikola back in line with Nasdaq's stock listing requirements. This has pushed Nikola's shares above the $1 level, but all indices point out toward the fact that it is more of a "dead cat's last leap".

Since then, Nikola shares have fallen steadily again, and the huge rally that took place at the end of the year in US stocks did not affect Nikola. Nor is 2024 a positive year - they have even fallen by a further 10% since the start of the year.

_{Nikola shares on D1 chart in MT4 platform by Purple Trading}

What is behind such a deep fall?

As usual, Nikola Corp's results were not worth much. Although Nikola had nearly 300 orders for the Semitruck at the end of Q3 last year, it had to call in all the cars it had ever produced for replacement due to battery failures. Replacing the batteries in more than 200 cars cost the company more than $60 million. The company's loss for the quarter thus climbed to over $400 million. At the end of the quarter, the company had only $360 million in cash. Nikola is clearly running out of time. The company will have no choice but to make extremely expensive loans or issue more shares. Investing in Nikola shares now looks more like playing with fire.

The company is in real danger of delisting from the Nasdaq, as the share price has not broken the $1 level for more than 30 consecutive days. Thus, 2024 could be the year Nikola Corp. delists its shares. Does Nikola have a chance to get its stock above $1 again? It would be a big surprise. The company already received a warning from Nasdaq in late January that if Nikola Corp's stock does not get above the $1 level within 180 days, the company faces delisting. Nikola may use a "reverse split" - that is, "wrapping multiple shares into one" - to stay on the stock market, thus artificially boosting the share price, but the question is whether the company won’t go bankrupt by then.

Where will Pfizer be in a year?

One of the biggest winners of the coronavirus season is not having a very happy time. Pfizer's stock has been falling steadily, putting the glory of 2021 and 2022 behind it. The stock is down nearly 40% over the past year, and has mimicked Nikola's performance since the start of the year, when it too fell 10%. But lumping Pfizer in with Nikola would be too harsh. Pfizer is still sitting on a mountain of cash from the coronavirus harvest, a P/E of around 14 is quite attractive for a pharmaceutical company, and a dividend yield of over 6% is also intriguing. On the face of it, this is an attractive investment, but appearances can be deceiving. So where does Pfizer fall short?

Investors are particularly concerned about the outlook. The boom that the company experienced during the covid is long gone, making the current outlook a big disappointment. For 2024, Pfizer expects sales of around $60 billion, while in 2022 they reached $100 billion. Pfizer is thus facing a huge drop in coronavirus vaccine sales and currently has no other ace up its sleeve. The company doesn't even have an answer to the big idol of current investors - a weight loss drug. It is the holy grail for investors, and it is driving Novo Nordisk and Eli Lilly shares skyward. Pfizer had to abandon its development of a competing drug. Along with a weak outlook, this was the biggest blow to the stock.

_{Pfizer shares on D1 chart in MT4 platform by Purple Trading}

But there are also positives

The company has finally completed its acquisition of Seagen, a biotech company focused on cancer research. The day after, the company also announced the approval of a bladder cancer drug in the US. In the U.S. and Europe, Pfizer also applied for approval of a new drug for hemophilia A and B. Still, there's nothing so big on the horizon to upend the market's current view of Pfizer.

Results for the last quarter of 2023 pointed to another huge drop in profits and sales. Sales fell 41% and profits even fell 91%. Pfizer is likely to pay for the sales slump for the next few quarters. Thus, while the stock may look attractive now due to its low valuation and high dividend yield, we probably cannot expect high valuations in the short term.

Will Alphabet surf the ads wave?

Alphabet shares have had a similarly good year to those of other tech giants. Over the past 12 months, the company's capitalisation has grown by more than 50%. With a capitalisation of nearly $1.8 trillion, Alphabet is the third largest company in the US, but Alphabet has a relatively large gap on the tandem of Apple and Microsoft, whose capitalisation is close to $3 trillion. However, we must not forget the fact that during 2022, Alphabet shares fell by almost 40% and are still not at an all-time high. However, 2024 could be a very good year for Alphabet shares for several reasons.

While the company is gradually making inroads into artificial intelligence, developing its own software and offering cloud services, the main source of revenue for Alphabet is advertising (over 75% in Q3 2023). And 2024 could be a very promising year for the advertising market.

After all, 2024 is packed with big events such as the Olympics, the EURO football tournament and the US presidential election. Ad spend could be at a record high in 2024 and Alphabet is ideally placed to make the most of it. After last year's growth, the stock certainly can't be described as cheap, but the current P/E ratio of 27 makes Alphabet the cheapest stock of the "Big 7". Long-term investors may also find alluring that Alphabet buys back their own shares, and quite actively. Over the past 5 years, the company has repurchased 10% of its shares, reducing its available volume which is a positive for existing shareholders. More share buybacks are in the pipeline.

_{Alphabet shares on D1 chart in MT4 platform by Purple Trading}

Alphabet in the courtroom

Alphabet is not without risks, however, and lately the company's representatives have been in court more often than they would like. Alphabet lost a highly publicized dispute with Fortnite creator Epic Games over its app store. Currently facing litigation over its monopoly position in the internet search engine space, Alphabet could face further hefty fines. In addition, YouTube Shorts faces stiff competition from TikTok. This was evident in the just-released financial results. Alphabet's ad revenue ultimately fell short of expectations precisely because of the strong competition from Meta and TikTok.

Alphabet's shares thus took a big beating. But this could be an interesting opportunity. In the period ahead, Alphabet's stock will be guided mainly by ad revenues (which could be interesting thanks to the above-mentioned events) as well as the development of artificial intelligence. Here Alphabet has certainly not fallen behind and is currently offering its own generative AI called Gemini, which should compete with OpenAI. Not only search but also the cloud section should benefit from the development of AI. This year could be Alphabet's year.

TOP 3 stocks January 2024