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The top three Nasdaq stocks to buy right now

A good deed often must meet these three requirements to consider buying it: good business model, a growing industry and an attractive valuation. Many meet the first two, but not all meet all three. Therefore, we can find three Nasdaq firms that meet the three conditions: Tractor Supply, Peloton Intera Rg-A and Amazon, according to Jon Quast in The Motley Fool.

Loyal customers

Tractor Supply describes himself as “America’s Largest Rural Lifestyle Retailer”. And that’s significant considering that the rural lifestyle is gaining popularity. According to a January report from the real estate company Redfin, the supply of housing in rural areas fell by a record 44% year-on-year in early 2021 as people leave urban areas in droves. Redfin’s chief economist said: “Homes in rural and suburban areas remain popular as the pandemic and remote working continue to motivate buyers to prioritize indoor and outdoor space over travel times and urban amenities.”

This overall prioritization of outdoor space could be a multi-year tailwind for the business as it gains new cohorts of potential customers. But this stock has beaten the market in the past, thanks in part to the ongoing loyalty from your existing customer base. In 2020, members of your loyalty program Neighbor’s club accounted for about 60% of total sales. And as of the first quarter of 2021, this loyalty program had more than 20 million members.

In the first trimester, net sales they increased a 42.5% year-on-year and its earnings per share more than doubled. Trading at a P / E of just 25, the stock certainly looks like a bargain, especially considering this impressive growth rate.

But perhaps investors fear that much of their earnings over the past year were the direct result of economic stimulus. To end this concern, consider that management estimates that only one-third of the comparable store sales growth in the first quarter was the result of stimulus money; much more was organic growth and therefore it is sustainable.

“Tractor Supply’s positioning in rural areas, its loyal customer base, and its attractive valuation make this one of the top Nasdaq buys right now, in my opinion,” says Quast.

Sustainable growth with a future

There are three facts about Peloton that combine to create a powerful business:

First: The company retains a impressive amount of clients. In his most recent trimester, his t12-month retention loop was 92%. And throughout its history, its retention rate has remained stable above 90% Second: It is an expert in acquire new customers, its user base increased by approximately 10 times to more than 2 million members in less than four years Third: The exercise equipment is well used, and the average customer currently he is working 26 times a years. In short, you get customers, keep customers, and customers stay extremely engaged.

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When you look at the overall market opportunity for home fitness, it doesn’t seem particularly compelling. According Fortune Business Insights, the industry only generated around $ 3.6 billion in revenue in 2020 in North America. And globally, the overall market is expected to grow less than 5% annually between now and 2028. However, the Peloton opportunity is far more compelling, as it appears poised to steal a larger slice of this market.

May steal market share with an underestimated flying effect as a result of acquiring Precor, which places fitness equipment in commercial spaces such as gyms and wellness centers rather than residences, creating an opportunity in the commercial space. And management also believes that commercial equipment drives home equipment sales. In fact, CFO Jill Woodworth He recently said that every new machine he puts in a commercial space could boost sales of seven machines in the home – an incredible tailwind.

At its peak in 2020, Peloton shares were trading at more than 20 times final sales, a high price-to-sell (P / S) valuation. However, it is currently trading at a P / S of around nine, a valuation roughly 56% cheaper.

“Consider that the company expects $ 4 billion in revenue for fiscal 2021 (ending this month), which represents an increase of more than 120% year-over-year. For me, that’s a compelling assessment given its growth, ”says Quast.

The omnipresent

Amazon is already ubiquitous in the e-commerce. But e-commerce may seem like a trend that has already developed in 2021. Yet surprisingly, we may still be relatively early in the e-commerce revolution.

According to US Census Bureau, E-commerce retail sales grew by 39% YoY in the first quarter of 2021, but they still represented only the 13.4% of total retail sales, which leaves plenty of room for advantages.

And Amazon is not just a retail business. Amazon Web Services (AWS) offers cloud computing to companies around the world. Right now, it’s available in 25 different regions spread across 80 Total Availability Zones. Amazon intends to open 15 new Availability Zones soon (19% growth). And between expanding and growing existing infrastructure, AWS has a whopping $ 52.9 billion backlog.

This backlog for AWS is intriguing. As of the first quarter of 2021, it represented only the 13% of total revenue, but it provided the 47% of your operating profit. So as you grow, it may not reflect much on the top line, but your overall earnings could explode quickly. Right now, Amazon is trading at a lagging P / E of around 66, its cheapest valuation in a decade on a P / E basis. But it wouldn’t take a lot of growth from AWS to make this valuation much cheaper.

“Given the growth drivers that already exist for AWS, Amazon’s stock is looking better than ever, in my opinion,” Quast concludes.

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