- May is expected to be another volatile month on Wall Street amid a plethora of significant market-moving events.
- Identifying favorable opportunities becomes paramount in the current environment.
- As such, investors should consider adding Salesforce, Walt Disney, and Okta to their portfolio as the new month kicks off.
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May is shaping up to be an exciting month for investors eyeing potential opportunities in the market amid growing uncertainty over the timing of the first Federal Reserve rate cut and indications of sticky inflation.
As we delve into the new month, several stocks are poised to capture attention, including Salesforce (NYSE:CRM), Walt Disney (NYSE:DIS), and Okta (NASDAQ:OKTA).
These companies not only have earnings reports scheduled for the month but also boast promising fundamentals and tailwinds that could propel their stocks higher.
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Let's delve deeper into what makes these three undervalued stocks compelling opportunities for investors heading into May.
1. Salesforce
Salesforce (NYSE:CRM) stock ended Thursday’s session at $272.13, about 15% below its all-time high of $318.71 reached on March 1. At current levels, Salesforce has a market cap of $263.1 billion, earning it the status as the most valuable cloud-based software company in the world, ahead of SAP, Intuit (NASDAQ:INTU), and ServiceNow (NYSE:NOW).
Shares - which are one of the 30 components of the Dow Jones Industrial Average - have gained roughly 41% during the last 12 months, rising alongside much of the tech sector.
Source: InvestingPro
Despite the impressive rally, current ‘Fair Value’ estimates indicate CRM stock is undervalued. InvestingPro’s AI models predict a 17.9% potential upside from the current market value, while Wall Street analysts forecast a 24% increase to about $337/share.
Catalysts for May: I expect Salesforce stock to outperform this month, with a potential breakout to a new record high on the horizon, as the enterprise software giant’s latest earnings and guidance will easily top estimates thanks to broad strength in its cloud business and recent AI initiatives.
The San Francisco, California-based company is scheduled to deliver its first quarter update after the U.S. market closes on Tuesday, May 28 at 4:00PM ET.
Not surprisingly, an InvestingPro survey of analyst earnings revisions points to surging optimism ahead of the print. As can be seen below, all 33 analysts covering the company upwardly revised their profit estimates in the past 90 days as the Street grows increasingly bullish on the cloud software provider.
Source: InvestingPro
Salesforce is seen earning $2.37 a share in Q1, rising 40.2% from the year-ago period. Meanwhile, revenue is forecast to increase 10.8% year-over-year to $9.14 billion thanks to solid demand from businesses and organizations for its customer relationship management (CRM) tools and solutions.
It should be noted that the Marc Benioff-led company has a long history of beating Wall Street’s quarterly estimates for profit and sales growth, doing so in every quarter dating back to at least Q2 2014.
As businesses increasingly prioritize digital engagement and data-driven decision-making, Salesforce's AI-powered CRM platform, ‘Einstein GPT’, positions the company for continued success in a rapidly evolving market.
2. Walt Disney
Walt Disney (NYSE:DIS) shares closed at $112.62 last night, putting it within sight of its 2024 high of $123.74 touched on March 28. The Burbank, California-based company has a market cap of $206.4 billion at its current valuation, making it one of the biggest entertainment and media companies in the world.
Shares have increased almost 25% since the start of the year, blowing past the gains made by competitors Netflix (NASDAQ:NFLX) (+16%), Warner Bros Discovery (NASDAQ:WBD) (-30.1%), and Paramount Global (NASDAQ:PARAA) (-6.3%) over the same timeframe.
Source: InvestingPro
It is worth noting that the AI-powered quantitative models in InvestingPro point to a gain of 8.6% in DIS stock from Thursday’s closing price. That would bring shares closer to their ‘Fair Value’ price target of $122.34.
Catalysts for May: Disney remains one of the best stocks to own heading into the new month thanks to its upbeat earnings and sales growth prospects.
The Bob Iger-led company is scheduled to deliver its financial results for the fiscal second quarter ahead of the opening bell on Tuesday, May 7, at 8:00AM ET.
An InvestingPro survey of analyst earnings revisions points to mounting optimism ahead of the results, with analysts growing increasingly bullish on the media and entertainment conglomerate. Profit estimates have been revised upward 12 times in the past three months, compared to four downward revisions.
Source: InvestingPro
The House of Mouse is forecast to earn $1.10 per share, improving 18.3% from EPS of $0.93 in the year-ago period, amid the positive impact of ongoing cost-cutting measures.
Meanwhile, revenue is seen rising roughly 2% annually to $22.15 billion, thanks to what I expect would be a relatively strong global performance in its iconic theme parks division and key streaming and linear TV businesses.
The company's streaming segment, led by Disney+, has been a standout performer, attracting millions of subscribers globally and driving growth in the direct-to-consumer business.
With a robust content pipeline, including highly anticipated film releases and original programming, Walt Disney is well-positioned to capitalize on pent-up consumer demand and drive revenue growth across its various business segments.
3. Okta
Okta (NASDAQ:OKTA) stock ended at $95.48 on Thursday, pulling back from a year-to-date peak of $114.50 reached on March 8. At current valuations, the San Francisco-based identity-and-access management specialist has a market cap of $15.9 billion.
Shares are up 35.8% in the last 12 months amid the ongoing rally in the tech sector.
Source: InvestingPro
It is worth noting that the present valuation of OKTA suggests it is a bargain, as indicated by the InvestingPro AI model. There's a possibility of a 20.7% increase from last night’s closing price, moving it closer to its 'Fair Value' set at $115.23 per share.
Catalysts for May: Okta is forecast to report strong double-digit profit and sales growth when it delivers first-quarter results after the closing bell on Thursday, May 30, at 4:00PM ET.
Wall Street is extremely optimistic ahead of the Q1 update, as per an InvestingPro survey, with analysts increasing their EPS estimates 33 times in the past three months to reflect a gain of nearly 150% from their initial expectations.
Source: InvestingPro
As seen above, Okta is forecast to earn $0.54 per share, surging 155% from a profit of $0.22 a share in the year-ago period.
Meanwhile, revenue is seen rising 16.6% year-over-year to $603.8 million as the security-software maker benefits from strong demand from large enterprises for its cloud-based identity and access management tools.
Okta provides cloud software that helps companies manage and secure user authentication into applications, and for developers to build identity controls into applications, website web services and devices.
Widely considered as one of the leaders in the fast-growing identity and access management space, Okta is a solid pick going forward as it benefits from the continuing growth in cybersecurity spending amid the current digital landscape.
Be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR S&P 500 ETF (SPY (NYSE:SPY)), and the Invesco QQQ Trust ETF (QQQ).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.