3 Stocks I Will Buy In September 2024

As we enter September 2024, there are three stocks I’ve got my eye on, and I’m ready to buy them if they hit my target price. Two of these, I already own. The third? Well, I’ve sold puts on it, and it looks like I’m going to be assigned. Let's dive into these companies.

1. PayPal (PYPL)

We've talked a lot about PayPal, and it’s no stranger to the financial Twitter community. From its all-time high of $310 per share, PayPal hit a low of $50 last year, and today, it’s hovering around $70.50, close to its 52-week low.

Why PayPal?

PayPal is currently trading at almost single-digit price-to-free-cash-flow ratios. When it was at $50, it was around 8 times free cash flow. That’s pretty incredible for a company of this stature. Yes, PayPal has seen a decline in users, but the transaction volume per user and the dollar amount per transaction are up. The company still holds strong with its security and trust, especially with Venmo in its portfolio. Venmo is so embedded in everyday transactions now that it’s practically a verb – people say, “Venmo me.”

The reality is, people were euphoric about PayPal when it was at its peak, and now, they aren’t. But if you loved PayPal at $310 per share, this lower price might be worth your attention.

Revenue Growth

In 2021, PayPal reported $25 billion in revenue. Over the last 12 months, that number has grown to $31 billion—a 20% increase over three years. While the stock is down over 80% from its highs, that doesn’t necessarily mean it’s a bargain, but it’s a good starting point for analysis.

Analyst Predictions

Analysts are predicting around 60% growth in earnings per share over the next four to five years, with revenue growth in the 7-10% range. Despite some chatter on Twitter that “PayPal is dead,” I see it differently. The stock price doesn’t tell the whole story.

Valuation

Using our Stock Analyzer tool, I did a 10-year analysis with assumptions of 4-10% revenue growth, 12.5-16.5% profit margins, and a PE ratio of 14-20. For desired returns, I plugged in 9% without a margin of safety.

The results?

• Low price: $60-$75
• High price: $150-$220
• Middle price: $96

If middle assumptions hold true, I’m looking at an 18% annual return over the next 10 years. That’s solid for a company like PayPal. My plan? I’ll be selling puts around $60 per share to give myself a healthy margin of safety.

2. Disney (DIS)

Ah, Disney. There’s been plenty of noise about Disney lately – from "Go woke, go broke" to claims that it’s dead in the water. But let’s be real: Disney’s content library is unmatched. They dominate the world of children's entertainment, with theme parks, cruises, and experiences that people are willing to go into debt to enjoy.

Profit Margins

Disney’s profit margins have been down recently. Over the last 12 months, it’s posted a 5.3% profit margin, while its five-year average sits at 2.6%. But if we look at pre-COVID numbers, Disney reported $70 billion in revenue and $11 billion in profit—about a 15% margin. The year before that, they hit over 20%.

Growth Potential

In the last 12 months, Disney generated $90 billion in revenue, a record for the company. Disney+ is finally turning a profit, and I believe it’s only a matter of time before margins return to their pre-pandemic levels.

Valuation

Using the Stock Analyzer tool, I projected more conservative margins, between 9-15%, and revenue growth rates of 3-7%. The PE ratio? I went with 18-24, though you could argue for a higher multiple given Disney’s brand strength.

The numbers?

• Low price: $75
• High price: $207
• Middle price: $130

My middle assumptions give me about a 14% annual return. Remember, this includes free cash flow returns, and Disney is still paying dividends.

3. Pinduoduo (PDD)

The third stock on my list is Pinduoduo (PDD), a Chinese company that I don’t currently own. However, I’ve sold puts on it and will likely be assigned. PDD had a recent high of $165 in May, and it’s now down to $88. In just the last week, it’s dropped by 40%.

Financials

PDD’s trailing 12 months show $48 billion in revenue, up from $35 billion the previous year. Free cash flow is even more impressive, with $19 billion reported last year. That puts the company at just seven times free cash flow. This steep drop is largely due to fears about China, but I’m okay with that risk.

Analyst Projections

Analysts expect PDD’s earnings to grow to $19 per share by next year, up from $12.31 this year. That’s huge growth for a stock currently trading around $90.

Valuation

I ran my Stock Analyzer with 6-12% revenue growth, 15-25% profit margins, and a PE ratio of 16-22. The results?

• Low price: $96
• High price: $226
• Middle price: $180

With these assumptions, PDD offers big-time return potential.

Conclusion

These are three companies I’m watching closely in September 2024. I’ve already got exposure to two, and I’ll likely be adding the third. But remember: do your own analysis. These are my personal opinions based on the data I’ve reviewed. The stock market can be volatile, and you need to have the conviction to hold through the ups and downs.

Thank you for your time, and happy investing!

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