The S&P 500 marked its 69th record close of the year on December 27 after hitting an intraday high for the first time in more than a month despite rising COVID-19 cases. This reflects investors' optimism surrounding the economy’s growth outlook.
Credit Suisse Chief U.S. strategist Jonathan Golub raised its S&P 500 price target to 5200 from 5000, based on robust estimates for economic growth both in real and economic terms.
While Reddit’s WallStreetBets (WSB) community primarily targets fundamentally weak stocks with a considerable level of short interest, we think that a few of the subreddit’s heavily discussed stocks possess sufficient fundamental strength to generate solid returns amid the current backdrop. Microsoft Corporation (MSFT) and Pfizer Inc. (PFE) are two such stocks that have witnessed relentless rallies over the past year and could prove to be long-term winners on the back of their improving fundamentals. So, these stocks could be solid bets now.
Microsoft Corporation (MSFT)
MSFT develops and supports software, services, devices, and solutions worldwide. It operates through Productivity and Business processes; Intelligent Cloud; and More Personal Computing. The company sells its products through OEMs, distributors, and resellers and directly through digital marketplaces, online stores, and retail stores.
This month, MSFT has announced the general availability of Teams Essentials, the company's first standalone Microsoft Teams solution geared particularly for small enterprises. Teams Essentials is a professional and economic meeting solution for small organizations to enable collaboration, connection, and productivity in a hybrid work environment.
During the first quarter ended September 30, 2021, MSFT’s revenue increased 22% year-over-year to $45.32 billion. Its operating income grew 27.5% from the year-ago value to $20.24 billion. The company's net income increased 47.6% from the year-over-year to $20.51 billion, while its EPS surged 48.9% from the prior-year quarter to $2.71 over this period.
MSFT is expected to witness revenue growth of 17.2% for the current year. In addition, its EPS is estimated to increase 14.3% year-over-year to $10.53 in fiscal 2023. MSFT’s stock has gained 51.7% over the past year and 53.4% so far this year.
MSFT's POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MSFT is also rated an A grade for Sentiment and a B for Quality and Stability. Within the Software – Application industry, it is ranked #14 of 169 stocks. To see additional POWR Ratings for Momentum, Growth, and Value for MSFT, click here.
Pfizer Inc. (PFE)
PFE is a biopharmaceutical company that primarily engages in the research, development, and production of healthcare products. Pfizer innovative health (PH) and Pfizer Essential Health (EH) are the company's two business segments. The company is primarily known for its blockbuster COVID-19 vaccine under the Prevnar 13/Prevenar 13 (pediatric/adult) and the Pfizer-BioNTech COVID-19 vaccine brands.
This month, The United States Food and Drug Administration (FDA) has approved the emergency use of PFE’s PAXLOVIDTM (tablets and ritonavir tablets) for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients with positive results of direct SARS-CoV-2 viral testing and who are at high risk of progression to severe COVID-19.
Also, this month, PFE announced the release of a post-hoc interim study demonstrating that treatment with VYNDAQEL / VYNDAMAX showed a clinically meaningful survival benefit after five years in patients with transthyretin amyloid cardiomyopathy (ATTR-CM). This study was based on data from the Phase 3 Transthyretin Amyloid Cardiomyopathy Clinical Trial (ATTR-ACT)
During the third quarter ended October 03, 2021, PFE's revenue increased 134.4% year-over-year to $24.09 billion. Its net income increased 454.5% year-over-year to $8.15 billion, while its EPS grew 446.2% from the prior-year quarter to $1.42. Its cash and cash equivalents increased 10.2% for the ten months ended October 03, 2021, to $1.97 billion.
PFE is expected to witness revenue growth of 13.2% next year. Its EPS is estimated to increase 26.9% year-over-year to $48.91 in 2022. Over the past year, PFE's stock has gained 57.6%. Furthermore, it has gained 60% over the past nine months.
PFE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. PFE has an A grade for Growth and a B for Value and Quality. Among the 193 stocks in the Medical-Pharmaceuticals industry, it is ranked #8.
In total, we rate PFE on eight different levels. Beyond what we’ve stated above, we have also given PFE grades for Stability, Momentum, and Sentiment. Get all the PFE ratings here.
MSFT shares fell $0.28 (-0.08%) in after-hours trading Wednesday. Year-to-date, MSFT has gained 55.03%, versus a 29.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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