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Adobe

What it does: Adobe is a global developer of various computer software programs for photo, text and video editing.

By Mark David Hartley. Adobe (NASDAQ:ADBE) is a lesser-known US artificial intelligence (AI) stock with a much lower entry price than leading AI stocks Nvidia and Microsoft. Yet the company has been breaking boundaries with its new generative AI tool Firefly. The tool can be used with Photoshop and other Adobe software, creating instant photo-realistic backgrounds and fills.

Yet despite its potential, the share price is down 16% this year. This follows weaker-than-expected sales reported in its March quarterly earnings announcement. Investors are allegedly disappointed with the slow adoption of Adobe’s AI integrations, which generative AI platforms like Stable Diffusion and Midjourney have overshadowed.

However, with the generative AI market expected to increase at a compound annual growth rate (CAGR) of 42% over the next decade, I believe Adobe will have its day. Unlike other fly-by-night options, I believe its slow and more purposeful development strategy will pay off in the long run.

Mark David Hartley owns shares in Nividia and Microsoft.

Amazon

What it does: Amazon is a technology company that operates in the e-commerce, cloud computing, and digital advertising markets. 

By Edward Sheldon, CFA. Amazon (NASDAQ: AMZN) stock has had a good run recently. But I think it can climb higher. 

Right now, Amazon’s profits are soaring. This year, Wall Street analysts expect earnings per share to come in at $4.54 – an increase of nearly 60% year on year. 

At the same time, the company’s valuation is at historical lows. If we take that 2024 earnings forecast figure, the price-to-earnings (P/E) ratio today is only about 40. That’s miles below where its earnings multiple was a few years ago. It’s worth pointing out that the price-to-earnings-to-growth (PEG) ratio is currently under one, which suggests that the Big Tech stock is cheap. 

Now, one risk here is economic weakness. This could impact growth in the company’s online shopping, cloud, and digital advertising businesses. 

Overall though, I’m very bullish on this ‘Magnificent Seven’ stock. I expect it to continue climbing in the years ahead as the world becomes more digital. 

Edward Sheldon owns shares in Amazon.

DraftKings

What it does: What started as a fantasy sports platform, DraftKings is now one the US’ largest sports betting companies.

By Charlie Keough. I’ve had DraftKings (NASDAQ:DKNG) on my radar for a while. With its shares trading 9.2% lower than the 52-week high they reached in March; I reckon this month could be the time to make my move.

Although unprofitable, the company is moving in the right direction. For Q1, revenue grew 53% to nearly $1.2bn. Monthly unique payers increased 23% to nearly 3.5m.

More widely, over the last two years, its per-customer acquisition costs have fallen by more than 40%. As a result, this has provided a major boost to the firm’s margins.

One of the biggest threats is competition. As more players enter the lucrative space, this could see the business’ market share come under pressure.

But even so, I still like the look of DraftKings shares. The current global online sports betting market is worth $54.6bn and is expected to grow at a compound annual growth rate of around 10.5% through to 2032. By that point, it could be worth up to $142.6bn. That’s plenty of demand for the business to capitalise on.

Charlie Keough does not own shares in DraftKings.

Intuitive Surgical

What it does: Intuitive Surgical is the world leader in robotic surgery. Its da Vinci system is revolutionary.

By Oliver Rodzianko. I believe that the next big stock market craze is going to be robotics. While AI has already begun to transform information transfer in the mainstream, it will likely revolutionise mainstream physical jobs next.

Intuitive Surgical (NASDAQ:ISRG) already has a headstart with its most famous product, the da Vinci system. Using four robotic arms and a clever remote operating device, hospitals can offer minimally invasive surgery with high precision.

If the company can adapt and include AI more prominently next, it might be the first organisation to one day offer fully autonomous operations. That’s why I’m betting big on the company now.

However, there’s some speculation here because the company has not started planning for this yet. If another startup beats them to the market with autonomous surgery or a better robotics system, Intuitive Surgical could lose its market lead.

Nonetheless, I find it promising. It’s likely my next investment!

Oliver Rodzianko does not own shares in Intuitive Surgical.

MercadoLibre

What it does: MercadoLibre is Latin America’s largest ecommerce and fintech platform, operating across 18 countries.

By Ben McPoland. MercadoLibre (NASDAQ: MELI) just keeps getting stronger and I think the shares are worth considering for long-term investors.

The company is growing multiple businesses at once — e-commerce, logistics, digital payments, advertising, while its Amazon Prime-esque loyalty programme (Meli+) is fuelling even more spending across its marketplace. 

First-quarter revenue of $4.3bn demolished analysts’ expectations for $3.8bn. This beating of estimates is nothing new. What is new, however, is the earnings growth. Its quarterly net profit surged 71% year on year to $344m, while Wall Street expects around $1.7bn in profits this year (50% growth).

Management said: “We believe that we are uniquely placed to capitalise on the structural shifts that are transforming the region’s commerce and financial services markets”.

Mercado Pago, its juggernaut fintech arm, has just applied for a banking license in Mexico in a bid to become the country’s largest digital bank.

One risk here is this is an expensive stock, trading at 51 times forecast earnings. But today’s share price might end up looking cheap in a few years time if the firm keeps growing its profits rapidly.

Ben McPoland owns shares in MercadoLibre.

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Berkshire Hathaway

What it does: Berkshire Hathaway is a diversified conglomerate including insurance, utilities, and railroad operations.

By Stephen Wright. Despite the US stock market looking slightly expensive at the moment, one stock stands out to me as a buying opportunity. It’s Berkshire Hathaway (NYSE:BRK.B). 

When I’m looking for shares to buy, the most important thing is a business that has a long-term competitive advantage. And Warren Buffett’s company fits the bill. 

Berkshire’s subsidiaries operate in a number of regulated industries, including insurance, utilities, and railroads. And as Buffett pointed out, this brings risk as regulators aren’t always predictable.

Nonetheless, all three are businesses where demand is highly predictable, even if regulation isn’t. And the barriers to entry for competitors are extremely high.

Trading at a price-to-book (P/B) ratio of 1.57 while earning a return on equity in excess of 18%, I think the stock is good value. That’s why its my largest stock investment and one I plan to continue buying.

Stephen Wright owns shares in Berkshire Hathaway.

Boston Scientific

What it does: Boston Scientific is a global medical device manufacturer. Their products tackle a wide range of medical conditions from heart disease to urology.  

By Harshil Patel : I reckon one of the best US stocks in the healthcare field is Boston Scientific (NYSE:BSX). This medical device manufacturer is going from strength to strength. It recently reported a strong first quarter with sales exceeding expectations.

Sales jumped by 15% versus the first quarter of 2023, driven by an innovative portfolio of products. It launched nearly 90 new products last year.

For companies to grow sales, innovation is one of the most important factors to consider. And Boston Scientific invests in research and development to create innovative new products and solutions.

One standout sector that I’d mention is Electrophysiology, which grew its sales by a whopping 72%. The jump was driven by encouraging adoption of its Farapulse platform.

Bear in mind that this industry is highly regulated. And Boston Scientific faces risks from both regulatory compliance and lawsuits.

That said, in the long term, an ageing population and other lifestyle factors are likely to support its growth.

Harshil Patel does not own shares in Boston Scientific.

DraftKings

What it does: DraftKings runs daily fantasy sports competitions and provides online sports betting services.

By Charlie Carman. DraftKings (NASDAQ:DKNG) is a relatively young company operating in a new market — online sports betting in the USA.

Since the Supreme Court lifted a federal ban in 2018, individual states have rushed to legalise the practice. DraftKings now has a presence in 27 of those markets.

With votes on sports betting due over the coming years in populous states like California, Florida, and Texas, there’s significant potential for further expansion.

Crucially, DraftKings is performing well across key growth metrics. Monthly unique players soared to 3.5m in Q4, representing a 37% year-on-year increase, and 2024’s revenue guidance has been lifted to a midpoint of $4.78bn.

Granted, DraftKings is still unprofitable, and competitive pressure from Flutter Entertainment and Entain poses risks for the firm’s market share.

Nonetheless, I think this market will be big enough to accommodate several major players and DraftKings looks well-positioned to benefit from further growth in the industry.

Charlie Carman owns shares in DraftKings. 

Marvell Technology

What it does: Delaware-based chip manufacturer that designs and produces semiconductors and related technology.

By Mark David Hartley. Despite a $55bn market cap and $64 share price, Marvell (NASDAQ:MRVL) is a small player in the booming semiconductor market. Unlike AMD and Nvidia, it doesn’t publicly retail under its own brand but supplies components to other tech firms in the artificial intelligence (AI) field. I’ve been invested for a while with little to report but now it looks ready to take off. Earlier this month, Bank of America reiterated its buy rating on the stock with a price target of $95. Other analysts on average eye an $88 target. 

Unfortunately, Marvell’s profits are very much tied to the success of the wider tech industry, so any falter there could hit it hard. AI is still a nascent industry running on a lot of speculation, so it falls in the ‘high risk/high reward’ area of investing. I like Marvell’s prospects but I’d balance it out with other stable stocks.

Mark David Hartley owns shares in Marvell Technology, Nvidia, and AMD.

Palo Alto 

What it does: Palo Alto Networks markets itself as the world’s cybersecurity leader, via the provision of security tools.

By Jon Smith. When looking across the pond, I’m a big fan of Palo Alto Networks (NASDAQ:PANW). I bought the stock last month after the share price dipped following worse than expected results in February.

Even with the tumble following results, the stock is still up 61% over the past year. This speaks to the increase in demand for cybersecurity. I also bought this as a way to get exposure to artificial intelligence (AI). The rise in AI means that more complex cyber scams are occurring. Therefore, companies like Palo Alto that are developing products for this should benefit from higher demand.

A risk is the high benchmark of expectations that investors have. For example, the quarterly results in February were good (revenue jumped 19% year-on-year) but just not as good as the lofty expectations. Even with this, I think the scope for significant growth in coming years is there.

Jon Smith owns shares of Palo Alto.

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Yesterday, DraftKings’ share price took a hit after Hindenburg Research published a scathing report on the company and said it was shorting the stock. Has this short-selling attack provided a buying opportunity for me? Or should I steer clear of the stock after this report? Let’s take a look at the investment case for DraftKings.

DraftKings stock: the bull case

Before I look at Hindenburg’s report, I want to discuss some of the reasons why I was thinking about buying DraftKings stock. 

The first is that the US sports betting market looks set for strong growth in the years ahead. Up until recently, sports betting in the US was illegal in most states. However, after a Supreme Court ruling in 2018, any state can now legalise this form of betting.

Already over 20 states have legalised it. Many more are likely to do so in the near future. This should provide tailwinds for companies that operate in the industry such as DraftKings. By 2025, US sports betting revenue is projected to hit $8bn, up from projected revenue of around $3bn this year.

The second reason is that DraftKings is generating very strong revenue growth. Over the last two years, revenue has risen from $226m to $615m. This year, Wall Street analysts expect the company to generate revenue of $1.17bn. This top-line growth indicates that the group has a lot of momentum right now.

Hindenburg’s report on DKNG

After Hindenburg’s report, I’m a little bit more apprehensive about buying DraftKings stock. In its report, entitled ‘DraftKings: A $21 Billion SPAC Betting It Can Hide Its Black Market Operations’, the short seller says:

• DraftKings’ merger with SBTech in 2020 brings “exposure to extensive dealings in black-market gaming, money laundering and organised crime.”

• Industry experts and competitors have questioned the viability of DraftKings’ model of aggressively burning cash on promotion and marketing to acquire customers. 

• It believes DraftKings has “systematically skirted the law and taken elaborate steps to obfuscate its black market operations.”

It’s worth noting that DraftKings has responded to the short attack by saying it conducted a thorough review of SBTech’s business practices and was comfortable with the findings.

Still, I think a degree of caution is warranted towards DKNG stock after this report. Generally speaking, short sellers do their research.

Other risks

Moving away from the report, there are a couple of other issues that concern me about DraftKings stock. One is the valuation. Currently, the company has a market-cap of around $20bn. That means the forward-looking price-to-sales ratio is about 17. That’s high.

Another issue is that the company is still unprofitable. Last year, it posted a net loss of $844m. Finally, DraftKings is likely to face intense competition from rivals such as Penn National Gaming, FanDuel, and William Hill. This adds risk to the investment case.

DraftKings: my move now

Weighing everything up, I’m going to keep DKNG on my watchlist for now. The stock certainly looks interesting. However, the risks are a bit too high for me at present

The post Should I buy DraftKings stock after Hindenburg’s short report? appeared first on The Motley Fool UK.