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ACI Worldwide

What it does: Develop digital payments software to process credit and debit card transactions with fraud protection.

By Mark David Hartley. ACI Worldwide (NASDAQ: ACIW) may not be a household name yet but it’s more than just another digital payments provider. The Nebraska-based company provides services to a host of well-known local and international clients. Think Co-op, Wendy’s, Westpac and Alipay, among others.

Recent Q1 earnings results revealed a 208% increase in operating cash flow and 93% increase in adjusted EBITDA. However, revenue growth was weak at only 9% and although net income improved, it still came in at a $8m loss. Overall, CEO Thomas Warsop said the results “exceeded expectations.”

It still carries a high level of debt ($1.03bn), with a debt-to-equity (D/E) ratio of 82.3%. That’s a risk if it increases but with earnings forecast to grow, I don’t expect that to happen. In the long term, I think the company has the potential to become a major player in the digital payments arena.

Mark David Hartley owns shares in ACI Worldwide.

Alphabet

What it does: Alphabet is one of the world’s most famous big tech companies, now invested heavily in AI.

By Oliver Rodzianko. In my opinion, Alphabet (NASDAQ:GOOGL) is one of the best investments on the US stock market right now. As such, it’s currently the second-largest holding in my portfolio.

It is incredibly rare for a big tech company to be trading below what it’s worth based on future earnings and cash flow generation. However, in this instance, I think the shares are roughly 10% undervalued based on my advanced models.

To understand the opportunity here more concretely, I compared the investment to Microsoft, which has a price-to-earnings ratio of around 38. Alphabet’s ratio is just 27.

Both are big competitors in the AI arms race. Therefore, Alphabet needs to be careful that Microsoft-backed ChatGPT doesn’t outdo Google’s Gemini.

However, I’m betting Alphabet will continue to be an AI leader over the long term. That’s why I’ll be doubling down on my investment in the company again soon.

Oliver Rodzianko owns shares in Alphabet.

Shopify

What it does: Shopify is a cloud-based e-commerce platform powering millions of online stores worldwide.

By Zaven Boyrazian. Shopify (NYSE:SHOP) has evolved drastically over the last decade. What started out as a simple e-commerce website builder has evolved into a full-stack business ecosystem. The platform handles online checkout, customer analytics, marketing, payment processing, business financing, and even logistics.

As a result, merchants using the Shopify platform are now responsible for approximately 10% of all online transactions in the US. And despite what the volatile share price might suggest, the company is still growing at a double-digit pace, consistently beating analyst expectations. Not to mention that profit and free cash flow margins are also expanding.

The stock does trade at a lofty multiple. So, seeing volatility in the share price isn’t a major surprise. Nor is it the only risk investors have to consider. Worsening economic conditions have created hurdles in the short term. And the firm still has plenty of rivals to compete with like Amazon.

Yet, with explosive long-term potential, these risks may be worth taking, in my opinion.

Zaven Boyrazian owns shares in Shopify.

Super Micro Computer

What it does: The company provides computer hardware such as servers optimised for AI workloads. 

 By Dr James Fox. Super Micro Computer (NASDAQ:SMCI) stock is up 1,000% over 18 months, but that doesn’t mean it’s overvalued. 

The company, which makes hardware solutions, is one of the beneficiaries of the AI revolution. More than 50% of the company’s revenues now come from AI and data centres. 

Super Micro’s innovation and first-to-market approach have seen its share of this lucrative and fast-growing market surge, reaching 8.4% in the last quarter. 

While there may be bigger players in the segment, Super Micro’s open architecture and proprietary liquid cooling systems optimise server performance, and this is vital for demanding AI workloads. 

One concern, as suggested by a handful of analysts, is that hyperscalers are frontloading their CAPEX on data centres and AI, inferring that the current demand is just a spike. 

However, I do subscribe to that forecast. The consensus suggests that earnings will continue to grow by around 40% annually throughout the medium term, leading to a price-to-earnings-to-growth ratio of 0.73. 

James Fox owns shares in Super Micro Computer. 

TransMedics Group

What it does: TransMedics Group is a medical technology company that provides hospitals with its organ care system (OCS).

By Muhammad Cheema. If I had to put all my money into one stock it would be TransMedics (NASDAQ:TMDX).

This is because of how transformative its OCS system has been in the organ transplantation process. It keeps organs fresh for longer and has started taking over the whole process from organ retrieval to transportation. Transplant centers can therefore focus on patient care.

And the company’s results prove how successful it’s been. Quarterly revenue is growing insanely fast, recently rising by 133%. It also became profitable for the first time.

In terms of risks, the company is yet to make a profit on an annual basis. Furthermore, as TransMedics puts more emphasis on the logistics of the process, some focus could be taken away from producing innovative medical technology.

However, I only expect the company to keep growing as organ transplantation is a huge issue. Unfortunately, over 100,000 people in the US are currently waiting for a transplant. Ultimately, TransMedics’ process could help to bring this number now.

Muhammad Cheema owns shares in TransMedics.

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Alphabet

What it does: The owner of both Google and YouTube, Alphabet is one of the largest technology companies in the world.

By Edward Sheldon, CFA. Alphabet (NASDAQ: GOOG) shares have had a great run in 2023. Yet I remain very bullish on them.

Alphabet is doing some amazing things in the artificial intelligence (AI) space right now. Recently, it rolled out Bard – its answer to ChatGPT. This appears to have enormous potential (it can now respond with real-time info from Google Maps, Flights, and Hotels).

Meanwhile, the group continues to have a lot of success with YouTube. Today, around five billion YouTube videos are watched every single day.

Additionally, the company is seeing strong growth in its cloud computing division. In Q2, revenues here were up 28% year on year.

The company’s valuation remains quite low by ‘Big Tech’ standards, however. At present, Alphabet has a forward-looking price-to-earnings (P/E) ratio in the low 20s. I think there’s a lot of value on offer at that multiple.

There are a few risks to be aware of here including regulatory fines, competition from rivals, and a downturn in advertising spending.

All things considered, however, I think the stock looks attractive at present.

Edward Sheldon owns shares in Alphabet.

Axon Enterprise

What it does: Axon is a leading defence company working closely with US, UK, and Canadian law enforcement to improve safety and efficiency.

By Zaven Boyrazian. The law enforcement industry in the US and UK continues to undergo a radical technological shift. Companies like Axon Enterprise (NASDAQ:AXON) are creating novel methods to provide non-lethal firearm alternatives as well as solutions for faster and more efficient response times.

Over the last 30 years, the company has built strong relationships with an estimated 95% of law enforcement agencies in the US. And even the London Metropolitan Police have started adopting the group’s devices and services.

Axon is most prominently known for its TASER devices. However, management has been busy diversifying. And today, the lion’s share of revenue actually comes from cloud-based software solutions to help with record keeping, evidence management, and real-time response.

Of course, with such sensitive data moving through the platform, potential cybersecurity breaches pose a significant threat. Apart from the reputational impact, it could encourage law enforcement agencies to start exploring alternative or in-house solutions.

Nevertheless, given the stock’s impressive track record and monopolistic traits, it’s a business worth buying today, in my opinion.

Zaven Boyrazian does not own shares in Axon Enterprise.

Shopify

What it does: Shopify is an e-commerce company that helps small firms build an online store and sell online through one streamlined dashboard.

fool_stock_chart ticker=[NYSE:SHOP]

By Matthew Dumigan. I’m convinced that among the best US stocks to buy in October is Shopify (NYSE:SHOP). 

After recently reporting revenues up 31% year over year and positive cashflow for the third consecutive quarter, the company is gaining some serious business momentum. 

Shopify is successfully shipping products faster and expanding its global merchant base while simultaneously improving its ability to generate greater free cash flow.

That said, there’s no hiding from the fact that it will continue to be tough for Shopify to compete against current and future competitors. Nonetheless, I’m confident that the platform’s customisation and promotional tools go a long way in setting it apart from rivals such as Amazon.com.

Finally, recessionary fears and weaknesses in consumer spending have caused the company’s share price to remain significantly below its previous high. As a result, I think Shopify represents a great long-term investment opportunity at today’s price.

Matthew Dumigan does not own shares in Shopify.

TransMedics Group

What it does: TransMedics Group is a medical technology company that provides hospitals with its organ care system (OCS).

By Muhammad Cheema. There are currently 103,000 people in the US on the national transplant waitlist. Each day 17 people die while waiting.

TransMedics Group (NASDAQ:TMDX) greatly improves the organ transplantation process. Its OCS keeps organs fresh by pumping them full of warm oxygenated blood.

It has also created an OCS programme. This takes over the whole process from organ retrieval to transportation, allowing transplant centers to focus on patient care.

The OCS programme is much better than the status quo and demand is soaring as a result. Second quarter revenue increased 156% year on year (YoY) to $56m. TransMedics is also edging closer to profitability, as its net loss narrowed from $11.5m to $1m YoY in the same period.

Having said that, TransMedics shares are trading at a price-to-sales ratio of 12. This is concerning as it’s very expensive. However, I analyse stocks through a long-term perspective and I believe TransMedics is growing fast enough to justify this.

Muhammad Cheema owns shares in TransMedics.

The post Best US stocks to consider buying in October appeared first on The Motley Fool UK.