Chances are you're looking for that next great stock to hold in 2015. Finding it can be quite challenging, even stressful given the many different choices that are available. Thankfully, Motley Fool contributing analysts have a few ideas of their own, and explain why Apple , Google , and Netflix might be top stocks in 2015.
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Bob Ciura (Apple)- My favorite stock for 2015 is my favorite stock from this year.Apple has produced market-trouncing returns this year, up 43% versus an 11% gain for the S&P 500 Index. But I think another year of out-performance is in store for the technology giant. That's because I suspect the iPhone 6 will be a smash hit, and easily topple sales estimates. Growth in new markets like China is likely to be better than anyone expects, because the 4G rollout there is still in the early stages, as is Apple's budding partnership with China Mobile , the largest telecom carrier in the world.
And, let's not discount the potential for Apple's lineup of new products. Next year, the Apple Watch will begin shipping, and early estimates are very positive. UBS analysts peg Apple Watch sales at 24 million next year, based on the number of iPhone owners who said they are very likely to buy the watch. Since the Apple watch will start at $349, this is a potential of at least $8.3 billion in sales, which would itself amount to 4.5% revenue growth next year, and of course this leaves out Apple's revenue growth from its other devices.
Of course, estimating sales of a device that hasn't hit the market yet is a tricky endeavor. But UBS's findings correlate similarly to those of other sell-side analysts. For example, RBC Capital Markets believes Apple will sell 20 million watches next year; Morgan Stanley predicts 30 million in Apple Watch sales. As a result, Apple should have little trouble producing double-digit revenue and earnings growth. Because of this, I'm fully content to own Apple through this product cycle and beyond, and I think Apple is still undervalued at 13 times forward EPS.
Brian Stoffel(Google)-Though I don't think Google will be setting any records for the highest stock returns in 2015, it's my favorite stock to own heading into the New Year. There will be several, perhaps hundreds, of stocks that perform better over the next 12 months, but I'm hard pressed to find a stock that I feel as confident about beating the market in the long run than Google.
A few years back, I interviewed Fool Co-Founder David Gardner about his investing strategy and he shared an insightful quote about both life and investing, from German philosopher Arthur Schopenhauer: "Talent hits a target no one else can hit; genius hits a target no one else can see."
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When Google got its start before the turn of the millennium, co-founders Sergey Brin and Larry Page said no one was focusing on search, but they thought it was vitally important -- they saw a target that no one else did. Some might say that this "genius" has passed, as everyone is now well aware of search's importance, especially when it comes to data aggregation and advertising.
But I would argue that Google's got a lot more tricks up its sleeve. The company's Google[x]project, headed by Brin, is focusing on technologies that will fix "broken" industries. While we don't know the full scope of such projects, we know that self-driving cars are one of the focuses.
Currently, Class C shares are trading for about 21 times earnings. Though you may get better price points in the future, that shouldn't stop you from investing in the company at today's prices -- which I think are more than fair.
Brian Nichols (Netflix)- Netflix shares have had a tough end to the year, falling 30% in the last three months. These losses were created after Netflix added just three million new subscribers in the third quarter, versus guidance to add nearly 3.7 million new subs.
Yet despite this miss, Netflix grew revenue 27% year-over-year to $1.4 billion, meeting analyst expectations, thanks to higher service prices. That said, Netflix is quickly growing into a disruptive company, one that's becoming a media giant with several avenues to success. Netflix CEO Reed Hastings recently compared its services to a car, and broadcast TV to a horse for transportation. With TV viewing declining over 4% in this most recent quarter, and Netflix being the number one destination for Internet users according to RBC, this analogy might not be far-fetched. RBC also noted that Netflix Internet viewing is well ahead of YouTube, and that growth in Hulu and Amazon streaming has flat lined.
That said, Netflix already has over 37 million U.S. subscribers, or 1/3 of all American households. During a recent conference, Netflix management noted that 60 million to 90 million total U.S. subscribers is their target. Further, Netflix is performing well in international markets, with 15.8 million subscribers outside the U.S. in the third quarter. Recent analysis from Digital TV Research estimates that Netflix has already added nearly three million new subscribers so far in the fourth quarter. This would be well above prior fourth quarter guidance for 2.15 million new international subscribers.
All things considered, Netflix may be pricey at 70 times next year's expected earnings. However, Netflix is also a disruptor, one that's growing very fast, and has proven over time that the demand for its cheap services is not only high in the U.S., but internationally too. Not to mention, if in fact Netflix's subscriber growth has accelerated in the fourth quarter, then fears associated with a slowing subscriber base in the third quarter will prove to be foolish. The outcome could be a stock that performs very well into 2014, and beyond as its subscribers continue to grow.
The article Heres My Favorite Stock For 2015 originally appeared on Fool.com.
Bob Ciura owns shares of Apple. Brian Nichols owns shares of Apple and Google (C shares). Brian Stoffel owns shares of Apple, Google (A shares), and Google (C shares). The Motley Fool recommends Apple, China Mobile, Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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