There are no sure things in the stock market, but the time-tested strategy of buying high-quality stocks at reasonable prices and holding on tight for years gives you the best chance at success. The odds are tipped further in your favor if you can score those stocks at severely depressed prices.
Two stocks that are cheap enough to double are telecom giant AT&T (NYSE: T) and freelance platform Fiverr (NYSE: FVRR).
AT&T
AT&T is a company that gets no credit from investors. Following a disastrous stretch of failed media acquisitions, the company has shed those non-core assets and refocused on its core telecom business. Wireless and fiber are the two pillars of AT&T’s business, and both are consistently winning subscribers.
Mobility service revenue jumped 3.3% in AT&T’s first quarter, thanks to a combination of subscriber growth and slightly higher revenue per user. The company gained 349,000 net postpaid phone subscribers, continuing a long streak of consistent growth. Postpaid phone churn remained low at just 0.72% as subscribers stuck with AT&T.
AT&T’s fiber revenue jumped 19.5% year over year in Q1, offsetting declines in legacy wireline services. The company expects to pass 30 million locations using its fiber network by the end of 2025, and it now sees a path to boost that number to 45 million in the long run. Outside of its existing service areas, AT&T can sell fiber services to customers served by Gigapower, a joint venture with BlackRock.
Despite the investments AT&T is making in its wireless and fiber networks, the company is on track to generate between $17 billion and $18 billion in free cash flow this year. With a market capitalization of roughly $124 billion, the price-to-free cash flow sits right around 7.
Combine free cash flow growth in the coming years and some valuation multiple expansion, and it’s not hard to see how AT&T stock could double. While investors wait, a 6%+ dividend yield is icing on the cake.
Fiverr
Freelance platform Fiverr finds itself at an interesting crossroads as artificial intelligence technology rapidly advances. On one hand, many types of services Fiverr offers could conceivably be replaced by AI. Think voice-over work, logo design, and writing.
On the other hand, effectively using AI technology to do useful things is a skill in and of itself. While demand for some types of jobs may decline in the age of AI, higher-value jobs combining AI with the human touch could ultimately drive more volume through Fiverr’s platform.
Fiverr expects AI to be a long-term growth driver along with business solutions and complex services. A tough hiring environment has slowed down Fiverr’s growth — revenue rose by just 6% year over year in Q1, and the number of active buyers sank 6%. However, the company sees better days ahead.
One example of how AI is already proving to be a net positive is the demand for chatbot development services. By deploying generative AI-powered chatbots to handle some customer service tasks, companies could potentially save money and reduce the time it takes to reach resolutions. Fiverr saw “significant demand” for chatbot development in Q1.
Fiverr is a profitable company, generating positive GAAP net income in the first quarter. Based on the company’s free cash flow in 2023, the stock trades at a price-to-free cash flow ratio of roughly 12.
With Fiverr stock down a whopping 92% from its pandemic-era peak and trading at a discounted valuation, the stock could soar if the company can successfully reaccelerate its growth in 2025 and beyond.
Should you invest $1,000 in AT&T right now?
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Timothy Green has positions in AT&T. The Motley Fool has positions in and recommends Fiverr International. The Motley Fool has a disclosure policy.
On Track to Double: 2 Bargain Stocks to Buy Now was originally published by The Motley Fool
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