August is the thick of the second-quarter earnings season. This year is particularly suspenseful as companies match up against the second quarter of 2020, where some of them got a huge pandemic boost, and others got a huge pandemic bashing. Many companies have bounced back big, topping 2019 numbers, and others have demonstrated lackluster growth in the face of tough comparisons.
Investors have rewarded stocks accordingly. They sent Home Depot stock down this week after it posted weak comps after a huge surge last year, and they rewarded Coca-Cola in July after it posted a 42% revenue rise.
But things are not quite that simple, and investors should focus on the long-term outlook when evaluating a stock. That’s why I’m going with Airbnb (NASDAQ:ABNB), Walt Disney (NYSE:DIS), and Upstart Holdings (NASDAQ:UPST) as hot stocks to buy this month. All three posted incredible growth in the second quarter, and they all have enormous upside.
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Artificial intelligence for banking
Despite a slow initial public offering in December, Upstart exploded into one of the hottest stocks on the market, gaining 420% year to date. Investors finally caught onto the company’s vast potential offering an artificial intelligence platform for small banking clients.
Upstart’s platform evaluates customer creditworthiness based on thousands of data points for an accurate risk assessment. This results in more approvals, putting more money in the client bank’s coffers with less risk involved, a true win-win.
“Our second-quarter results continue to show why Upstart has the potential to be among the world’s largest and most impactful fintechs,” Upstart CEO Dave Girouard said in the company’s Q2 earnings release. That confidence is warranted when you see what kind of growth Upstart is experiencing.
In the second quarter, revenue increased more than 1,000%, and loans originated increased more than 1,600%. It moved to a profit from a loss last year, and it expects similarly spectacular results in the third quarter.
The only problem with Upstart stock is how expensive the stock has become over the past few months. It now trades at nearly 300 times trailing-12-month earnings. That’s a hefty premium. Keep in mind, though, many of today’s greatest all-time gainers have traded at such a premium at one time or another. So while it may take time for the stocks to catch up to this pricy valuation, the way things are going and look to be continuing, you’ll still have a lot of bang for your buck.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.