Brett's Trades

In Depth Analysis: All research done on the Bloomberg Terminal *NOT Financial Advice

With a recent market downturn to start the second quarter of 2025, a lot of stocks have been put on sale. Tariff headlines, global trade wars, and recession fears loom in the mind of investors, leading to sell-offs in maybe solid companies. Every long investor's dream is to see the companies they believe in on sale for 15+%. Some of the companies listed have seen drops of upwards of 50%! Market sell-offs create panic and fear for the short term, but they make generational wealth opportunities for the long term. Here are my top 3 stocks on sale currently:

1. Advanced Micro Devices (AMD): AMD has been one of the most hated stocks in the stock market for the past year. It seems like nothing can go right for the chip company led by CEO Dr. Lisa Su. Even with tariff uncertainty, AMD sets up to be one of the most rewarding plays of the next 3-5 years. Competition-wise, many investors fear AMD's counterpart, NVIDIA, arguably the hottest stock of the AI frenzy, but AMD differs vastly from NVIDIA. Large corporations, especially those of the Mag 7, have made it abundantly clear... AI spending is going nowhere. With many smaller-scale companies just now getting into the AI game, AMD's cheaper/more accessible chips are going to benefit. There is no shortage of production for AMD, recently launching its MI325X AI Accelerator chip with plans for MI350 (back half of 2025) and MI400 (2026). Now that you have a small sliver of the setup for AMD's business model, let's get into numbers. AMD has a current ratio of 2.6 and a quick ratio of 1.6, signaling a healthy company with no near-term issues regarding overleveraged liabilities. AMD is expected to report $31.8 billion in revenue for FY2025 compared to $25.8 billion in FY2024, and $38.1 billion for FY2026, keeping pace with an expected 15% revenue growth. EPS is expected to grow around the 30% mark with expectations for $4.61 FY2025 compared to $3.31 FY2024, and $6.18 FY2026. AMD's data center component is expected to bring in the most revenue for the next 3 years and grow at around 50%. AMD's forward P/E at the time of this analysis is at 18, companies growing 15% revenue per FY typically command a P/E of 20-25, but with the no shortage of AI spending on the horizon AMD could likely command a P/E of near 30 before valuation becomes a concern for the more value minded investors. With uncertainty looming and current market conditions, I am hesitant to put a price next to AMD, but I believe $150-$200 is achievable just based on earnings growth alone for the next 3 years, leaving investors with a return potential of 50 %+ over the next few years. 

2. ELF Beauty (ELF): Three months ago, ELF would not have cracked my top 3 buys list, but with an over 60% drop in price over the past three months, it is hard to ignore the cheap cosmetics powerhouse. It is important to first touch on how we got here. In their most recent earnings report, ELF cut guidance by a couple of percentage points, citing a weakening consumer outlook. With the recent barrage of tariffs on China, where most of ELF's production is, investors see nothing but gloom on the horizon. It is important to note that in the earnings call, CEO Tarang Amin responded to tariff questions positively, citing that ELF flourished during the first Trump administration and has a plan to do the same this time around. Another important piece of ELF's business model is it is by far the cheapest cosmetic brand in stores. ELF could easily raise prices by 25 or even 50 cents, and the consumer would hardly notice, but margins and investors would. ELF is not yet a mature company, but they are experiencing those growing pains now. Revenue deceleration was another reason for many investors to go bearish on the beauty company, but ELF was comping against revenue numbers well exceeding 70% in its previous breakout year. In its most recent report, ELF grew sales at 40% YTD and gained 2.2% in market share, the ONLY cosmetic brand to gain market share for 24 quarters consecutively. With recent years reaching rock bottom for the cosmetics industry, but ELF has continued to show strong resilience, relying on social media marketing, cheap products, increased market share, and international growth. Even with the recent growth, there is still plenty of room for future expansion for the young company. With many analysts calling for a recession in the near term, ELF's cheap and easy products set up extremely well to flourish even with a weakening consumer. ELF revenue forecasts are for $1.3 billion in FY2025 and $1.4 billion in FY2026, compared to the $1.0 billion in 2024. EPS forecasts are $3.34 FY2025 and $3.60 FY2026, compared to $3.18 FY2024. It is clear that analysts expect ELF to decelerate considerably, but for the reasons listed above, I personally disagree with these forecasts. Even with the current rock-bottom forecasts, ELF trades at a 16.03 Forward P/E, making it an incredibly cheap growth stock. The average one-year price target is $91.13, representing an upside of 70%, but with a 3-5 year outlook, ELF could easily be back to its previous highs of $200. 

3. Amazon (AMZN): Amazon wraps up this list of the top 3 stocks that are big-time buying opportunities. Amazon, once known as an e-commerce giant, has now dipped into many other industries. While e-commerce sales are still the main source of revenue for the magnificent 7 company, its cloud computing AWS, is close behind. Amazon sees an opportunity in computing and data storage and wants to be a major competitor. AWS saw 19% revenue growth in Q4 of last year, and investors will anxiously await the upcoming earnings report for more potential growth. Amazon is one of those companies you buy and hold forever. Whenever you see a deep discount, you buy, and you thank Wall Street for the gift. Amazon is consistently expanding and improving its business model, diversifying across many industries. This diversification is going to benefit Amazon sooner rather than later. There is no surprise that Amazon is going to take a hit from the current trade war with China, but with a strong cash pile and diversification into cloud computing/data storage, Amazon remains committed to growth. Amazon grew revenue at 11% during FY2024, analysts project they will grow revenue between 9% and 10% for FY2025. EPS growth is expected to come in between 15% and 20%. Nobody knows how much tariffs will impact companies, but I remain confident in the $73 billion cash and cash equivalents stockpile they have built. Amazon currently trades at a 25 forward P/E, which may seem a bit stretched for current market conditions, but for the long-term future, it is very cheap for the growth opportunity Amazon provides. Another tidbit regarding valuation, Amazon trades at a historical 5-year P/E of 55, making the current 26 much more attractive. Amazon's long-term opportunity is what makes it so attractive; it may fall another 15 %+ in the near term, but in the next 3-5 Amazon is likely a $300+ stock, representing an over 50% return.