What to buy in June 2024 – interesting Insights

Historically, the stock market has shown some patterns of seasonal variability, and June’s performance has varied depending on various factors. While June 2024 presents an interesting landscape for investors, we see a mix of positive and negative factors, which may affect stock performance. Given our outlook for summer months, we share our insights what to buy in June 2024.

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Mixed factors for profitable investing

June 2024 presents an interesting landscape for stock market investors. However we would like to highlight some positive and negative factors which may influence the stock market in the coming months:

Positive Factors:

• Earnings Growth: Strong first-quarter earnings have eased inflation fears, and investors anticipate earnings growth acceleration in the second half of 2024.
• Historical Trend: June historically tends to be one of the best months for stocks, according to Business Insider.
• Cash on the Sidelines: A record $6 trillion in cash is waiting to be invested, which could boost stock prices.

Negative Factors:

• Inflation and Interest Rates: Inflation remains a concern, but the Federal Reserve is likely to maintain current interest rates for an extended period.
• Market Valuation: The S&P 500 currently trades at a premium valuation, and some analysts warn of a potential correction or bear market.
• For more in-depth stock market analysis, please check our recent article.

Expert Opinions:

• Analysis of the 10-year historical S&P500 monthly returns shows that the S&P 500 produced an average return of 1% in June during the last decade, followed by an average return of 3.1% in July and 0.3% in August. In short, history says the U.S. stock market could build up stream through the summer months.

In our view, the stock market looks overheated currently and the odds of stock market sideways increased and will highly depend on the economic data.

Investment picks for June 2024

Taking into account uncertain market environment, we highlight two stocks, which we have included on our investment radar for June 2024. In our view, it makes sense to watch undervalued companies with high growth potential in the coming years. The companies, which were overlooked by investors. Below we highlight the following names:

ACCENTURE PUBLIC LIMITED COMPANY (ACN)

Accenture is concentrating on fostering holistic value for its stakeholders, primarily through leveraging technological advancements. The organization is committed to sustained expansion by constructing a foundational digital infrastructure utilizing cloud services, data analytics, and artificial intelligence. Additionally, it emphasizes continual technological progression and the cultivation of skilled professionals. We are of the opinion that such strategies solidify Accenture’s reputation as a dependable ally for its clientele and maintain the allure of its stock. Partially attributable to these favorable factors, the value of Accenture’s shares has risen by 16% in the preceding twelve months (year 2023).

However, the stock significantly underperformed the market this year, with share price dropping by almost 18% year-to-date.

Key reasons for ACN share price weakness ytd

The Accenture plc (ACN) stock price experienced weakness in 2024 due to several factors:

Reduced Revenue Outlook: Accenture lowered its revenue growth outlook for the full fiscal year 2024. This revision likely impacted investor sentiment and contributed to the share price decline, in our view.

Flat European Revenue and Decline in North America: While the company reported solid earnings, there were signs of weakness. Revenue remained flat in Europe and slightly decreased in North America. Sectors like communications and financial services also saw sales declines. Investors may have reacted negatively to these trends.

Economic Headwinds: Accenture acknowledged economic challenges that could affect future quarters.

ACN Outlook, Our view and Valuation

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Accenture currently trades at P/E of 26.1x, which is below its peers. P/S ratio stays at 2.8x which is also below its peer group average of 11.5x. Based on estimates of 27 industry analysts ACN has BUY rating with average price target of $375.8 per share indicating a 30.5% upside potential for the stock.

In our view, Accenture aims to bolster its revenue growth by leveraging AI and market insights. Below we highlight the following growth drivers:

AI-Powered Market Connection: Accenture recognizes the need to find new growth opportunities. With AI, it can rapidly connect to market needs, identifying where to focus and what to offer.

New Product Innovation: Approximately $160 billion of industry growth is expected to come from new product innovation. Accenture can tap into this by creating innovative solutions that address emerging customer demands.

Value-Added Services Monetization: Accenture can unlock additional revenue by monetizing value-added services, contributing to the projected growth. This will be done with the help of the recent acquisitions which the company made in 2024. (we mentioned above).

Given ACN’s strong fundamentals and attractive valuation, we believe that Accenture will be on the spotlight this month. The company will report on June 20th. If the company delivers solid financials, we recommend to BUY the stock with the mid-term / long-term holding period.

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IONQ, INC. (IONQ)

IONQ, a leader in the quantum computing industry, recently announced its first quarter 2024 financial results. Below we highlight the main points:

• Revenue: IONQ recognized $7.6 million in revenue for Q1 2024, exceeding the high end of their guidance range. This represents 77% year-over-year growth compared to the prior year’s revenue of $4.3 million.
• Bookings: IONQ achieved $0.3 million in new bookings during the first quarter.
• Cash and Investments: As of March 31, 2024, IonQ had $434.4 million in cash, cash equivalents, and investments.
• Net Loss and Adjusted EBITDA: The net loss for Q1 2024 was $39.6 million, and the Adjusted EBITDA loss was $27.0 million. Adjusted EBITDA excludes a non-cash gain related to the change in the fair value of IONQ’s warrant liabilities.

IONQ has been making strides in its commercial applications. Notably, they collaborated with Oak Ridge National Lab to explore quantum computing’s potential for optimizing the United States power grid. Furthermore, their work with Deutsches Elektronen-Synchrotron (DESY) demonstrated quantum computing’s effectiveness in optimizing gate assignments for airplanes, surpassing classical computing solutions.

For the full year 2024, IONQ expects revenue between $37.0 million and $41.0 million. Their full-year bookings guidance ranges from $70 million to $90 million. Although IONQ anticipates an Adjusted EBITDA loss of $110.5 million for the full year 2024, we estimate that the loss will gradually decrease in the coming years 2025-2026. For the first quarter 2024 IONQ delivered positive EPS surprise of 24%. Going into the next quarters we foresee continuing growth in revenues which will help the company to improve its operating margins and profitability.

IONQ will accelerate its growth in 2025-2030

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IONQ is rated BUY with a 12-month target price of $15.56, a 101.82% upside from the current price of $7.71. We would be Buyers of IONQ during its share price weakness. Taking into account significant underperformance of the stock in 2024 -37.8% ytd, we consider IONQ attractive for opening a small position in the stock.

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