Rate-cut stocks are poised for a strong rally ahead as the Federal Reserve eases its hawkish stance.
We’ve seen several months of elevated interest rates combating inflationary pressures. We could see the first rate cut as early as September. This major shift could rejuvenate certain stocks, which have had it rough over the past couple of years. Some stocks, in particular, have been hit incredibly hard by rising interest expenses, significantly weighing down their bottom-line results. Additionally, lowering interest rates is set to broaden the stock market’s appeal. This is a shift from a few AI-driven players to a more diverse assortment of winning stocks.
Though the exact timing of rate cuts isn’t known for sure, given the likelihood in the second half, it’s an ideal time to gain exposure to the best rate cut stocks. These three stocks are positioned to benefit substantially from the upcoming rate cuts, offering robust upside ahead.
Rate Cut Stocks To Buy: PayPal (PYPL)
The upcoming interest rate cuts spell good news for PayPal (NASDAQ:PYPL) as it looks to turn its fortunes around. PYPL stock has been trading in the red over the past year, but rate cut tailwinds could kick-start a recovery.
Moreover, lower rates encourage consumer spending, potentially resulting in a strong uptick in PayPal payment volumes. Given its powerful presence in its niche, PayPal stands to gain immensely from the likely changes in the monetary policy, making it an excellent buy at just 1.9 times forward sales estimates.
Despite the recent sluggishness in its stock market performance, PayPal’s underlying business remains healthy. Its first-quarter (Q1) report showed a 9% increase in sales on a year-over-year (YOY) basis and a 14% increase in payment volumes. Moreover, its EPS for the quarter grew remarkably 18%, along with an eye-catching 86% YOY increase in free cash flows.
Given these strong results and its encouraging outlook ahead, investing in PYPL stock at current levels is most prudent.
United Airlines (UAL)
United Airlines (NASDAQ:UAL) is a global aviation giant that’s navigating a turbulent post-pandemic period. Global lockdowns during the pandemic years crippled demand for air travel, which left United and many of its peers with massive debt burdens. However, the past few years have seen a robust return for airlines. Fueled by surging demand and phenomena like ‘revenge travel,’ United and its peers have finally found their footing.
United has posted five consecutive quarters of top-and-bottom-line beats, including its most recent one in the second-quarter (Q2). Its Q2 Non-GAAP EPS of $4.14 beat analyst expectations by 21 cents, while revenues bumped to $14.99 billion, up 5.7% YOY. Additionally, it witnessed a healthy 8.3% increase in capacity compared to the prior-year period, highlighting its robust trajectory.
Though United’s third-quarter (Q3) guidance fell short of estimates, it confidently reiterated its full-year earnings projection of $9 to $11 per share. Moreover, with rate cuts on the horizon, we could see an even stronger showing in the second-half of the year for the company.
Riot Platforms (RIOT)
Riot Platforms (NASDAQ:RIOT) remains a giant in the Bitcoin mining space, efficiently harnessing the power of its energy-efficient ASIC miners to stay ahead of the curve. With potential interest rate cuts on the horizon, the crypto market is in for a healthy rally, propelling bellwethers like Bitcoin to new heights.
BTC prices remained robust during Q1 and the better part of last year. However, Riot’s stock price has lagged, dropping more than 30% year-to-date (YTD). Hence, it’s now trading at attractive levels, offering superb upside potential.
Financially, the firm stands on solid ground, boasting a tremendous cash reserve of $688 million and $606 million in BTC holdings as of Q1. As we advance, Riot’s hash rate capacity may increase dramatically. This could significantly increase its revenue base. Its capacity currently stands at 12.4EH/s and is projected to soar to 31.5EH/s by the conclusion of this year. These expansions, alongside anticipated rate cuts, could result in substantial growth for RIOT stock ahead.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines