Riding The Wave: Two Stocks Set To Thrive Despite 2024's Global Economic Chill
The Federal Reserve seems to have navigated the U.S. economy to a soft landing, narrowly avoiding a recession despite bringing the benchmark interest rates to the highest level in 22 years. The aggressive hawkish monetary policy has brought the inflation rate down from the 40-year high of 6.8% in 2022 to 3.2% in October.
With the economy stabilizing, the Fed has signaled rate cuts coming in 2024, as the Federal Open Market Committee (FOMC) is expected to slash the federal funds rate three times in 2024. This should allow the U.S. to skirt a recession in 2024.
With broader economic headwinds, including worsening geopolitical conditions, the global economy is expected to slow. The International Monetary Fund expects the global economy to grow by 2.9% in 2024. This falls significantly short of the historical average of 3.8% observed between 2000 and 2019.
However, as slashed interest rates rejuvenate growth prospects, these stocks could be poised for a strong performance in 2024.
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Enphase
Enphase Energy Inc. (NASDAQ:ENPH) had a brutal 2023, as the stock plunged by nearly 50% year to date. The U.S.-based solar energy company's revenue declined by over 13% year over year to $551.1 million in the third quarter ended Sept. 30. In addition, Enphase's earnings per share (EPS) fell by 26.6% quarter over quarter to $0.80 in the last quarter.
However, a decline in interest rates is expected to open doors for Enphase as the company expands into new markets around the world. Over the past two months, Enphase has launched microinverter devices in North America, Brazil and Switzerland.
Analysts expect Enphase's EPS to increase at a compound annual growth rate (CAGR) of 10.9% over the next five years. Jefferies Group and Mizuho Financial Group have a Buy rating on Enphase stock.
Prologis
Up over 17% year to date, Prologis Inc. (NYSE:PLD) is a global leader in logistics real estate with roughly 1.2 billion square feet in 19 countries as of Sept. 30.
The ongoing macroeconomic headwinds have impacted the logistics real estate investment trust's (REIT) profit margins in the last quarter, as the firm's net EPS fell by over 41% year over year to $0.80.
“Our results reflect strong execution by our team and the quality of our global portfolio,” Prologis CEO Hamid Moghadam said. “That said, until there is more stability in the economy, negative customer sentiment will weigh on demand. We remain focused on capturing our embedded lease mark-to-market, building out our land bank into a favorable future supply environment and partnering with our customers to address their most critical pain points.”
Nonetheless, as the Fed begins slashing rates beginning next year, analysts expect Prologis's financials to exhibit stable growth in the near term.
The consensus revenue estimate of $1.85 billion for the fiscal first quarter ending in March 2024 indicates a 13% improvement year over year. In addition, Wall Street analysts expect the company's EPS to amount to $0.58, indicating a 16% improvement from the same period last year.
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