Impressive corporate earnings and job growth helped the S&P 500 deliver decent returns last month. And although the Federal Reserve’s decision to commence bond tapering and rising inflation could foster significant market volatility in the near term, we think it could be worth adding last month’s best-performing S&P 500 stocks—Tesla (TSLA), NVIDIA (NVDA), Union Pacific (UNP), Enphase Energy (ENPH), and Teradyne (TER)—to one’s watchlist. Let’s examine these names.
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After witnessing one of the worst monthly performances in September (down 5%), the SPDR S&P 500 Trust ETF (SPY), which is widely seen as the best representation of the broader market, gained nearly 7% in October–highest one-month gain since November 2020–closing at a $459.25 all-time high. Factors like Pfizer-BioNTech’s COVID-19 vaccine’s approval for use in children aged 5 -12, impressive third-quarter earnings releases, declining jobless claims, and the possibility that President Biden’s infrastructure bill may become law have all helped SPY and other benchmark indexes to hit fresh highs in October.
An expected increase in consumer spending ahead of the holiday season could aid the performance of the major indexes this month and in December also. However, factors such as the continued spread of COVID-19 , rising inflation, supply chain logjams, and the Federal Reserve’s decision to taper its bond-buying program raise concerns over a potential market correction in the near term.
Tesla, Inc. (TSLA), NVIDIA Corporation (NVDA), Union Pacific Corporation (UNP), Enphase Energy, Inc. (ENPH), and Teradyne, Inc. (TER) were the best-performing S&P 500 stocks last month, so we think it could be wise to add them to one’s watchlist.
Tesla, Inc. (TSLA)
EV giant TSLA designs, develops, manufactures, leases, and sells high-performance EVs, EV powertrain components and offers services related to its sustainable energy products internationally. The Palo Alto, Calif.-based company operates in two segments: Automotive; and Energy Generation and Storage. It develops energy storage products, commercial facilities, and utility sites, and owns its sales and service network.
On November 1, 2021, TSLA opened its 10 Supercharger locations to non-Tesla electric vehicles for the first time in the Netherlands. Non-Tesla drivers will need to create an account in the Tesla app, select “Charge Your Non-Tesla” search for the nearest Supercharger location, add a payment method and start charging. With this slow roll-out, TSLA expects to witness rising sales from the Supercharger network in the coming months.
Also, TSLA signed an agreement with Ganfeng Lithium, one of the world’s leading lithium manufacturers in China, and its GFL International Co. Ltd unit, to receive battery-grade lithium hydroxide over the next three years. As it becomes increasingly involved in the raw material supply chain for battery cells, TSLA should produce more battery cells and profit from the huge orders for its EVs in the coming months.
Amid global supply chain and logistics challenges, TSLA produced approximately 237,823 vehicles in the 2021 third quarter, representing a 64% increase from the prior-year period. The company also delivered 241,300 vehicles, up 73.2% from the year-ago period.
For its fiscal third quarter, ended September 30, 2021, TSLA’s total revenues came in at $13.76 billion, representing a 56.8% year-over-year rise. The company’s gross profit was $3.66 billion, up 77.4% from the year-ago period. TSLA’s income from operations was $2 billion, indicating a 147.7% rise from the prior-year period. While its non-GAAP net income increased 139.5% year-over-year to $2.09 billion, its non-GAAP EPS increased 144.7% to $1.86. The company had $16.07 billion in cash and cash equivalents as of September 30, 2021.
Analysts expect TSLA’s EPS to improve 169.2% year-over-year in the current year to $6.03. A $51.10 billion consensus revenue estimate for the current year represents a 62% improvement year-over-year. It surpassed the consensus EPS estimates in three of the trailing four quarters. Analysts expect the stock’s EPS to grow at a 73.1% rate per annum over the next five years.
The stock has gained 186.4% in price over the past year to close yesterday’s trading session at $1,213.86. It gained 43.7% in price in October.
NVIDIA Corporation (NVDA)
NVDA in Santa Clara, Calif., designs and manufactures computer graphics processors, chipsets, and related multimedia software used in the gaming, professional visualization, data center, and automotive markets. Its products are sold to OEMs, ODMs, system builders, add-in board manufacturers, retailers/distributors, Internet and cloud service providers, mapping companies, and other ecosystem participants.
On October 21, 2021, NVDA introduced its next-generation cloud gaming platform delivering GeForce RTX 3080-class gaming on GeForce NOW. The GeForce NOW RTX 3080 membership tier provides gamers access to the greatest-ever generational leap in GeForce history, offering cloud gaming’s highest resolutions and fastest frame rates, paired with the lowest latency compared to the latest game consoles. This new gaming experience is expected to help NVDA gain demand and expand its market reach in the coming months.
On September 30, 2021, popular gaming company Electronic Arts Inc. (EA) introduced more of its hit games to NVDA’s NVIDIA GeForce NOW cloud gaming service. EA’s games have enabled GeForce NOW membership to more than double in the last year. The company expects to see an expanding customer base in the coming months.
NVDA’s revenues for its fiscal second quarter, ended August 1, 2021, increased 68.3% year-over-year to $6.51 billion. The company’s non-GAAP gross profit was $4.34 billion, up 70% from the prior-year period. Its non-GAAP income from operations came in at $3.07 billion, indicating a 102.6% rise from the year-ago period. NVDA’s non-GAAP net income was $2.62 billion for the quarter, representing a 92% year-over-year improvement. Its non-GAAP EPS increased 89.1% year-over-year to $1.04. The company had $5.63 billion in cash and cash equivalents as of August 1, 2021.
NVDA’s EPS is estimated to rise 65.2% year-over-year to $4.13 in the current year. It surpassed the Street’s revenue estimates in each of the trailing four quarters. Analysts expect its revenue to be $25.77 billion for the current year, representing a 54.5% year-over-year improvement. The company’s EPS is expected to grow at a 32.6% rate per annum over the next five years.
The stock has gained 104.3% in price over the past year to close yesterday’s trading session at $265.98. It returned 23.4% last month.
Union Pacific Corporation (UNP)
UNP hauls agricultural, automotive, and chemical products and offers long-haul routes from all major West Coast and Gulf Coast ports to Eastern gateways, connects with Canada’s rail systems, and serves the major gateways to Mexico. UNP is headquartered in Omaha, Neb.
On October 27, 2021, UNP, the Port of Long Beach (POLB), and the Utah Inland Port Authority (UIPA) unveiled an initiative to remove cargo from port terminals by optimizing rail deliveries between California and Utah, thus, reducing port congestion and enable enhanced efficiency for regional importers and exporters. By offering advanced logistics solutions and efficient rail services, the authorities hope to reduce current supply chain issues.
On August 19, Progress Rail, a Caterpillar company, approved using up to 20% biodiesel blend in specific EMD locomotive series operated by the UNP. This will usher in low carbon fuel usage in UNP locomotives and is another step toward achieving a long-term goal of reducing absolute scope 1 and 2 greenhouse gas (GHG) emissions by 26% by the end of 2030. UNP is looking forward to a long-term partnership with Progress Rail.
For its fiscal third quarter, ended September 30, 2021, UNP’s total operating revenues increased 13.2% year-over-year to $5.57 billion. The company’s operating income came in at $2.43 billion, up 19.7% from the prior-year period. UNP’s net income was $1.67 billion for the quarter, representing a 22.7% rise from the year-ago period. Its EPS increased 27.9% year-over-year to $2.57. As of September 30, 2021, UNP had $1.19 billion in cash and cash equivalents.
Analysts expect the stock’s EPS to improve 21.9% year-over-year to $9.98 in the current year. A $21.72 billion consensus revenue estimate for the current year indicates an 11.2% rise from the prior-year period. UNP surpassed the consensus EPS estimates in three of the trailing four quarters. UNP’s EPS is expected to grow at a 16.1% rate per annum over the next five years.
UNP has gained 29.2% in price over the past year to end yesterday’s trading session at $239.46. In October, the stock returned 23.2%.
Enphase Energy, Inc. (ENPH)
ENPH is a provider of energy management solutions for the solar photovoltaic industry worldwide. The Petaluma, Calif., company manufactures and sells semiconductor-based microinverters, combined with its proprietary networking and software technologies, to provide energy monitoring and control services. It serves solar distributors, OEMs, strategic partners, and homeowners, as well as the do-it-yourself market.
On October 25, 2021, ENPH introduced its all-new, all-in-one Enphase Energy System with IQ8 solar microinverters for customers in North America. Unlike competing devices, this software-defined IQ8 can form a microgrid during a power outage using only sunlight, providing backup power even without a battery. This product should enable ENPH to gain widespread recognition across the industry in the near term.
On October 21, 2021, ENPH announced that its home energy systems would integrate with most leading models of home standby AC generators, providing enhanced performance and a glitch-free transition for homeowners during power outages. With the Enphase app, homeowners can monitor real-time power flow, start and stop their generators remotely, and set quiet hours. ENPH expects to witness high demand in the coming months.
For its fiscal third quarter, ended September 30, 2021, ENPH’s revenue increased 96.9% year-over-year to $351.52 million. The company’s non-GAAP gross profit came in at $143.27 million, indicating a 95.6% rise from the year-ago period. Its non-GAAP operating income was $85.93 million for the quarter, up 96.8% from the prior-year period. While its non-GAAP net income increased 101.5% year-over-year to $84.16 million, its EPS increased 100% to $0.60. As of September 30, 2021, ENPH had $885.55 million in cash and cash equivalents.
A $2.28 consensus EPS estimate for the current year represents a 66.4% year-over-year improvement. It surpassed the Street’s EPS estimates in all four trailing four quarters. Analysts expect ENPH’s revenue to improve 76.5% year-over-year to $1.37 billion. Its EPS is expected to grow at a 43.5% rate per annum over the next five years.
The stock has gained 125.9% in price over the past year to close yesterday’s trading session at $236.58. It surged 54.5% in price in October.
Teradyne, Inc. (TER)
TER is a global supplier of automation equipment for test and industrial applications worldwide. The company operates through four business segments: Semiconductor Test; System Test; Industrial Automation; and Wireless Test. Its equipment includes semiconductor test systems, military, aerospace test instrumentation, circuit-board test, inspection systems, automotive diagnostic, and test systems. TER is headquartered in North Reading, Mass.
On January 12, 2021, TER announced that its UltraFLEX test platform enabled AI chip company Syntiant Corp. to ship millions of its microwatt-power deep learning Neural Decision Processors to customers worldwide. TER continues to support the qualification and production ramp of the Syntiant NDP120 and Syntiant NDP121 Neural Decision Processors at under 1mW power consumption and is looking for a long-term partnership with Syntiant.
For its fiscal third quarter, ended October 3, 2021, TER’s net revenues increased 16% year-over-year to $950.50 million. The company’s non-GAAP gross profit came in at $571 million, up 24.4% from the prior-year period. Its income from operations was $329 million for the quarter, indicating a 32.5% year-over-year improvement. Its non-GAAP net income came in at $278.60 million, representing a 35.6% rise from the prior-year period. And its non-GAAP EPS increased 34.7% year-over-year to $1.59. TER had $1.08 billion in cash and cash equivalents as of October 3, 2021.
A $5.83 consensus EPS estimate for the current year represents a 26.2% year-over-year improvement. It surpassed consensus EPS estimates in each of the trailing four quarters. TER’s revenue is estimated to rise 18% year-over-year to $3.68 billion in the current year. And its EPS is expected to grow at a 15.4% rate per annum over the next five years.
TER has gained 56.2% in price over the past year to close yesterday’s trading session at $140.32. In October, it returned 26.6%.
TSLA shares were trading at $1,231.31 per share on Thursday morning, up $17.45 (+1.44%). Year-to-date, TSLA has gained 74.49%, versus a 25.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.