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Nasdaq Correction: Can Buying These 2 Safe Stocks Today Set You Up for Life?

Nasdaq Correction: Can Buying These 2 Safe Stocks Today Set You Up for Life?

  • a day ago
  • fool.com
  • Keywords: AI, Market Correction, Stock Market

During the Nasdaq correction, American Express and Alphabet offer undervalued opportunities with strong fundamentals and resilient businesses, promising long-term growth despite market concerns.

Alphabet News

Estimated market influence

The Motley Fool

Positive
Analyst rating: N/A

The Motley Fool is a financial services company that provides investing solutions and market analysis, which are relevant to the article.

American Express

American Express

Positive
Analyst rating: Neutral

American Express is highlighted as a safe stock with a P/E ratio of 18, down 20% from highs, offering a buying opportunity.

Alphabet

Alphabet

Positive
Analyst rating: Buy

Alphabet's stock is discussed in the context of AI threats and market correction, with its revenue growth showing resilience.

Context

Analysis of Market Correction and Safe Stock Opportunities

Nasdaq Correction Overview

  • Current Status: Nasdaq-100 index is down 12.6% from its highs, triggering an official stock market correction (a decline of 10%-20%).
  • Market Sentiment: Investors may feel inclined to avoid the market during corrections, but this is seen as a buying opportunity for high-quality stocks.

American Express (AXP)

Key Data Points:

  • Current Price: $260.75
  • Today's Change: -2.10% ($5.36)
  • Market Cap: $179B
  • P/E Ratio: 18 (down 20% from highs)
  • Dividend Yield: 1.10%

Business Insights:

  • Premium Customer Base: Focuses on travel, entertainment, and food, serving a resilient premium customer segment.
  • Revenue Streams: Generates income from card swipe fees, credit card loan balances, and annual fees.
  • Macro Risks: Concerns about consumer spending decline, particularly impacting partner Delta Airlines' revenue growth (reduced from 7%-9% to 3%-4%).
  • Resilience: American Express has weathered past economic challenges and is expected to recover despite potential short-term impacts.

Alphabet (GOOGL)

Key Data Points:

  • Current Price: $167.11
  • Today's Change: -1.87% ($3.07)
  • Market Cap: Not explicitly stated but significant as a tech giant.
  • P/E Ratio: 20

Business Insights:

  • AI Competition Concerns: Fears of losing search traffic to AI tools like ChatGPT, impacting advertising revenue (Google Search accounts for over half of Alphabet's revenue).
  • Revenue Growth:
    • Google Search revenue grew from $48B in Q4 2023 to $54B in Q4 2024.
    • Google Cloud revenue run rate: $48B annually, growing at 30% YoY.
    • YouTube revenue: Over $50B annually (combined advertising and subscriptions).
  • Strategic Response: Alphabet is embedding AI into Google Search to compete effectively with ChatGPT, leading to increased search queries.

Market Implications

Short-Term:

  • Both companies are trading at discounted valuations due to market concerns.
  • American Express: P/E of 18 (undervalued compared to historical averages).
  • Alphabet: P/E of 20 (appeals to long-term investors despite AI fears).

Long-Term:

  • American Express: Expected to maintain its premium customer base and recover from any short-term economic downturns.
  • Alphabet: Strong growth in Google Cloud and YouTube offsets potential risks from AI competition.

Strategic Considerations:

  • Corrections provide opportunities to buy high-quality stocks at discounted prices.
  • Both companies are seen as "blue chip" investments with durable competitive advantages.

Competitive Dynamics

  • American Express vs. Competitors: Benefits from a strong payments network and premium customer focus, reducing vulnerability to macroeconomic downturns.
  • Alphabet vs. AI Startups: Dominance in AI development positions it for long-term leadership despite short-term competition concerns.

Conclusion

The Nasdaq correction presents a unique opportunity to invest in undervalued blue-chip stocks like American Express and Alphabet. Both companies demonstrate resilience and growth potential, making them attractive options for long-term investors during market downturns.