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3 Stocks to Buy and 3 Stocks to Sell in June

Plus new research on Nvidia.

3 Stocks to Buy and 3 Stocks to Sell in June
Securities In This Article
Qualcomm Inc
The Home Depot Inc
Palo Alto Networks Inc
Zscaler Inc
Chewy Inc

Susan Dziubinski: Hello, and welcome to The Morning Filter. I’m Susan Dziubinski with Morningstar. Every Monday morning, I sit down with Morningstar Research Services Chief US Market Strategist, Dave Sekera, to discuss what’s on his radar this week, some new Morningstar research, and a few stock picks or pans for the week ahead. But before we get started, this week, there’s a programing note.

On Monday, June 17, we’ll be streaming a special episode of The Morning Filter. It will be a viewer mailbag. So what investment questions do you have for Dave, or what stocks would you like to hear more about? Let us know in the comments section beneath this video or via our email, which is We’ll choose a selection of questions to answer on the June 17 show.

So back to this week’s business. Dave. We have a few companies reporting earnings. First up is CrowdStrike. How does this cybersecurity stock look heading into earnings, and what will you be listening for?

David Sekera: Hey, good morning, Susan. Yeah it’s going to be an interesting show. Can’t wait to see what questions we have coming in to us for that one. But as far as cybersecurity, I mean, as we’ve talked about several times, we’ve long had a positive view on the underlying fundamentals for the cybersecurity sector. And we continue to do so.

I just note here with CrowdStrike, I’d say there’s probably not a lot to do from an investing perspective. The stock is currently rated 3 stars. I think it trades just a hair above our fair value. I do think there are several other cybersecurity stocks that, from an investing point of view, are much more attractive at this point.

So really I’m just looking here to see what their take is on the industry, maybe their take on their outlook. Really listen to see if there’s anything that they say that’s going to be different than the other cybersecurity companies that have already reported their earnings.

Dziubinski: And Bath & Body Works also reports this week. Why is this a company that you’re watching?

Sekera: Well, I mean, first of all, we did recommend the stock on our Nov. 27 show. The stock’s up I think about 70% since then. And we still think it’s undervalued here. It’s a 4-star-rated stock. Trades at a 33% discount to fair value. And now I would just say with this one it’s going to be interesting to see kind of what they report in their guidance.

Now the last couple of shows we’ve discussed how we’re starting to see the first indications that the middle-income consumers look like they’re really starting to crack. I mean, the low-income consumer has already been under pressure for inflation for the past year. But I think it’s that compound impact of two years’ worth of inflation really starting to take their toll.

I think at this point excess savings the middle-income consumer already used up. We now see that the savings rate is actually below prepandemic levels. And the areas that are really starting to take the hit the hardest right now are those that consumers consider to be indulgent. So, for example, we saw Starbucks report a 7% decrease in foot traffic.

So I just think that tells you a lot of people are either making their coffee here at home or maybe skipping their afternoon latte. So the question here: Do consumers consider Bath & Body Work products an affordable luxury or not? If so, I think their business can probably hold up during this period that we are seeing a heightened consumer restraint.

Or are their products considered to be more of an affordable luxury? And I would just note here in the Sekera household, anyway, it’s still considered to be an affordable luxury, but really, no, all kidding aside, I know our equity research team does look at it as being something that consumers will consider to be an affordable luxury.

And we do expect that their sales will be able to hold up. Either way, the stock does still trade at a pretty large margin of safety from its intrinsic valuation, albeit a lot less than we first recommended it last November.

Dziubinski: Now, staying on the theme of the consumer, Dollar Tree reports this week. And we had Dollar General reporting last week. So what are you listening for here?

Sekera: So Dollar General reported earnings slightly better than expected. We maintained our fair value at $145 a share. Looks like the stock closed last Friday at about $136. So I think probably most noteworthy here is that they did announce that their foot traffic increased 4%. And I think it’s just really the same story as what we’ve been hearing this past quarter across much of the retail sector.

Their sales on nondiscretionary items looks like were up 10%. You know, a lot of that being in the consumable area. Whereas nondiscretionary items, specifically like home and apparel, I think they called out, fell 10% and 2%, respectively.

So I’m expecting out somewhat similar results at the Dollar Tree. That’s also a 3-star-rated stock. Trades at a pretty close to $115 fair value estimate. Specifically for them, I’m going to be listening for an update on the closure of some of their Family Dollar Stores, plus the impact on operating margins if competition really starts to heat up—price competition with like, maybe Walmart and some of the other discounters that have announced pretty wide cost-cutting across their products--and then lastly, also what’s going on with shrink, also known as shoplifting.

Whether or not that’s getting any worse because, of course, that also has a very large impact on their margins.

Dziubinski: How about on the economic front, Dave, anything you’re watching this week?

Sekera: Yeah, I would say for the first part of the week, it’s pretty quiet on the economic front. There’s a number of different PMI and ISM numbers out. I think that helps to gauge economic activity. But for the most part, they’re not necessarily market movers. For people that do watch these numbers, I’d just remind you that they’re what’s called a diffusion index.

So if the reading is above 50, that indicates expansion. If it’s a reading below 50, that indicates contraction. But really it’s going to be Friday when we get the payrolls and the unemployment numbers that I think that those metrics have the potential to move markets. I think what the Fed is looking for here is kind of the indication that the job market is softening but not falling too quickly.

They’re looking for wage growth to moderate. But not so much that it looks like either things are getting too weak, but also that wage growth isn’t increasing so fast that it could potentially lead to kind of that wage price spiral that would then boost inflation.

Dziubinski: Well, let’s move on to some new research from Morningstar. And we have quite a bit to catch up on this week. We’ll stay on the economic front with the PCE number, which is the inflation metric that the Fed pays most attention to. That number came out on Friday, and the market really rallied. So unpack the number for viewers, Dave.

Sekera: Yeah I think the market probably, if the market actually moved up on that number, I think they were taking it too far to the upside. So the core PCEnumber did come in just slightly better than expected on a month-over-month basis. It came at your 2/10 of a percent. Consensus estimate was for 3/10 of a percent.

But when you actually calculate that number, the actual percentage change came in at 0.249%. So it got rounded down to that point two, whereas if it was only 1/100 of a percent higher, it actually would have rounded up to the consensus number at 0.3%. Otherwise everything else came in at consensus. And essentially that was flat to the prior month.

So net net, I would say inflation isn’t getting any worse but at the same point in time, it’s really not getting out that much better.

Dziubinski: So given the PCE numbers, what’s the market pricing in in terms of rate cuts in 2024 now?

Sekera: You know, really wasn’t that much of a change in the market expectations. You know, the market’s still pricing in no cut at the June meeting. Looks like only a 14% probability of a cut at the July meeting. And then when we take a look at the September meeting, a little bit higher of a probability than before the number, but still only 57%.

Of course, that does remain our base case. Our US economics team does still see the Fed cutting rates at the September meeting themselves.

Dziubinski: So pivoting over to new research about some companies that reported earnings since our last show, and we must start with Nvidia. Earnings were strong. The forecast was stellar. And Morningstar raised its fair value estimate on the stock by 15%. So what’s Morningstar think of the stock today?

Sekera: So our fair value right now is $1,050 per share based on where the stock’s trading. Puts it in the 3-star territory. And I’d say one of the bigger parts of our fair value increase is really more in our short-term forecasts. So right now, we’re looking at four to six quarters where we’re still looking at supply not being able to meet demand.

The company’s still being able to sell their products for pretty much whatever they want to charge, and people are still buying them. Taking a look at guidance, they gave a revenue number of $28 billion for the second quarter. I think that’s going to be up 7.5% on a quarter-over-quarter basis.

In our view, that probably still leaves room for Nvidia to beat again when they report their second-quarter numbers. So essentially, the company’s just going with your typical guidebook, trying to underpromise and overdeliver for the market. Taking a look at our financial model, we’re looking at earnings this year of 2,804.

And then looking at $39.33 per share for next year. So on a multiple basis, that puts it at 37 times this year’s earnings, 27 times next year earnings. May sound a little bit high, but when we’re looking at our compound annual growth rate for the next three years at 58%, it’s actually really not all that high for a company that’s growing that much for at least the next couple of years. So I’ll just note an interesting comment from Brian, who covers the stock for us. Probably one of the things really to watch for in this situation are its cloud customers. And I would really look for if they start to slow their capex spending, I think that’s probably going to be the first indication that Nvidia’s growth rate has likely peaked.

So taking a look at how much money Microsoft, Alphabet, Amazon some of those big cloud companies are spending on these GPUs is going to be the first red flag to watch for as far as when growth starts to slow down for Nvidia.

Dziubinski: Now, Nvidia also announced a 10-for-1 stock split, which is set for after market close on June 7. So what’s Morningstar’s take on the split, and what will our fair value estimate be on the stock after the split?

Sekera: And I think you always have to remember: A stock split doesn’t change the economic value of the company itself. It only changes the proportion of ownership that each share represents of the company. So when the stock does split, our fair value would just get cut from $1,050 per share to $105 per share.

Net net, I would just say stock splits just don’t have the same impact that it used to decades ago, back when stocks were traded in lots of 100 shares at a time. Back then, high dollar stocks did have less liquidity. But with technology nowadays it’s much easier to trade odd lots.

You can even trade individual shares. So the only impact I think this really has here is going to be on market sentiment, not from any kind of change in improved liquidity or any change in value of the underlying company.

Dziubinski: We have a lot of tech companies to talk about besides Nvidia, so let’s start through them. Palo Alto stock fell after earnings, but Morningstar raised its fair value estimate on the stock by 22%. So why did Morningstar respond so differently than the market to the results? And does Morningstar think the stock’s a buy today?

Sekera: And this is one of those differences where I think the market is overly focused on the short term whereas we’re taking that much longer-term approach. Really think of how the dynamics within the underlying business are evolving and will impact the company over the next couple of years. So I think the reason the stock fell as much as it did is the market was disappointed by a weaker than expected billings guidance.

But when you look at the reason for the weaker billings, it’s just because the company is offering bundling discounts to its existing customers. However, we’re just not as concerned by that short-term issue. The fair value increase was really due to an increased confidence that our analyst team has in the company’s strategy, essentially being able to drive more customers onto its platform over the next couple years.

And we think that strategy is actually starting to show some early signs of success. Now long term, within the cybersecurity industry, we also expect to see a lot of vendor consolidation over time. So we expect that customers for cybersecurity will condense their spending into a narrower and narrower list of security vendors over time.

Those security vendors specifically who can provide cybersecurity across things like the network, the cloud security operations, endpoint detection, all of that within the same provider as opposed to having to deal with multiple providers. So our fair value right now is $366 per share, with the stock near $290.

That puts out a 20% discount to fair value. So it’s trading at that 4-star level right now.

Dziubinski: Now Zscaler posted strong results for the quarter and the stock rallied. What’s Morningstar think of those results, and is the stock a buy today?

Sekera: It got a nice little pop, I think is up about 8% after earnings. We maintained our fair value at $213 per share. So it’s also trading at about a 20% discount, again in that 4-star range. Company’s just having good strong execution in their core business. One of the things our analytical team highlighted was as an indication of that, customers with annual contract values of over $1 million, that expanded by 31%.

But we’re also seeing strength in the emerging product categories. We think Zscaler also will be a beneficiary from that increase in vendor consolidation over time.

Dziubinski: So staying with tech, Salesforce stock sold off after the company missed on revenue and issued some soft guidance. What did Morningstar think the results? Any changes to the fair value estimate on this one? And is the stock a buy after the pullback?

Sekera: So we did lower our fair value by 5% in this case. So I think it’s now $285 a share as opposed to $300 before earnings. It was a combination of a couple different things: slightly lower revenue in the first quarter, a little bit lower guidance for the second quarter. But I think the stock probably sold off too much even in light of our cut in our fair value. It’s now trading at a 20% discount so that puts it in the 4-star category. From a long-term perspective, we still think that it’s one of the better stories in the software space. We think it has a very strong combination of revenue growth, operating margin, expansion potential, and a pretty strong balance sheet.

So I’d just note here, if you do want to buy into Salesforce, this might be a good situation to try and layer into a position. So I know Dan Romanoff, who covers the stock, specifically cautioned that, while the second-quarter outlook was relatively light, the company maintained their full-year outlook. So he thinks this does raise the possibility that you could see some disappointment throughout the rest of the year.

And if so maybe see the market sell off a little bit more. So again maybe take a smaller position to start. And then that gives you the room that, if the company’s stock does sell off with any further disappointments, it gives you some room in your portfolio to be able to buy more stock at lower prices.

Dziubinski: Now, Morningstar took a fresh look at Intel and cut the stock’s fair value estimate by 14%. So why the cut? And is the stock overvalued today?

Sekera: It might not yet be time to throw Intel into that bucket of the other legacy tech names. But it’s starting to really feel like it’s getting closer and closer to that. So the reason our analytical team really took a fresh look here at Intel was that they paid attention to what was going on at Microsoft Build conference, and they reduced their assumptions regarding Intel’s PC processor revenue growth for several years. What they’re seeing is that there’s an increase in the number of PCs that are going to end up using Qualcomm Snapdragon Elite processors, as opposed to chips from Intel or even from AMD. So the stock right now is trading pretty close to our fair value. It’s a 3-star-rated stock. But in my opinion there’s just a lot better stories out there, specifically companies that have a better trajectory, also trading at discounts to fair value. So I’d much rather own a lot of those situations than this one. I think just net net, over the next couple of years, Intel has a lot of catching up to do with the rest of the semiconductor market.

Dziubinski: Morningstar also reexamined its assumptions about Qualcomm stock, and in this case, we raised our fair value estimate on the stock by more than 28%. So why the boost? And is there an opportunity here?

Sekera: Following that Microsoft conference, we now anticipate that Qualcomm will actually start taking market share away from Intel in PCs designed for heightened artificial intelligence performance. Having said all that, the stock is still rated 2 stars, trades at a 14% premium to our fair value. And I think a lot of it: We just don’t foresee really that much overwhelming growth in their core smartphone business over time.

So I think it’s a matter of, while it will benefit from the heightened sales with that new product, I think the market is just overestimating kind of the long-term growth in the smartphone business.

Dziubinski: All right. Well, time to move off the tech sector. Let’s talk about Target. Target experienced a decline in sales, in traffic, and in average ticket during the last quarter, and the retailer also announced price reductions on 5,000 frequently shopped items. And then the stock, of course, fell after earnings on that news. What’s Morningstar think of Target today?

Sekera: Yeah, I think Target’s got at least a couple of very difficult quarters in front of it. And especially with middle-income consumers reining in their spending. You know, at this point, excess savings from the pandemic have been used up. Middle-income consumers have already cut back their savings rate. And I expect to see consumers just continuing to delay purchases of those discretionary goods, specifically areas like home and hard lines, which do make up a lot of Target’s sales.

Target did see its traffic fall 2%. I think a lot of consumers are trading down to other discount retailers. And they also noted that their comparable stores sales fell 3.7%. And I’d note that that’s an environment where inflation is still up, call it, 3% on a year-over-year basis.

So I think that really indicates how much business they were losing there. Target stock is rated 2 stars. Trades at a 15% premium. I think this is a story where you’re going to need to see wage growth really come back over multiple quarters, get back to kind of where they were prepandemic as compared to inflation, before customers get comfortable enough starting to increase spending back in those discretionary categories.

Dziubinski: And then Chewy stock was up more than 27% after reporting earnings. And I know this is a stock we’ve talked about before on the show. So what’s Morningstar think about the earnings? Any changes to the fair value estimate, and is this stock still attractive after that rally?

Sekera: Yeah. This was another one that we actually recommended on our Nov. 27 show last year. But I do think this was really a good example of why stocks that we highlight aren’t really necessarily trades but really investments. And of course those are two different thought processes. Now the stock initially did pretty well after we first recommended it, but then the stock had a pretty rough number of months in February through April.

But after surging I think like 27% after earnings, the stock is now up a total of 17% since that recommendation. So a company reported pretty strong first-quarter results. They did maintain their guidance of 4% to 6% sales growth for the year. They also increased their adjusted EBITDA margin by 40 basis points. But more importantly, I think, underneath it all we’re seeing normalization in their underlying fundamentals.

If you remember part of our story here was that there was a big increase in the number of pets per household during the early years of the pandemic, while people were at home they decided to get dogs or cats or whatever. But then, of course that growth really slowed in 2023.

And so I think it’s really getting to the point where it’s normalizing. This past quarter, they reported a number of pet adoptions outpaced the number of relinquishment. And I think that was the first time that’s happened now in over the past year or so. Plus, they also know that a 6.4% increase in their autoship program.

So I think that all bodes pretty well for future revenue growth here.

Dziubinski: All right. It’s time to move on to the stock picks portion of our program. We’re heading into a new month. And you’ve brought viewers three overvalued stocks to sell and three undervalued stocks to buy in June. Let’s start with your stocks to sell. The first is Home Depot. Stock’s having a tough year, yet it’s still looks overpriced compared to Morningstar’s fair value estimate.

What’s the story here?

Sekera: Now again, it’s one of these stories: Good company, overpriced stock. It’s a 2-star-rated stock, trades at a 25% premium to our fair value. I would note it looks like the stock has been on kind of a downward trajectory since they reported earnings. You know their comparable store sales were down 2.8%. That reflected both a decrease in the average per receipt as well as a decrease in foot traffic.

But most notable was the decrease in big ticket transactions. So those are average receipts of over $1,000. So that was down 6.5%. Our analytical team noted they suggest that that really shows continued softness in the larger discretionary projects. I think there’s just a number of ongoing headwinds here.

You know, as well we’re seeing relatively low turnover in existing housing. And I think high interest rates are going to probably tamp down those large home remodeling projects at least for our next couple of quarters. Plus, I think there’s still a little bit of a hangover from the pandemic. I mean, there was a huge increase in remodeling and redecorating.

A lot of that, I think, got pulled forward into 2020, 2021, even into 2022. And so I think in 2023 and going forward in 2024 a lot of that remodeling has already been done. So I think it’ll take time for that to get back to more of a normalized basis.

Dziubinski: Your next stock to sell in June is specialty retailer Williams-Sonoma. Stock’s up 160% during the past 12 months.

Sekera: Again, it’s one of these ones where oftentimes the market acts like a pendulum and can swing you out too far to the downside, starts getting some momentum, and then can swing out too far to the upside. So this time last year, Williams-Sonoma was actually a 5-star-rated stock and was trading at about half of our fair value.

But as you noted, with as much as the stock has surged to the upside, it’s just trading too high in our fair value estimate range. It’s a 2-star-rated stock I think at about the 19% or 20% premium to fair value. Now Williams-Sonoma had a great quarter. They beat on top line and bottom line. They even lifted their margin guidance.

However, the increase to the margin guidance for the full year was less than what they reported for the individual quarter. So we think that might signal that the operating margin gains will be limited over the next three quarters. So I think what we’re really looking at here is a combination of a couple things. We think that the company on a valuation basis is probably trading too high as compared to a multiple of its underlying earnings.

I think that over time high interest rates are probably going to pressured this story as well. You know, we’re going to see lower housing turnover, weakening consumers. So that’s all going to weigh on home furnishings over the next couple of quarters, if not even longer. So we don’t see their sales growth returning to a normalized mid-single-digit level until probably well into next year.

Dziubinski: So your final stock to sell in June is the leader in streaming, Netflix. Now, Morningstar expects Netflix to remain top dog in its industry for at least the next decade. So given that opinion, why is this a stock to sell, Dave?

Sekera: So underlying fundamentals, they’ve done very well over the past couple of quarters between their crackdown on password-sharing, their new advertising supported subscription. They’ve done a great job bringing in a lot of net new subscribers. But I think this is a matter of the market taking that recent high growth and pricing that in for too long into the future.

In fact, if you look at our earnings estimates here, we do expect to see a pretty strong deceleration in that subscriber growth over the course of the second half of this year. The other thing that’s going on here: Netflix announced it’s no longer going to report their subscriber growth. I think that really has to make you assume that the company is undergoing a change in their business strategy, getting away from that hyperfocus on growing the number of subscribers and probably really looking at more improving their profitability.

So that’s a good thing over time. However, in the short term, I think that could cause a dislocation in the market as far as how that stock is going to trade. So right now the stock does trade at a 35 times this year’s earnings or at least compared to our earnings estimate but still 30 times our 2025 earnings estimate.

And that’s going to be pretty high even for a company here where we do have a five-year average compound annual growth rate of earnings of 19%. So net net it’s a 2-star-rated stock. Trades at a 46% premium to our fair value.

Dziubinski: All right. Let’s move on to three stocks to buy in June. And we have a couple of names here that you’ve talked about before on the show. Your first stock to buy is Adobe. Remind viewers why you like this name.

Sekera: So Adobe is currently a 4-star-rated stock. Trades at a 27% discount to our fair value. Yet the stock is down 25% year to date. And I think this is a bit of a story stock here in the marketplace. And we just think that generally there’s a misunderstanding of what’s going on based on the guidance that they provided from their first quarter.

Now first-quarter results were just fine. In fact, I think we consider them to be pretty good. But the market was reacting to the guidance. So in this case we think the market’s overreacting to what occurred here. So if you talk to Dan Romanoff, he’s the equity analyst that covers the stock, he in fact actually described the guidance as being “perplexing.”

And that’s just really never a word that should be attributed to a guidance. And I think management had a problem really trying to convey what they thought was going on in the underlying business for the next quarter and for really the remainder of the year. So management refused to reiterate their full-year outlook for net new recurring revenue.

Yet they repeatedly said that they felt really good about it. Now Dan also noted that there was a number of other moving parts in the guidance, and I think it just ended up being overly confusing, really wasn’t very well laid out for the marketplace. But yet once Dan went through all of this, there’s really nothing definitive in there that caused him to change his underlying view of the longer-term fundamentals.

So our fair value was unchanged after that earnings announcement. This is a company that we rate with a wide economic moat, although it does have a high uncertainty. But again, for stock in the tech industry, you expect that high uncertainty. So I think this is a good stock pick for investors looking to keep exposure in that large-cap growth space and the tech sector.

Two areas of the market that are at least fully if not starting to get to be overvalued here. So our next earnings report is coming up here on June 13. So hopefully I think management will do a better job conveying their outlook for the remainder of the year, and if their outlook is at least what the market’s expecting if not maybe slightly better, we could see some upward momentum here.

Dziubinski: Now your next pick is also a stock you’ve recommended before, and it’s having a pretty good year. The stock’s up nearly 30% so far in 2024. It’s RTX.

Sekera: And for those of you with a little less hair and a bigger forehead like me, you’ll remember that company is Raytheon. Now, we first recommended that stock on our July 31 show. It’s had pretty good upward momentum since then. It actually just moved into 3-star territory from 4 star. Although it still trades at a 6% discount to our fair value. Pays a 2.4% dividend yield.

So not necessarily a pound the table, this thing is ridiculously cheap, kind of story. But I still think it’s relatively attractive here. We also do rate the company with a wide economic moat. So we do see long-term durable competitive advantages. And just a synopsis on the story here: Their underlying business is split between the other commercial aerospace and defense. On the commercial side,

Collins is one of the largest aircraft component suppliers. The Pratt and Whitney division, we think that’s still in the relatively the early innings of ramping up delivering thousands of jet engines based on some new engines that they have there. But really, I think it’s the defense business right now

that people are really paying the most attention to. Raytheon provides missiles, missile defense systems, secure communications, and especially on the missile and missile defense side, that’s really proving its value in the geopolitical conflicts we see going on today. And lastly, I’ll just note with everything that’s going on, they have a large multiyear backlog.

So unfortunately I do think this is still a stock that does have some upward momentum here.

Dziubinski: And then your last stock to buy in June is a name I don’t think we’ve talked about, at least not recently on the show. It’s Norwegian Cruise Lines. Now the stock’s down about 17% this year. But if you’re concerned about the consumer, why is this a stock you like, Dave?

Sekera: Yeah. This one really does seem like it’s going against the grain of how we do see a weakening middle-income consumer for at least the next couple of quarters. I spoke to Jamie Katz, she’s the equity analyst that covers the cruise lines and this company specifically, but I also talked to Dan Wasiolek. He covers the hotels and some other consumer-related companies.

And really what both of them are seeing is still very strong demand this season for travel and for vacations. So while consumers, I think, are pulling back on indulgent items and delaying other nondiscretionary purchases, I think there’s a couple of things going on here with travel specifically. So either--one, I think at this point, a lot of people have already booked their summer travel or within their own mind, they’ve already accounted for it within their budget.

So I think that’s kind of like a different segment in the thought process of how people spend money as opposed to some of the day-to-day spending. Then I’d also note here specifically for Norwegian--their demographics do skew toward the higher-end consumers. The higher-end consumers look like they still have plenty of money to spend at this point.

So I’d be more cautious with the cruise lines, like maybe Carnival Cruise Lines, which skewed toward more middle- or lower-end consumers. And then lastly, I think this is also a bit of a turnaround story. So we have a new CEO that took the reins last year. He’s been an insider. He ran the Norwegian brand for a number of years.

He has just a long history within his career at Norwegian and the cruise line business. So we think he’s going to be able to take this company up to the next level. They’re setting up 2026 corporate goals, and I think they’re just undertaking a lot more responsibility and accountability and defining those goals and really coming up with the underlying plans and how they’re going to be able to meet those corporate goals.

And then lastly, I know Jamie’s noted in some of her recent research here, there’s good momentum in the bookings. Pricing is still increasing at a pretty healthy rate. And cruises, interestingly, are still actually 40% cheaper than land-based vacations. That was at 20% prepandemic. So I think that cruises for the people that enjoy cruises is still a pretty attractive alternative.

And I think the concerns surrounding the consumer have weighed on the stock thus far this year. And that’s really what’s opening up this opportunity. Right now, it’s a 4-star-rated stock and trades at a pretty wide margin of safety from its intrinsic valuation at 45%.

Dziubinski: Well, thanks for your time this morning Dave. Viewers interested in researching any of the stocks that Dave talked about today can visit for more analysis. We hope you’ll join us for The Morning Filter again next Monday at 9 a.m. Eastern, 8 a.m. Central. In the meantime, please like this video and subscribe to Morningstar’s channel. Have a great week!

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Authors

David Sekera, CFA

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Dave Sekera, CFA, is chief US market strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. Before assuming his current role in August 2020, he was a managing director for DBRS Morningstar. Additionally, he regularly published commentary to provide investors with relevant insights into the corporate-bond markets.

Prior to joining Morningstar in 2010, Sekera worked in the alternative asset-management field and has held positions as both a buy-side and sell-side analyst. He has over 30 years of analytical experience covering the securities markets.

Sekera holds a bachelor's degree in finance and decision sciences from Miami University. He also holds the Chartered Financial Analyst® designation. Please note, Dave does not use either WhatsApp or Telegram. Anyone claiming to be Dave on these apps is an impersonator. He will not contact anyone on these apps and will not provide any content or advice on either app.

Susan Dziubinski

Investment Specialist
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Susan Dziubinski is an investment specialist with more than 30 years of experience at Morningstar covering stocks, funds, and portfolios. She previously managed the company's newsletter and books businesses and led the team that created content for Morningstar's Investing Classroom. She has also edited Morningstar FundInvestor and managed the launch of the Morningstar Rating for stocks. Since 2013, Dziubinski has been delivering Morningstar's long-term perspective and research to investors on

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