With the S&P 500 and Nasdaq near record levels, finding stocks that still offer compelling value has become increasingly difficult. According to investor Joseph Carlson, three companies stand out because the market may be underestimating their long-term growth potential: Uber, Meta Platforms and Netflix.
1. Uber Technologies (NYSE: UBER)
Uber is Carlson’s first high-conviction opportunity, largely because investors are increasingly worried that autonomous vehicles could disrupt its core ride-hailing business. Waymo is expanding rapidly, and that competitive threat has put pressure on Uber’s valuation. However, Carlson believes the market may be pricing in a much more severe disruption than is likely to occur.
Uber continues to grow revenue at around 20%, while its forward P/E is around 20, according to the discussion. The company also has a significant advantage that autonomous-vehicle operators must overcome: its enormous global network of riders and drivers. Uber can potentially integrate autonomous vehicles into its existing platform rather than having to build an entirely new customer network city by city.
That network effect could become increasingly valuable as autonomous transportation expands. Waymo may have advanced technology, but Uber already has enormous demand, supply and network density across markets. Carlson argues that this gives Uber a path to remain relevant even if autonomous vehicles become a major part of transportation.
2. Meta Platforms (NASDAQ: META)
Meta is the second stock highlighted as a potentially attractive opportunity. The company has faced pressure from investors over its enormous capital spending on artificial intelligence infrastructure, while regulatory and legal concerns have added to the uncertainty surrounding the stock.
However, the larger investment opportunity could be Meta’s attempt to build a powerful AI ecosystem of its own. Carlson argues that CEO Mark Zuckerberg does not want Meta to become dependent on a small number of AI companies in the same way that technology companies can become dependent on platforms such as Apple’s App Store or Google’s Android ecosystem.
Meta is therefore investing heavily in AI infrastructure and models. The company could potentially use its own AI technology to improve advertising, recommendations and its broader social-media products while reducing its dependence on outside AI providers. Meta already has an enormous cash-generating core business, while its aggressive AI investments could create another layer of long-term competitive advantage if the company successfully develops its own AI infrastructure and models.
3. Netflix (NASDAQ: NFLX)
Netflix is the third stock on Carlson’s list, with the company’s recent decline largely attributed to concerns about user engagement and slowing growth. Carlson believes those concerns have been exaggerated and that several underlying metrics remain healthy.
One of the major arguments against Netflix has been declining engagement per subscriber. However, Carlson points out that total engagement increased year over year and that Netflix continues to add subscribers. The company has also indicated that the retention of viewers between the first and second seasons of shows has improved.The decline in engagement per user can also partly be explained by Netflix’s geographic expansion. Markets such as the United States, Canada and Europe have relatively high television consumption, while newer international markets can have lower viewing hours per subscriber. As Netflix expands into these markets, average engagement can therefore decline even while the overall customer base grows.
Netflix continues to benefit from improving margins, strong free cash flow and share buybacks. If the market’s concerns about engagement and growth prove overstated, the stock could have room to recover.
