TOP 3 Stocks in December 2023

The return of Carrefour's past glory?

Carrefour SA shares are a new addition to the list of the month's most traded stocks. What makes it all the more interesting is that they were even at the absolute top of the most interesting stocks for Purple Trading clients during December. The well-known supermarket chain has had a rather below-average year, with its shares rising by less than 5% and thus lagging the market quite significantly (the Euro Stoxx indices recorded double-digit gains).

Looking at the longer-term chart, it is evident that Carrefour shares are particularly favored by active traders. Investors who prefer the "buy and hold" style have not enjoyed much joy with them in recent years. At least the dividend yield, which is currently over 3%, may be attractive. However, at a time when the stock is underperforming the market, the dividend is little consolation. On the positive side, however, the company's share buybacks are also positive - it promised €800 million of buybacks for 2023, which it has probably delivered. But why have Carrefour shares been so popular and what is their future potential?
 

_{Shares of Carrefour SA on D1 chart, MT4}

Carrefour is currently transforming - focusing primarily on the European and Latin American markets. However, it is struggling with many obstacles in both markets. These include weak economic growth in Europe and economic normalization in the Americas. In addition, Carrefour has completely discontinued its presence in Asia and is now focusing mainly on digital and online sales. This move has been costly but is already reaping its first fruits. Online orders and home delivery are growing substantially and are certainly the future of the industry. The exit from Asia is also proving to be a good move, with Carrefour selling its last assets in 2022. Especially given the current economic problems in China.

Carrefour currently generates 46% of its sales from France, 28% from the rest of Europe, and 26% from Latin America. It is doing particularly well in Brazil, where it is also the market leader thanks to the acquisition of Grupo Big. It is sales from Latin America that are growing at the most interesting rate, making it a goldmine for Carrefour. But the question is how the company will manage to generate profits in an environment of plummeting inflation, especially in a market where it has minimal margins. Moreover, Carrefour is undergoing a transformation until 2026, by which time there may be significant fluctuations, which this stock is no stranger to. So the earnings in particular will bring interesting trading opportunities for active traders, with more to come on 20 February.

Disney - a return to the limelight?

The year 2023 was one of the best for US stocks, with the S&P 500 index up more than 26% and the Nasdaq technology index up 43%. However, there was one famous name that did not experience any growth - Disney. Walt Disney shares ended 2023 with a gain of just 1.5%. Even though the start of the year 2023 was a dream come true for Disney, with the shares gaining 25% in January alone. However, as the year progressed, these gains were steadily eroded, falling to their lowest level in 9 years.

So what's the problem with Disney? The clouds are gathering over the theme parks in particular and also Marvel Studios. Both have been cash cows for Disney in the past. The theme parks were emptier than the company would have liked during the summer, especially the Florida park.

The problems at Marvel Studios have been glaring - the quality and sales of individual projects have steadily declined. Some films have barely ended up in black numbers, which is certainly not something Disney is used to after the blockbuster Avengers broke attendance and sales records in the past. The cost of new projects, however, is rather rising - the Secret Invasion series, for example, reportedly cost over $210 million, but reviews are inconsistent at best.

Disney currently reeks of desperation to deliver as much content as possible to its Disney+ platform in order to lure new subscribers. Disney and Marvel are now sort of paying the price for their past success - in the pre-pandemic era, the company sanctioned virtually every project because it saw virtually certain commercial success behind it.

_{Shares of Disney on D1 Chart, MT4}

Disney was forced to make a turn due to circumstances. It has hired a new boss, Bob Iger, and laid off thousands of people to investigate. The latest quarterly results are already showing light at the end of the tunnel. The total number of Disney+ subscribers has already grown to 150 million, and the platform could finally report a profit by the end of this year. Total profits for the quarter were up 173% year-on-year and revenues were up 5%. Despite a weak summer, the theme parks have finally returned to prosperity and Disney plans to invest heavily in them over the next decade.

In addition, the new CEO is also succeeding in significantly reducing overall costs. The end of the strike in Hollywood could also help Disney, although it forced it to postpone several premieres. Overall, the next period will be one of transition for Disney and the stock may experience higher volatility in the short term. However, in the long term, Disney stock looks interesting and if the theme parks repeat their growth and manage to get the Disney+ platform into profit, the stock could very quickly return to the highs of last year.

Are Shopify shares too expensive?

If anyone has been able to take full advantage of the huge stock rally that has swept the US markets since last November, it's Shopify stock. As recently as the end of October, they were still a third below their current level. But then Shopify reported great results that came at the right time. The ensuing rally sent the stock tens of percent higher, and Shopify stock finally ended 2023 with an appreciation of an amazing 118%. This clearly begs the question, are these shares too expensive?

Let's take a look at Shopify's dazzling results first. Revenue and earnings quite clearly beat expectations, unlike the previous Q3, Shopify turned a profit. Total revenue on Shopify's platforms came in at $56 billion, up 22% year-over-year. The company also downsized significantly, laying off 20% of its workforce in May. Thanks to a strong Q3, total revenue is expected to grow 25% in 2023. It was this outlook that triggered a huge rally in Shopify stock.
 

_{Shares of Shopify on D1 Chart, MT4}

Last year, the company also divested its loss-making logistics business, and in doing so has now returned to its roots, offering mainly software and payment processing for smaller and medium-sized online stores. The positive effects can already be seen in the latest earnings, it was the sale of the logistics business that brought the company back into the black. Thus, positive numbers could be coming this year as well. However, the high expectations may look risky, especially after the huge rise in the stock from the end of the year. The stock has added over 60% since the beginning of November alone. Given that Shopify hasn't been profitable for a long time, a look at the P/E ratio doesn't make sense.

So let's look at the price-to-sales (P/S) ratio. It currently comes in at 14.3, which is a fairly high number. During the cover-up, when the stock was breaking all-time records, the ratio in question was even above 60 several times, but the more relevant comparison is with the period around 2018. Back then, the P/S ratio was at similar levels as now, but Shopify was expected to deliver huge growth, which the company delivered. Now, while growth is also expected, it will be significantly less. Shopify is also not a pure "saas" business, hence its margins are lower than other companies. Shopify's earnings are not likely to be dazzling and thus the current valuation may not be that attractive to investors. Thus, we can expect a lot of volatility in Shopify this year.

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