71.65 % of retail investors lose their capital when trading CFDs with this provider.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71.65 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

TOP 3 stocks October 2023

Published: 02.11.2023

Wondering where to look for volatility in the stock markets for speculation? Our regular roundup of the top 3 most traded stocks among Purple Trading clients for the month of October will give you a hint.

Middle East conflict an opportunity for Palantir?

Palantir shares have been on an incredible run this year, up more than 130% since the beginning of the year. Since the beginning of May alone, Palantir has added around 100%. While technology stocks have been running out of breath since the summer, Palantir is still riding high despite the correction. What's causing this? And are there first signs of cooling? The stock has written off around 25% of its value since its one-year high in August. But Palantir has had one success after another this year. In particular, the company has benefited greatly from the frenzy around artificial intelligence. Palantir in particular has been using it for data analytics for quite some time and should be one of the pioneers in this sector. Investors can appreciate that.

Palantir stocks in D1 graph, MT4
Palantir shares in D1 chart, MT4

In addition, Palantir has a steady revenue stream from the US government sector, and the current geopolitical tensions may be another opportunity for the company to increase its revenue through data analytics for the military. In addition, the number of civilian clients is also growing - it is the heavy reliance on the US military that the company has long been accused of, but times are now changing with the growth of new clients. Palantir has also swung into profit - in Q2, its earnings additionally grew by 116% and revenue by 13%. The company is expected to report Q3 results on November 2 and we expect a lot of volatility. Thanks to the strength of both the commercial and government sectors, revenue could rise to $555 million, which would be a 16% year-over-year increase. Earnings per share should come in at 6 cents, which would be an even 500% increase.

It is precisely because of exceeding expectations that Palantir shares have shot up so significantly. Further better-than-expected results could once again send Palantir stock closer to its yearly high. However, any disappointment can cause significant volatility and a move of more than 10% either way is certainly not ruled out. In the longer term, however, Palantir could benefit from its pioneering position in artificial intelligence, which has helped it to new contracts.

In late September, the company was awarded a $250 million contract to develop and implement AI solutions within the US military. An even bigger haul was a five-year contract with the UK's National Health Service (NHS) that will bring in nearly $500 million in revenue. This too may make Palantir look like an interesting investment for the longer term. However, worse-than-expected results may cause high volatility in the short term. Nor do technology stocks now benefit much from the risk-off sentiment in the markets, which has already played a role in the washout in Palantir stock since August.

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Tesla under pressure of falling margins. Are we expecting more declines?

Despite the correction of recent weeks, 2023 is a great success for Tesla. The stock is up 85% since the start of the year and some believe it may still be attractive as a long-term investment. So let's take a look at Tesla.

We've been warning about Tesla's earnings results for a long time. The most watched indicator, besides the number of cars delivered and produced, is the margin. And that has been severely compromised by Tesla's pricing policies. Indeed, Tesla has logically fought lower demand by getting cheaper, several times. So for Q3, we expected a significant margin reduction, which was finally confirmed.

Operating margin fell to 7.6%, compared to 17.2% a year ago. Moreover, for the first time since Q2 2019, Tesla missed market expectations for both profit and revenue. The stock reacted to the results with a big sell-off. In addition, Elon Musk expressed concern about the overall state of the global economy due to high-interest rates and expressed his intention to produce cheaper cars.


Tesla shares on D1 chart, MT4
Tesla shares on D1 chart, MT4


Tesla, however, has two aces up its sleeve. The first is a new planned factory in Mexico, where construction was already due to begin. That should help Tesla produce even more cars at lower costs.

The second is the long-announced Cybertruck. The first cars should be delivered to customers at the end of November. But the question mark hangs over the price tag. It should be around $70,000 for the two-motor version, well below the market average for electric pickups in the US. This would confirm Elon Musk's words about a more affordable pricing policy. Moreover, the Cybertruck should be a literal hit, with almost 2 million people having confirmed their interest and a waiting period of up to 5 years.

Just for comparison, Tesla is expected to produce around 1.8 million new cars in the full year 2023. However, given the falling prices, Tesla's margins are likely to continue to suffer. The stock may thus be vulnerable to further sell-offs. However, the stock's fall below $200 may be used as a buying opportunity by some investors, and given the new production capacity and Cybertruck, Tesla may be interesting as a long-term investment.

Tesla's quarterly sales by segment. Source: CNBC
Tesla's quarterly sales by segment. Source: CNBC

Why isn't Pfizer doing well? Is it time to buy?

Investors love growth and unfortunately, Pfizer is not offering it now. The gold mine for Pfizer was coronavirus and its vaccines. But the world is gradually forgetting about coronavirus and Pfizer stock is falling into oblivion. Since the beginning of the year, they have written down over 40% in value and are currently at their lowest point in over 3 years. The development of these shares seems a little unfair, they are at the same value as before the coronavirus, but Pfizer is a different company.

Revenues for 2022 were practically double compared to 2019. The same is true for earnings. So the company has a lot of resources to develop new drugs, so Pfizer is not a "one trick pony". The stock may also be attractive for long-term investors thanks to its interesting dividend, the yield is currently over 5.5% per year. Moreover, the coronavirus is not over yet, Pfizer has recently agreed with the US government to supply additional vaccines.

Pfizer shares on D1 chart, MT4
Pfizer shares on D1 chart, MT4


To get investors excited again, however, Pfizer will need something new. So far, it hasn't been very successful. Pfizer is also in the race for an obesity drug, and its testing has been relatively successful - people lost weight faster than Novo Nordisk's rival drug, but interim results from the development phase have pointed to potential liver damage, putting Pfizer at a big disadvantage here against Eli Lilly and Novo Nordisk. The company does have several other promising projects up its sleeve - but the drugs must first pass the US FDA.

The stock has also been knocked by the expectations of the company itself, which revised earnings and revenue significantly lower. For this year, profits are expected to fall by as much as 75% year-on-year and sales by as much as 40%. The company even fell into a loss for the past quarter due to large write-downs. Sales numbers were not too good either - they fell 42% year-on-year and fell short of market expectations. Given this, we cannot now label Pfizer as a buy despite its attractive capitalization and dividend.

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71.65 % of retail investors lose their capital when trading CFDs with this provider.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71.65 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.