Only 175,000 jobs were added in April. That figure came in below expectations, and unemployment ticked higher to 3.9%. Stocks rocketed higher on the news despite a cooling labor market.
What gives?
Prospects of a cooler job market are raising hopes that the Fed will act more swiftly with interest rate reductions. Lower interest rates make borrowing money easier and stimulate the economy.
This stock market reaction demonstrates how it’s not always appropriate to correlate a rising stock market with a strong economy. However, the stock market is filled with opportunities, and these stocks can benefit from the latest job data.
Alphabet (GOOG,GOOGL)
Lower interest rates can lead to more spending, and companies often use online advertising to promote their products and services. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is the industry’s leader and stands to benefit as advertising accelerates.
Alphabet reported 15% year-over-year revenue growth in Q1 2024 and 57% year-over-year net income growth. The stock trades at a 27 P/E ratio and offers a 0.47% yield. It’s been outperforming the stock market for several years and is up 22% year-to-date.
Google Cloud is becoming a more important part of Alphabet’s business. It represents more than 10% of total revenue and is a welcomed development. The company is becoming less reliant on online advertising and is diversifying its revenue streams. Artificial intelligence will create more opportunities and allow Alphabet to strengthen its cloud platform.
Alphabet is rated as a “Strong Buy” among 36 analysts. It currently has a projected 15% upside from current levels.
Walmart (WMT)
In theory, lower interest rates will stimulate consumer spending. However, if unemployment rises and people deal with elevated living costs, they will turn to affordable retailers like Walmart (NYSE:WMT) for their purchases.
This economic environment can help Walmart attract wealthier consumers. This development will increase the average purchase value of each customer. Walmart offers a wide range of products, making it possible to do all your shopping in one place.
The company’s 10,000+ stores aren’t its only strength. Walmart has expanded its e-commerce platform and grew that segment by 23% year-over-year in Q4 FY24. Overall revenue increased by 5.7% year-over-year. The retailer recently raised its dividend by 9%, a good sign for the company’s long-term growth opportunities. Advertising is a notable segment that remains small for now, but a high growth rate can make it more enticing in a few years.
Investors don’t have to wait for Walmart’s advertising division to take off. The stock is already up by 14% year-to-date and has soared by 80% over the past five years.
Celsius Holdings (CELH)
Celsius Holdings (NASDAQ:CELH) offers enticing sports beverages that cater to health-conscious consumers. They nix many unhealthy ingredients you can easily find in other drinks.
Revenue growth was a bit slower in Q1 2024 at 37% year-over-year. However, that’s still a good growth rate as the company gears for an international expansion. Meanwhile, net income soared 89% year-over-year from $41.2 million in Q1 2023 to $77.8 million in Q1 2024. Profit margins are expanding, and lower interest rates can lead to more sales.
Sales in Canada exceeded the company’s first quarter expectations. Investors can also expect to find Celsius drinks in Australia, France, Ireland, New Zealand and the United Kingdom in 2024. The international growth story is still in its early innings, and profit margins are rising quickly.
The stock has been a boon for patient investors. Shares are up by almost 6,000% over the past five years. Investors shouldn’t expect Celsius Holdings to repeat that performance, but it is up by a respectable 47% year-to-date.
On this date of publication, Marc Guberti held long positions in GOOG and CELH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.