5 Best Short Term Stocks to Buy in July 2021

With the S&P 500 posting fresh all-time highs in every single of the past seven sessions, sentiment seems to be as bullish as it can get. This risk-on attitude has been further fueled this morning by an upbeat jobs report, with non-farm payrolls showing a net add of 850,000 new positions – surpassing Wall Street’s estimates of 706,000 jobs added during June.

It seems that market participants are paying more attention at the moment to the pace at which the economy is recovering while shrugging off fears about the impact that the Delta variant of the COVID-19 virus could have on the population.

In this overly bullish environment, certain stocks emerge as good candidates to keep profiting from the rally. These names still offer some upside potential based on a technical analysis of the latest price action while their fundamentals are fairly robust as well.

1. Nike (NKE)

Nike (NKE) reported a record-shattering fourth quarter only a few days ago, with revenues surpassing analysts’ estimates by almost 12% as they landed at $12.34 billion. The company cited higher digital sales and a bounce in wholesale volumes as the leading cause for this uptick.

Meanwhile, earnings per share came in 83% higher than Wall Street’s forecast for the period, landing at $0.93 per share. These results produced a 15.5% single-day jump in the stock price and they left behind a sizable bullish gap that could support the continuation of this fresh bullish cycle for the shoemaker.

Based on the Fibonacci extension shown in the chart, Nike could rapidly reach the 1.618 extension of $160 per share. After that, it would be plausible to expect a pullback. However, based on a significant improvement in the business fundamentals, chances are that this temporary drop led by overheated technicals could produce a window of opportunity for late buyers to take a long position on a promising stock at a lower price.

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2. Zoom Video Communications (ZM)

The price of Zoom Video Communications (ZM) shares has advanced more than 21% since the company published its quarterly results as the video conference platform beat both revenue and earnings estimates for the period, with non-GAAP EPS surging 560% compared to a year ago at $1.32.

Meanwhile, Zoom raised its revenue and earnings guidance for the full 2022 fiscal year, with the company now expecting to see its sales landing at $4 billion while its diluted EPS should end the year at $4.6 per share.

Based on this guidance, Zoom’s net income could land at around $1.4 billion by the end of 2021. Historically, the company has delivered free cash flows of around 200% its net earnings which results in a forward price-to-cash-flow valuation metric of 34.

This is a particularly conservative multiple when compared to the firm’s growth prospects, as profitability should continue to be strong in the future for Zoom now that corporations around the world are increasingly adopting a hybrid work methodology that would require the use of the firm’s video conferencing software.

Based on the stock’s positive momentum, this latest upbeat report, and Zoom’s relatively conservative valuation, one could expect a continuation of the uptrend, with a short-term target of $455 per share for Zoom stock for a 15.5% potential upside.

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3. Facebook (FB)

The dismissal of an anti-trust claim against the company headed by Mark Zuckerberg on 28 June pushed the price of Facebook (FB) 4% higher while its market capitalization reached $1 trillion for the first time in its history.

The most appealing aspect of Facebook at the moment is its fairly conservative valuation, as the stock is being valued at only 26 times its NTM earnings, even though Facebook has been growing its bottom-line results at a compounded annual growth rate of around 50% from 2015 to 2020.

Meanwhile, the chart above shows how the stock broke above its upper trend line on the day that the news came out. Trading volumes have remained quite high since then while the stock price is climbing back to the 1.618 Fibonacci extension level that previously served as resistance but that could now turn to support.

If the price bounces strongly off that $353 level, a first target for Facebook could be set at $388 per share.

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4. CarMax (KMX)

CarMax reported strong quarterly results in late June that included a 138% surge in the firm’s revenues amid a significant rise in both prices and volumes.

This latest uptrend in used car prices is driving the current positive momentum the stock is seeing and, as a result, the stock experienced a 6.7% jump on the day that the earnings report came out while it is accumulating an 11% post-earnings advance.

Based on the latest price action, a plausible short-term target for CarMax (CMX) could be set at around $142 per share for a potential 7.5% upside if the uptrend continues as is.

This view is reinforced by momentum oscillators, as both the MACD and the RSI have effectively reversed their long-dated downtrends while the stock’s short-term moving averages are about to post a bullish golden cross that could provide further support to the price over the coming weeks.

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5. Microsoft (MSFT)

Similar to Facebook, Microsoft (MSFT) has been posting solid revenue growth since 2018 on the back of higher top-line results of its Intelligent Cloud unit. Meanwhile, the firm has a robust balance sheet that includes $125 million in cash that fully cover its long-term debt commitments.

At the moment, the stock is trading at 34 times its NTM forecasted earnings per share, which results in a price-to-earnings-to-growth ratio of around 0.63 – pointing to Microsoft as a potentially undervalued stock.

The chart above shows that based on Microsoft’s latest uptrend the stock could reach the $285 level before the next quarterly earnings report comes out for a potential 3.7% short-term upside based on today’s price.

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Bottom line

The forecasts provided above are estimations of what a stock could do based on a combination of fundamental and technical analysis. They should not be taken as financial advice and you should perform your own due diligence before entering a long position on any of the instruments mentioned in this article.

Moreover, the market’s latest seemingly unstoppable rally could eventually reach a phase of exhaustion that could lead to a short-term pullback or a full-blown reversal of the latest uptrend. This could affect the performance of the stocks mentioned within this article as well.

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