The Nasdaq 100 is beating the market in 2023. The tech-heavy list of the 100 largest companies on the Nasdaq exchange (minus banks and financial institutions) has gained more than 41% year to date. The broader Nasdaq Composite index stopped at 34%, and both Nasdaq-based lists are crushing the S&P 500's 18% gain.
But the market surge isn't lifting every boat equally. Coffeehouse giant Starbucks (SBUX 0.79%) and mobile network operator T-Mobile US (TMUS 3.71%) are lagging behind the Nasdaq 100 index so far. At the same time, I'm talking about world-class companies with fantastic long-term business prospects here.
Let's take a closer look at the bargain-bin deals I see in T-Mobile and Starbucks today. If you agree with my analysis, you may want to start a new position or double down on your existing holdings in these top Nasdaq 100 components.
NASDAQ: SBUX
Key Data Points
Starbucks: A steaming cup of growth potential
The global coffee chain is back to full health after the COVID-19 downturn in 2020 and has been posting double-digit revenue growth in nearly every quarter nowadays. For example, this week's third-quarter report showed a 12% year-over-year revenue increase, with 588 net new stores and 10% higher sales in comparable stores.
The top-line gains were even stronger outside the domestic market, with a 24% revenue increase in the international segment. The Chinese market was a particularly tasty roast, reporting 50% year-over-year growth and an 8% increase from the second quarter.
The bottom line rose by 19%, thanks to higher revenue and improved operating efficiency. Profit margins are up, Starbucks' sales growth looks stable, and the customer loyalty program added 4 million members in the last year. That's a 15% boost in 52 weeks.
Still, Starbucks' share price is only up by 5% this year, trailing far behind the Nasdaq 100 and S&P 500 market barometers. Bearish investors worry about increasing competition and rising staff compensation. Some also grumble about potential missteps in the ongoing "reinvention plan," where Starbucks is modernizing its operations with new technology, such as an instant cold-press brewer and non-fungible tokens (NFTs) in the loyalty program.
In my book, these are simply normal issues facing pretty much every company. Starbucks can lean on its powerful brand name and top-notch management team to navigate this tricky period.
Given Starbucks' strong recovery and robust fundamentals, its swooning stock offers a solid opportunity for investors who believe in the company's long-term resilience.
NASDAQ: TMUS
Key Data Points
T-Mobile: Dialing up industry-leading results
Warren Buffett's companies own exactly one telecom company right now. You might expect him to grab the usual high-yield dividend payers in this sector, but that's not how he's playing the telecom market in 2023.
The Oracle of Omaha is going all-in on T-Mobile, instead, holding on to a $712 million investment Berkshire Hathaway made three years ago. Given T-Mobile's stalled price trend and strong business results in recent quarters, it wouldn't surprise me to see Buffett increasing his investment in this growth stock over the summer.
The company has built a market-leading 5G network around a solid portfolio of mid-band radio spectrum licenses. While AT&T and Verizon stuffed generous dividend checks into shareholder pockets, T-Mobile invested its spare cash into a superior network, instead.
As a result, a recent OpenSignal report shows T-Mobile customers getting a 5G connection 58% of the time, while the second-best performer stopped at 21%. And when those high-speed connections are established, T-Mobile's average download speeds more than doubled the runner-up result.
Warren Buffett is betting Berkshire's hard-earned dollars on the highest-quality mobile network today. The company also has a history of customer-friendly policies and below-average service fees. T-Mobile is taking full advantage of these business advantages, adding 1.6 million postpaid customers in the second quarter. AT&T gained 464,000 postpaid customers in the same period, and Verizon had to settle for just 168,000 new customers.
But T-Mobile's stock price is down by 2% in 2023. These shares look quite affordable, trading at 2x trailing sales and 14x forward earnings estimates. The stock also comes with Warren Buffett's gold-standard seal of approval. That adds up to a tremendous buying opportunity in my book.
