Three stock picks that could be worth a bet in July based on standout performance last month
June was an excellent month for the stock market as all of the major U.S. indexes posted positive returns.
Corporate earnings remained strong, and while the Fed did not act on interest rates, inflation rates fell, indicating a continuing trend toward the Fed’s target of 2% inflation.
The S&P 500 also finished in the black for the second straight month, returning 3.5% in June. However, the Nasdaq Composite was the big winner, recording one of its best months of the year with a 6.2% return in June.
The Dow Jones Industrial Average lagged a bit, gaining 1.1% in June, while small caps continued to struggle as the Russell 2000 finished the month down 1.1%.
These were the three top stocks on the S&P 500 in June.
1. Adobe, up 24.9%
Adobe (NASDAQ:ADBE), which produces software for graphic design and photo editing, saw its share price spike in mid-June after the release of its fiscal second-quarter earnings.
On June 14, the share price jumped from $459 per share to $525 per share — a 14.4% leap — on a blowout earnings report that smashed estimates. Adobe stock ended the month up 24.9%.
The company generated record revenue of $5.3 billion in the quarter, up 10% year over year. Meanwhile, its net income skyrocketed 21.5% to $1.6 billion, or $3.50 per share.
“Adobe achieved record revenue of $5.31 billion driven by strong growth across Creative Cloud, Document Cloud and Experience Cloud,” said Shantanu Narayen, chair and CEO of Adobe. “Our highly differentiated approach to AI and innovative product delivery are attracting an expanding universe of customers and providing more value to existing users.”
Adobe also raised its revenue and earnings targets for its fiscal third quarter and the full fiscal year based on expectations for improved macroeconomic and foreign exchange environments.
It was a bounce-back month for Adobe. Even with the strong June performance, the stock is down 5.2% year to date.
2. CrowdStrike, up 22%
CrowdStrike Holdings (NASDAQ:CRWD), which develops cybersecurity software, was the second-best performer on the S&P 500 in June, returning 22% for the month. Last month marked the continuation of a strong year for CrowdStrike stock, which has returned 50.5% YTD.
June was indeed an eventful month for the company as it was added to the S&P 500 on June 24. However, the major catalyst for CrowdStrike was its first-quarter fiscal-2025 earnings report, released on June 4.
Following this blowout earnings report on June 4, CrowdStrike stock jumped from $305 per share to $343 per share the next day and kept rising from there.
One could see why, as CrowdStrike posted a 33% year-over-year increase in revenue to $921 million, while net income skyrocketed from $0.5 million in the same quarter a year ago to $43 million in the most recent quarter. Net earnings per share climbed to 18 cents per share, from 0 cents in the same quarter a year ago.
“In addition to our strong top-line performance, financial highlights included record gross margin, significant year-over-year operating leverage, record free cash flow of $322 million or 35% of revenue and a rule of 68 on a free cash flow basis, showcasing our focus on profitably scaling the business to $10 billion ending ARR (annual recurring revenue) and beyond,” said Burt Podbere, CrowdStrike’s chief financial officer.
CrowdStrike also boosted its revenue and earnings outlook for the fiscal second quarter and full fiscal year. For the second quarter, it is calling for revenue of $958.3 million to $961.2 million, and for the full year, it is targeting $3.976 billion to $4.01 billion in revenue.
3. Broadcom, up 20.8%
Broadcom (NASDAQ:AVG) has been a juggernaut over the past few years, and it is not slowing down. The AI chipmaker posted a 20.8% return in June, and its stock price is up about 47% YTD.
Like the other two stocks on this list, Broadcom stock was fueled by an excellent quarterly earnings report in June. The company grew revenue by 43% year over year in its fiscal second quarter to $12.5 billion.
Its net income tumbled about 40% year over year, but that was impacted by expenses related to the acquisition of VMware last year. However, the adjusted net income, minus acquisition costs and other one-time expenses, soared 20% to $5.4 billion, or $10.96 per share.
Those gains were driven by its AI chips, which generated record revenue in the quarter.
The other huge catalyst was the announcement of a 10-for-one stock split, which will take effect on July 15. When the split kicks in, investors will receive nine additional shares for every share they own.
The stock split could also fuel future growth, as Broadcom’s share price will be lower by a factor of 10, making it more accessible to more investors. It is currently trading at $1,638 per share.
Beware valuations amid the potential
All three of these stocks are trading at high multiples, so be mindful of their valuations. However, all have excellent earnings potential and are worth considering as long-term options.
Most immediately, look for Broadcom to potentially pop after the stock split, but again, keep an eye on the price-to-earnings ratio.
