2 Stocks That Could Make Big Moves Before Year End

Two stocks that have recently caught the attention of investors are: Sirius XM Holdings (SIR -5.10%) AND Carnival (CCL 0.99%). These stocks have underperformed the major market indices this year, but they are notable names that many investors recognize.

Both companies are showing improving trends that could lead to sharp increases in their share prices. Let’s look at the fundamental catalysts that could benefit shareholders of these companies and what returns can be expected if things go well.

1. Sirius XM Holdings

Sirius XM is a very profitable business that relies on recurring revenue from millions of subscribers for its satellite radio service. It has deals with major automakers to pre-install the service in their vehicles, and that advantage has helped Sirius XM gain 33 million subscribers. It also owns Pandora, which has about 6 million subscribers.

The company has seen a slight increase in cancellations over the past year, which has helped boost revenue and stocks. However, this appears to be a temporary decline; management attributes the increase in subscriber churn to an increase in vehicle sales, which has caused some volatility between paid and free plans. However, management expects subscriber trends to improve in the second half of 2024.

Meanwhile, Sirius XM continues to grow its advertising revenue, which rose 7% year over year in the first quarter, which is starting to have an impact on earnings. The company’s net income rose 14% year over year to $265 million in the first quarter.

Analysts predict that Sirius XM will grow earnings per share by almost 10% annually over the long term, which should justify a higher price-to-earnings (P/E) ratio.

The stock is currently trading at a conservative P/E of 13 — about half the market average. The stock could rise another 30% if the P/E is at the 17.4 it had at the beginning of the year.

Of course, it’s hard to predict the market, but assuming Sirius XM announces an improvement in its subscriber base and continues to grow its advertising revenue, the stock could see significant growth by the end of the year.

2. Carnival

Carnival is the world’s largest cruise operator, making it one of the best stocks to cash in on growth in the travel industry. The company continued to report strong financial results in the first half of 2024, with higher revenue, operating profits, customer deposits and booking trends compared to early 2023.

The stock is expected to rise over the next year. The company is working hard to improve profitability and reduce the debt it has incurred during the pandemic. It expects to significantly increase capacity on its flagship Carnival Cruise Line — one of its more profitable brands — by 2028. That will go a long way toward helping it reach its financial goals.

Meanwhile, demand trends look very favorable, which will translate into more profitable growth toward 2025. Management noted during the Q2 earnings conference call that prices for bookings made in the quarter will trend upwards for the rest of the year.

Another positive indicator is that Carnival entered the second quarter with less inventory to sell, allowing it to book farther into 2025. Strong demand combined with flat capacity growth next year points to higher prices, revenues and profits.

Carnival stock has traded in a range over the past year, but it could be on the cusp of hitting new highs. The stock has a modest P/E ratio of around 16. That’s low enough for the stock to rally as investors start looking at next year’s earnings estimates.

Wall Street currently expects Carnival to report adjusted earnings of $1.18 this year, then grow 30% to $1.54 in 2025. Applying the current P/E ratio to 2025 earnings estimates would result in a share price of $24, implying upside potential of 33%.

Investors typically start pricing stocks based on next year’s estimates in the fourth quarter or early in the new year, so assuming Carnival maintains its positive outlook, the stock could see a rally as 2025 approaches.