2 Magnificent Stocks to Buy With $100 as the Bull Market Continues in August, According to Wall Street | The Motley Fool

The S&P 500 (SNPINDEX: ^GSPC) bull market is still intact, and the index has historically moved higher in August, returning an average of 0.6% during the month since 1928, according to Yardeni Research. Of course, a long-term mindset is the surest path to success in the stock market, but there is no harm in leaning into historical trends.

On that note, Chipotle Mexican Grill (CMG -0.82%) and DigitalOcean (DOCN -7.39%) are stocks worth buying today, according to Wall Street.

• Among 38 analysts, Chipotle has a median target price of $59.50 per share. That implies 38% upside from its current share price of $43.
• Among 14 analysts, DigitalOcean has a median target price of $38 per share. That implies 40% upside from its current share price of $27.

Investors can purchase a single share of both stocks for less than $100. Here’s why they are worth owning.

Chipotle Mexican Grill: 38% implied upside

Chipotle reported disappointing second-quarter financial results. Revenue increased 3% to $3.1 billion, but Wall Street expected 5% growth. And non-GAAP net income fell 3% to $0.33 per diluted share. Particularly discouraging was the 4% drop in same-store sales, which itself was caused by a decrease in consumer traffic.

Same-store sales are viewed as an indicator for brand appeal and consumer sentiment, and the market was unsettled by the decline. Chipotle stock fell 9% and settled at a 52-week low after the company announced its Q2 results. But I think the market overreacted, and the sell-off creates an opportunity for patient investors.

Chipotle’s same-store sales declined in this year’s Q1 and Q2, but that is highly unusual. In fact, the company last reported a decrease in same-store sales five years ago following the onset of the Covid-19 pandemic. Similar to that incident, I think the most recent drop in customer traffic was entirely due to economic uncertainty, not a loss of brand appeal.

Consumer sentiment dropped to its lowest level in three years following President Trump’s tariff blitz in April, according to the University of Michigan. That coincided with weakness in Chipotle’s business. But consumer sentiment rebounded in June, and Chipotle CFO Adam Rymer said that coincided with a reacceleration in consumer traffic as the company rolled out summer marketing initiatives. The rebound continued into July, which hints at better days ahead.

Going forward, Wall Street expects adjusted earnings will increase at 16% annually through 2026. That makes the current valuation of 38 times adjusted earnings look fairly reasonable. Likewise, Chipotle currently trades at 5 times sales, a material discount to the three-year average of 6.4 times sales. Long-term investors should feel comfortable buying a small position today.

DigitalOcean: 40% implied upside

DigitalOcean reported Q1 financial results that exceeded expectations on the top and bottom lines. Revenue increased 14% to $211 million, the second straight acceleration, due to strong demand for core cloud and artificial intelligence (AI) services. Non-GAAP net income jumped 30% to $0.56 per diluted share.

The investment thesis for DigitalOcean is simple: While large public clouds like Amazon Web Services (AWS) and Microsoft Azure offer a much broader and deeper range of cloud-computing services, their products are built for large enterprises with robust IT departments. DigitalOcean simplifies cloud computing for individual developers and small businesses with click-and-go options, extensive technical documentation, and 24/7 customer support.

Importantly, the company is also leaning into demand for AI, a market forecast to grow at 36% annually through 2030. DigitalOcean introduced a generative AI development platform earlier this year, which lets businesses customize foundational models to build and deploy AI agents. It also introduced an AI-powered copilot that helps businesses detect and resolve website issues.

Looking ahead, Wall Street expects the company’s earnings to remain unchanged through 2026, but I think analysts have missed the mark. The International Data Corp. estimates that, among individual developers and businesses with fewer than 500 employees, cloud-services spending will increase at 22% annually to reach $250 billion by 2028.

Furthermore, DigitalOcean beat the consensus earnings estimate by an average of 25% in the last six quarters, which suggests analysts may be underestimating future earnings growth. And with the stock currently trading at a reasonable 13 times adjusted earnings, patient investors should feel confident buying a small position today.