Time to go bottom fishing? 3 ‘Strong Buy’ Stocks That Are Down About 50% This Year
What do you think of the markets right now? Last week brought more losses in what has been a volatile year for stocks. The five straight weeks of market decline marked the longest such streak in more than a decade. More worryingly, they came up with a number of other disturbing data points.
April’s employment figures, released on Friday, came in at 428,000 jobs added for the month, which is superficially strong and well above the 391,000 expected. But the workforce remains depressed and the total number of workers, even after a year of strong increases, is still 1.2 million below its pre-pandemic peak. Worse still, wage gains of 5.5% in April, the fifth consecutive month that wages rose more than 5%, did not keep up with the annualized inflation rate of 8.5%. Workers are better paid, but still lag behind.
On top of that, the high inflation rate prompted the Fed to start raising interest rates. The latest increase, of 0.5%, was the largest in more than two decades and is already translating into higher bond yields (the 10-year Treasury is above 3%) and higher mortgage rates .
For investors, however, the conditions are gearing towards bargain hunting – finding the stocks that perform at low prices but with the potential for high long-term returns.
With that in mind, we’ve used data from TipRanks to pull out three stocks that are posting losses of 50% or more for the year so far – but also showing strong buy-from-the-street ratings and the potential for double or more in the coming year. Here is the truth.
Digital Kornit (KRNT)
We will start with a technology company in the textile industry. Kornit presents itself as a global digital printing company, specializing in high-speed, industrial-grade inkjet printers, as well as pigments and chemicals, for the apparel, apparel and , household items and decoration. The company’s machines are capable of printing intricate designs directly onto finished textiles, allowing textile workers to call out patterned textiles on demand. This frees up inventory space and eliminates redundancies, important considerations for Kornit’s customer base.
One number is enough to show the breadth of Kornit’s work and niche: more than 150 million clothing models are printed on Kornit machines every year. The company coordinates this work through 5 global offices in New Jersey, Miami, Dusseldorf, Hong Kong and Shanghai.
The company will release its 1Q22 financial results this Wednesday, May 11, but we can get a good idea of its current situation by looking back on previous quarters. In the second half of 2021, Kornit reported strong revenue numbers, with the fourth quarter figure of $87.5 million setting a quarterly record for the company. Annual revenue for 2021 was $322 million, up 67% year-over-year. The company was profitable, with GAAP earnings of 2 cents per diluted share in the quarter and 13 cents for the full year.
Despite these positive moves, the company’s shares have fallen 58% so far this year. However, 5-star analyst James Ricchiuti of Needham isn’t backing down from Kornit’s recent share price losses. In fact, he’s pricing the stock as a buy, with a price target of $155. The figure implies that the shares will be valued around 141% higher in a year. (To see Ricchiuti’s record, Click here)
Supporting his bullish stance, Ricchiuti writes, “We believe the long-term secular drivers underlying our positive investment thesis on Kornit are intact…We believe business remains healthy, despite heightened macroeconomic uncertainty. We continue to expect strong tailwinds in KRNT’s business in 2022 and 2023, driven by positive momentum with its largest customers, the growing trend towards offshoring and the focus on sustainability by apparel manufacturers, as well as a rich pipeline of new products. »
Overall, with 7 recent positive reviews on record, Kornit’s stock enjoys a unanimous consensus strong buy rating from the Wall Street analyst corps. The shares are selling for $64.19 and their average price target of $151.71 implies a one-year upside potential of around 136%. (See KRNT stock analysis on TipRanks)
Bill.com Holdings (BILL)
The second beat stock we’ll be looking at is Bill.com, a provider of cloud-based software solutions for accounting and paperwork issues that threaten to overwhelm the small business world. The company’s cloud platform enables customers to automate the day-to-day processes of invoicing, invoicing, receiving payments and making payments, the constant accounting tasks that consume so much time for small business owners.
Bill.com is popular among its small and medium-sized business target customers, as evidenced by the company’s strong revenue growth in recent quarters. Earlier this month, the company released its fiscal 3Q22 financial results and posted strong year-over-year revenue growth of 179% to a total of $166.9 million. for quarterly revenue. Of that total, subscription fees increased 78% to $52.2 million, while transaction fees increased 286% to $113.3 million.
Even though finances were, on the surface, solid, the stock fell by a third after publication. Investors were somewhat spooked by a slowdown in revenue growth. Quarter over quarter, revenue grew only 6.6%, a far cry from the 34% q/q growth in 2Q22. And looking ahead, the company gave fiscal guidance for the fourth quarter in the range of $182.3 million to $183.3 million, which even at the high end would represent quarterly growth. less than 10%. So far this year, the stock is down 51%.
Nevertheless, 5-star Canaccord analyst Joseph Vafi remains optimistic. He writes of this company: “Although no one knows the future of macro at this time, we consider BILL to be relatively well positioned in the current environment, except for its exceptional valuation, which has clearly already comes in. With over 70% organic growth and 179% overall growth in Q3, no one can say the BILL model isn’t continuing to work on what is a huge, long tail in small businesses that have need help with their financial back-offices Plus, with over 80% gross margins and a powerful 1-2 hit revenue business model based on SaaS subscription and payment volume, BILL remains, to our opinion, the model to beat for SME payments.”
Along with these bullish comments, Vafi gives BILL a Buy rating and a price target of $250, implying a roughly 107% upside over the next 12 months. (To see Vafi’s track record, Click here)
Wall Street would tend to agree with this bullish outlook – as shown by the 12-to-1 split in recent reviews, favoring longs over bookings and supporting a strong buy consensus. The stock is currently trading at $121 and its average target of 240.83 suggests a 99% upside from that level. (See BILL stock forecast on TipRanks)
Last but not least, DermTech, a leader in the field of molecular dermatology. More specifically, DermTech develops and commercializes new diagnostic technologies for the early detection of melanoma. It is a common skin cancer, dangerous in itself and made even more dangerous by its propensity to metastasize to other parts of the body. Early disease detection is the key to successful treatment, and that’s where DermTech comes in.
The company has developed an adhesive patch melanoma test, which can perform non-invasive skin biopsy for medical testing. The company operates its own genetic testing laboratory where skin samples can be examined. And best of all, the DermTech test can be performed by the patient, at home, rather than in a doctor’s office.
Like the other stocks here, DermTech is showing a combination of strong earnings and a declining share price. In its 1Q22 report, the company announced quarterly revenue of $3.7 million, up 47% year-over-year. The gain was driven by a 61% increase in testing revenue, which in turn was driven by a 53% year-over-year increase in billable sample volume, to 14,730 for the quarter. The company posted a quarterly net loss of $1.01 per share – although it ended the quarter with positive cash of $202.1 million. The stock, however, has fallen 51% so far this year.
Analyst Sung Ji Nam of investment firm BTIG sees the falling share price as an opportunity to buy the stock.
“DMTK remains well positioned to more than double revenue in 2022 barring further significant COVID-related healthcare disruptions in the United States for the remainder of the year. Key growth drivers for 2022 and 2023 include significant sales force expansion in 2021 which is expected to drive testing volume growth, and DMTK’s focus on improving testing ASP through increased Medicare segment penetration, call management and expanding third-party payer coverage,” noted Ji Nam.
Consistent with these bullish comments, Ji Nam puts a buy rating on the stock and his price target of $38 indicates robust upside potential of around 393% ahead. (To see Ji Nam’s record, Click here)
Overall, this small cap stock has only 4 recent analyst reviews – but they are unanimously bullish, for a strong buy consensus rating. The shares are priced at $7.71 and have an average price target of $30.33, suggesting 293% year-over-year upside potential. (See DMTK stock forecast on TipRanks)
To find great stock trading ideas at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock information.
Warning: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.