3 Humiliated Nasdaq Stocks Ready to Rebound
2022 has been a difficult year for the market. Although we saw a few flashes of bullish brilliance here and there, the Nasdaq Compound (NASDAQ INDEX: ^IXIC) is currently more than 16% below its November peak. And it shows signs of falling even lower. Some Nasdaq-listed stocks, of course, fared much better.
Now is not the time to panic, however. While it may be uncomfortable to do so, seasoned investors can attest that the time to buy good companies is when their stock prices are falling. The ultimate pullback in the market is bullish, even if it pulls back from time to time.
With that in mind, here’s a look at three of the most undervalued names on the Nasdaq following a brutal sell-off. These three picks are more primed than their peers for a rebound.
1. PayPal Credits
PayPal Assets (NASDAQ: PYPL) may have been all the rage in 2020 and 2021 when consumers were suddenly forced to do most of their shopping online. However, the end of pandemic shutdowns and new competition are weighing on the stock. PayPal shares are now 64% below last year’s highs and appear to be falling further.
Poor forecasts for the current year largely explain the current weakness. As recently as November, the company forecast revenue growth of 18% in 2022, in line with analysts’ outlook. This forecast was reduced to 15% to 17% in February when the earnings forecast was also reduced.
However, there is one important and glaring detail that is obscured by the relatively disappointing expectations for the current year. Revenue growth between 15% and 17% is still solid, given that online shopping has continued in earnest for most of the past year. Additionally, even in the middle of the company’s lowered earnings guidance range of $4.60 to $4.75, the stock now trades at a forward price-to-earnings (P/E) ratio of around 23. Thanks to its exaggerated hindsight, it’s cheaper than stocks have been in years.
As it faces new competition, it is easier for a leading company to maintain its lead than for a newcomer to dethrone that leader. To that end, the Maruti Techlabs market research team estimates that PayPal is still the preferred payment option for over 90% of e-commerce sites.
2. T. Rowe Award
When investors think of notable Nasdaq-listed stocks, T. Rowe Prize Group (NASDAQ: TROW) isn’t usually a name that comes to mind. Although the mutual fund company is well known and respected, it lacks the spark that excites investors.
Don’t let the lack of pizzazz paint you a bad picture, though. It’s a great deal, and T. Rowe Price shares are particularly tempting as they trade 35% below last year’s high, pushing their dividend yield to almost 3.4%.
As most investors know, mutual fund companies aren’t paid to produce results that outperform the market. While a string of poor performance undermines investors’ willingness to stick with a particular fund or fund manager, simply keeping pace with overall market performance is often seen as enough. Mutual fund companies are paid based on a fixed percentage of their asset pool each quarter, even if those funds have lost value during those three months.
In that vein, T. Rowe Price Group is expected to experience a slump in earnings this year, from 2021 net income of $12.75 per share to $11.74, reflecting broader market weakness. An income of $11.74 is still healthy, however. It is expected to grow again in 2023 and will be more than enough to cover the current annual dividend payment of $4.80 per share in the meantime.
3. Rivian Automotive
Finally, add the electric vehicle (EV) manufacturer Rivian Automotive (NASDAQ: RIVN) to your list of humble Nasdaq stocks ready to bounce.
If the name means nothing to you, there is a good reason. Rivian has only been listed on the stock market since November, and it made just 1,015 electric vehicles in its first year of production last year. For the point of view, You’re here delivered more than 936,000 battery-powered cars in 2021. Rivian is hardly a top contender in the EV market, a reality that has slowly but surely been rolled into stock. While Rivian shares jumped shortly after its November public offering, the stock is currently nearly 80% below its November high and still within reach of record lows hit last month.
However, most of this pullback may have more to do with the market emerging from its pre-IPO euphoria than with the company itself. While most analysts and watchers rightly suspect the company could stay in the red for years, it isn’t necessarily destined to lose money forever. He needs scale, which he earns. Rivian manufactured 2,553 electric vehicles in the first quarter and continues to increase production capacity. As long as the company moves forward, investors are likely to be interested in owning the shares now that the post-IPO jitters have passed.
There’s definitely room for more than one EV drive, too. The US Energy Information Administration estimates that more than 670 million electric vehicles will be on the world’s roads by 2050, up from around 10 million today.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool owns and endorses PayPal Holdings and Tesla. The Motley Fool recommends the Nasdaq. The Motley Fool has a disclosure policy.