In this article, we will be going over the 11 best depressed stocks to invest in. To skip our comprehensive analysis of the market in 2022, go directly and see the 5 Best Depressed Stocks To Invest In.
The threat of a global recession hangs over the heads of investors, as the International Monetary Fund cuts its global growth outlook for 2022, according to a recent report by Bloomberg. The report details that global economic expansion will likely slow down to 3.2% in 2022, dropping from initial estimates of 4.4% in January. Furthermore, central banks have increased interest rates significantly to contain inflation. With global output growth predicted to further slow down to 2.9%, this economic slump is likely to seep into 2023 as well.
The massive boom seen by technology stocks at the onset of the pandemic also seems to have come to an end. According to the Wall Street Journal, the S&P 500’s information-technology sector dropped to nearly 20% at the beginning of 2022, its worst start to a year since 2002. This decline has caused investors to pull more than $7.6 billion from technology-focused mutual funds. It is the highest pullout since 1993. Prominent tech stocks like Amazon Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Meta Platforms Inc. (NASDAQ:FB) have experienced massive declines in their stock prices.
However, there is an opportunity in all of this for long-term investors.
Source:Pixabay
Our Methodology
We picked stocks that are currently trading at prices close to their 52-week lows (as of August 15) but show catalysts for strong long-term growth, due to factors like positive analyst ratings, solid financials, and significant growth predictions. These stocks provide attractive entry points for long-term investors. Furthermore, we preferred stocks which had a consensus Buy rating by expert Wall Street analysts. The stocks have been ranked according to the number of hedge funds which hold stakes in them, from lowest to highest.
Insider Monkey’s extensive database tracking 912 elite hedge funds was used to gauge hedge fund sentiment around each stock.
Best Depressed Stocks To Invest In
11. Eventbrite Inc. (NYSE:EB)
Number of Hedge Fund Holdings: 18
Share Price (as of August 15): $7.99
YTD Declines (as of August 15): 54.85%
Based in San Francisco, Eventbrite, Inc. (NYSE:EB) is an American event management and ticketing website which enables users to browse, create, and promote local events. Eventbrite (NYSE:EB) posted a record revenue of over $66 million in Q2 2022. Furthermore, the company reported an earnings-per-share of -$0.2 in Q2 2022, trailing behind estimates of -$0.13 by $0.07. Shares have taken a plunge of 14% after larger-than-expected losses per share. The stock reached a 52-week low of $7.79 per share on August 9.
On July 14, Piper Sandler analyst Matt Farrell initiated coverage of Eventbrite (NYSE:EB) with an Overweight rating and a price target of $13. Even with the risk of potential macro headwinds, Farrell views Eventbrite (NYSE:EB) as a lucrative investment opportunity in the small market cap technology sector. Exiting the COVID-19 pandemic, Farrell claims that Eventbrite (NYSE:EB) management has refocused its strategy on frequent creators, right sized the financial model, and added a creator marketing solution in Boost. Farrell is convinced that Boost might be a “game changer” for Eventbrite (NYSE:EB), owing to the fact that it facilitates event creators with social media advertising and email marketing tools to encourage higher ticket sales and reach more buyers.
Moreover, fundamentals seem to be getting back on track. Revenue and paid ticket growth has increased considerably since the pandemic in 2020, hitting roughly three quarters of 2019 levels. The company has made structural improvements including cost cuts and an increased emphasis on digital events. Investor interest has slightly decreased, with 18 funds listing Eventbrite (NYSE:EB) on their Q1 2022 portfolio, compared to 20 funds in Q4 2021. As of the first quarter of 2022, Cyrus De Weck’s Portsea Asset Management is the largest shareholder in the stock, with a cumulative stake of $82.6 million.
Artisan Partners mentioned Eventbrite (NYSE:EB) in their Q2 2022 investor letter, a copy of which can be obtained here. This is what they said:
“Eventbrite (NYSE:EB) is the largest software and ticketing platform helping event creators plan, promote and produce live events in small-and-mid markets. The company generates revenue by charging a per-ticket fee on paid tickets and has a strong foothold in the small-and-mid markets—nearly 20X the size of the next largest competitor. We believe Eventbrite (NYSE:EB) is well-positioned to benefit from a sharp increase in demand for live events amid the broader re-opening of the US economy—a dynamic it has already witnessed in Australia with live events bouncing back to approximately 90% of 2019 levels. We expect this to be amplified by significant cost cuts made during the pandemic (>30% of 2019 revenue) remaining in place. Longer term, we believe Eventbrite (NYSE:EB) should benefit from the secular trend toward consumer experiences, an industry growing over 8% per year prior to the pandemic.”
10. Azenta Inc. (NASDAQ:AZTA)
Number of Hedge Fund Holdings: 25
Share Price (as of August 15): $65.20
YTD Declines (as of August 15): 37.19%
Azenta Inc. (NASDAQ:AZTA) is a provider of automation, vacuum, and instrumentation equipment for semiconductor manufacturing, technology device manufacturing, life sciences and many other markets. As of the second quarter of 2022, Seth Rosen’s Nitorum Capital is the largest shareholder in the stock, with a total stake value of $107.1 million. As of Q2 2022, the company posted an EPS of $0.12, beating estimates of $0.1 by $0.02. Investor interest around Azenta Inc. (NASDAQ:AZTA) took a significant dip in Q1 2022, with only 25 hedge funds long the stock, down from 33 hedge funds in Q4 2021.
On July 14, B. Riley analyst Yuan Zhi lowered the price target on Azenta Inc. (NASDAQ:AZTA) to $82 from $94, maintaining a Buy rating on the stock. The analyst wrote that the disruptions in Azenta’s (NASDAQ:AZTA) growth trajectory are due to transitory factors like unexpected currency headwinds and softness in the cyclical side of the business. Zhi claims that a short-term overcorrection in the shares provide an enticing entry for investors. Moreover, Azenta Inc. (NASDAQ:AZTA) has received a consensus Strong Buy rating from expert Wall Street analysts, who point out that Azenta’s (NASDAQ:AZTA) core markets are predicted to grow more than 15% per year for the next five years. It is also pertinent to note that approximately 75% of Azenta’s (NASDAQ:AZTA) revenue is recurring, with a customer base intent on storing for up to 25 years. Hence, all of this points to the fact that Azenta Inc. (NASDAQ:AZTA) is at a unique crossroads and should be conferred a higher valuation.
Artisan Partners mentioned Azenta Inc. (NASDAQ:AZTA) in their Q4 2021 investor letter, a copy of which can be obtained here. This is what they had to say:
“We started new investment campaign in Azenta Life Sciences. Azenta (NASDAQ:AZTA) provides a broad range of products and services focused on biological sample management. The company is well positioned to benefit from the rapid rise in blood, tissue and cell samples being collected, analyzed and stored by pharmaceutical, diagnostic, medical centers and academic researchers. It provides storage systems and consumables for customers storing their own samples and also offers outsourced sample storage and analysis (which given Azenta’s (NASDAQ:AZTA) scale and capabilities, can be a more efficient solution). In addition, we see an important internal change underway at the company, as it’s in the process of divesting its large legacy semiconductor business to focus entirely on life sciences. This divestiture is expected to yield $2bn in proceeds, which Azenta (NASDAQ:AZTA) can use to supplement its organic growth via complementary acquisitions.”
9. CarGurus Inc. (NASDAQ:CARG)
Number of Hedge Fund Holdings: 29
Share Price (as of August 15): $20.40
YTD Declines (as of August 15): 41.61%
Headquartered in Cambridge, Massachusetts, CarGurus, Inc. (NASDAQ:CARG) is an automotive research and shopping website that helps users compare local listings for used and new cars, and contact sellers for an easy and secure sales transaction. The company also featured on Forbes‘ list of Most Promising Companies in 2015. Investor interest around CarGurus Inc. (NASDAQ:CARG) has marginally risen in Q1 2022, with 29 hedge funds long the company, compared to 24 hedge funds in Q4 2021. PAR Capital Management is the largest stakeholder in the company as of Q1 2022, with a total stake worth $122.7 million. Like Amazon, Inc (NASDAQ:AMZN), Apple, Inc. (NASDAQ:AAPL), and Meta Platforms, Inc. (NASDAQ:FB), CarGurus, Inc. (NASDAQ:CARG) is a software company which has seen a massive decline in share price in 2022.
CarGurus, Inc. (NASDAQ:CARG) suffered dramatically during the COVID-19 pandemic, seeing massive deflections owing to the largescale shift of car dealerships to online vendors like Vroom and Carvana. However, in 2022, the company is regaining strength. The stock has rallied more than 20%, reflecting an increased refocus on fundamentals and growth and an undervaluation entering into 2022. CarGurus, Inc. (NASDAQ:CARG) remains the number one website for used cars in the United States.
12 Wall Street analysts have rated CarGurus, Inc. (NASDAQ:CARG) since May, with 6 conferring it with a Strong Buy rating and 3 giving it a Buy rating.
On August 10, RBC Capital analyst Brad Erickson lowered the company’s price target to $35 from $45, maintaining an Outperform rating on the stock. Erickson claims that he remains bullish long-term on CarGurus, Inc. (NASDAQ:CARG), as the company expands from being the number one lead generation provider, to reinforcing used car dealers’ strategies as they compete with digital platforms. Truist analyst Naved Khan lowered the price target to $38 from $44, while maintaining a Buy rating on the stock. Khan claims that at 9.6-times expected 2023 EBITDA, the risk/ reward ratio on the stock remains attractive.
8. Stanley Black & Decker Inc. (NYSE:SWK)
Number of Hedge Fund Holdings: 38
Share Price (as of August 15): $101.54
YTD Declines (as of August 15): 46.15%
Based in the Hartford city of New Britain, Connecticut, Stanley Black & Decker, Inc. (NYSE:SWK) is an American Fortune 500 company which manufactures industrial tools, household hardware, and security products. In the second quarter of 2022, the company posted an EPS of $1.77, trailing behind estimates of $2.11 by $0.34. Stanley Black & Decker, Inc. (NYSE:SWK) reported an annual revenue of $15.6 billion in the fiscal year of 2021. The company has a 54-year streak of dividend growth, paying dividends since 1876, with free cash flow recorded at $246.1 million in Q1 2022. In the first quarter of 2022, Stanley Black & Decker, Inc. (NYSE:SWK) paid nearly $117 million in dividends to shareholders.
Shares of Stanley Black & Decker, Inc. (NYSE:SWK) are currently down 50% from their previous high, with the stock trading at a forward PE ratio of 16.67 as of August 10. According to analysts, the market has reacted too strongly concerning current business challenges, with Q1 2022 performance casing downward revisions across the board. Hence, investors can expect the stock price to remain depressed for some time. However, analysts are confident that these headwinds are transitory in nature. They maintain that the company is growing organically and through acquisitions, with an increased focus on restructuring and impairment charges.
On July 29, Baird analyst Timothy Wojs lowered the company’s price target to $116 from $130, maintaining an Outperform rating on the stock. The analyst noted that Stanley Black & Decker, Inc. (NYSE:SWK) announced a much needed earnings reset, as the company sharply cut 2022 EPS guidance on slowing demand and elevated inventory levels. Despite maintaining his rating, Wojs warns that the stock can be range bound near term and it might take some time to rebuild credibility. Hence, this makes for a lucrative long-term investment and an attractive entry point for investors.
Investor interest around the stock has taken a hit in the first quarter of 2022, with 38 hedge funds long the stock, having a cumulative stake of $922 million. This was down from 42 hedge funds long the stock in Q4 2021, having a total stake value of $1.34 billion.
Here is what Saturna Capital had to say about Stanley Black & Decker, Inc. (NYSE:SWK) in their Q3 2021 investor letter:
“Stanley Black &Decker (NYSE:SWK) performed well through the first part of the year but struggled over the summer. China accounts for much of its production, and their zero-tolerance approach to pandemic safety measures has led to disruption, compounded by shipping difficulties and rising materials expenses. We still believe one outcome of the pandemic will be a buoyant home improvement market, given that one never knows when the next pandemic lockdown may occur.”
7. Zoom Video Communications Inc. (NASDAQ:ZM)
Number of Hedge Fund Holdings: 43
Share Price (as of August 15): $113.23
YTD Declines (as of August 15): 40.36%
Zoom Video Communications, Inc. (NASDAQ:ZM) is an American communications company based in San Jose, California. It specializes in videotelephony, and online chat services through a cloud-based peer-to-peer software platform used for video communications. It also offers an open platform allowing third-party developers to build custom applications on its unified communications platform. As of Q2 2022, ARK Investment Management is the largest stakeholder in the company, with a total stake value of $1.02 billion. Investor interest in Zoom (NASDAQ:ZM) has slightly decreased in Q1 2022, with only 43 hedge funds featuring Zoom (NASDAQ:ZM) on their investment portfolios, compared to 48 in the preceding quarter. Like Amazon, Inc (NASDAQ:AMZN), Apple, Inc. (NASDAQ:AAPL), and Meta Platforms, Inc. (NASDAQ:FB), Zoom (NASDAQ:ZM) is a technology stock which has seen a massive decline in share price in 2022.
Zoom’s (NASDAQ:ZM) shares have been on the decline for over a year. With the market now increasingly skeptical about work-from-home stocks, Zoom’s (NASDAQ:ZM) shares are now down over 80% from their highest value. However, analysts remain increasingly bullish on Zoom (NASDAQ:ZM), claiming that the video conferencing behemoth is trading at a very enticing valuation, offering a great entry point for investors. Video calling, according to Zoom (NASDAQ:ZM) stock bulls, is here to stay and will play a far larger part in enterprises, schools, and everyday life.
Zoom (NASDAQ:ZM) has been expanding on the services it offers, crossing the 3 million user mark for its cloud PBX system in Q1 2022. The company has also added CCaaS products and offerings for sales teams, which provide a huge opportunity to add incremental revenue from existing customers. Moreover, all of Zoom’s (NASDAQ:ZM) offerings can run on the same cost structure, use existing infrastructure, and sales resources. This generates extra revenue growth without increasing operating costs by as much, thereby reducing the impact a recession may have on the company.
On August 4, MKM Partners analyst Catherine Trebnick assumed coverage of Zoom (NASDAQ:ZM) with a Buy rating, setting the price target at $135. In a research note, the analyst contends that despite the fact that the stock is down 30% year-to-date due to multiple compressions across the software market and the company’s management guiding to slower Y/Y growth post-pandemic, the recent valuation of the stock has created an attractive entry point for investors nonetheless. Trebnick adds that strong execution on product expansion and upselling into enterprise segment customers can boost Zoom’s (NASDAQ:ZM) growth back up to 20%.
Here is what FPA Queens Road has to say about Zoom (NASDAQ:ZM) in their Q1 2022 investor letter:
“One of the Fund’s biggest losers in the first quarter was Zoom Video Communications. (NASDAQ:ZM) I have admired ZM’s business ever since I began using the service a few years ago before the Covid-19 pandemic emerged. Despite my admiration for the business, the valuation since it came public three years ago was too rich for my blood until recently.
ZM’s business has been one of the greatest beneficiaries from the pandemic, but one would have no idea that was the case looking at its stock price performance over the past two years. ZM is down 20% over that time and now trades at the cheapest valuation since coming public. When ZM came public in April 2019 it had an Enterprise Value (“EV”) of $17.4 billion, traded at 27.9x FY2020 revenue and 1,370x FY2020 operating income. It now has an EV of $29.3 billion, trades at 6.4x FY2023 revenue, 20.3x FY2023 operating income and 26.3x EPS. Since the 10-year Treasury Yield was 2.56% when it came public compared to 2.33% at March 31, 2022, this huge multiple contraction appears to be largely tied to the market’s view of its prospects.
Before opining on its future, one should admire what ZM has accomplished over the past two years. ZM’s revenue increased from $623 million in FY2020 to $4.1 billion in FY2022 while its operating income increased from $13 million to over $1.1 billion—all while increasing its R&D spend from $33 million to $363 million. Looking at its last quarter, ZM has very high gross (76.0%) and operating (23.5%) margins, which helps translate into robust free cash flow generation. Since coming public, ZM’s cash & equivalents has increased from $737 million to $5.4 billion, which now makes up over 15% of its market capitalization. ZM is expected to grow its revenue at a 12.2% compound annual growth rate (“CAGR”) over the next three years. Looking at FY2025 (ending 1/31/25) consensus estimates, excluding its cash & equivalents, ZM trades at 16.8x operating income and 21.1x EPS…” (Click here to see the full text)
6. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holdings: 50
Share Price (as of August 15): $173.39
YTD Declines (as of August 15): 25.78%
Headquartered in Minneapolis, Minnesota, Target Corporation (NYSE:TGT) is an American big-box department store chain, and is the eighth largest retailer in the United States. The company operates more than 1,931 outlets nationwide and was ranked number 37 on the Fortune 500 list of largest U.S. corporations by revenue in 2020.
On August 1, Wells Fargo analyst Edward Kelly upgraded Target Corporation (NYSE:TGT) to ‘Overweight’ from ‘Equal Weight’, raising the price target to $195 from $155. In a research note, the analyst claims that Target’s (NYSE:TGT) selloff provides the opportunity to elevate a “proven share gainer into an underappreciated earnings recovery at the right price”. Kelly contends that the firm deserves some criticism for its inventory missteps, but the decisive action taken by management will help protect pandemic share gains. Target Corporation (NYSE:TGT) took the greatest and earliest margin hit in retail, pointing to a relatively lower risk and a faster recovery from here on out. Kelly thinks that investors have been “too pessimistic” over recovery earnings. Overall, the analyst sees a favorable risk/reward ratio, and projects the upside to $220 in a reasonable bull case.
Moreover, while sentiment for Target Corporation (NYSE:TGT) as an investment has drastically changed in the last few weeks owing to disappointing first-quarter results, analysts remain bullish over the stock, categorizing the retail giant as recession-proof and more than equipped to fight inflation. Analysts opine that Target Corporation (NYSE:TGT) is heavily undervalued and is a solid, well-run business with a strong history of paying dividends. The company announced its second highest dividend increase two years in a row. Hence, it makes up for a great long-term investment opportunity for value investors.
Here is what Nelson Capital Management had to say about Target Corporation (NYSE:TGT) in their Q2 2022 investor letter:
“We added Target (tkr: TGT) to our consumer staples sector. Target Corporation (NYSE:TGT) offers a broad array of products in owned and known brand items at affordable prices. Its omni-channel fulfillment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target (NYSE:TGT) is an attractive holding.”
Click to continue reading and see 5 Best Depressed Stocks To Invest In.
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Disclosure: none. 11 Best Depressed Stocks To Invest In is originally published on Insider Monkey.
