3 Oversold Stocks Down More than 40% This Year
Free Book Preview Money-Smart Solopreneur
Like any year in the stock market, 2021 has had its share of big winners and big losers. Sometimes the losers of today can turn into the winners of tomorrow and vice versa.
Although a stock could be down big for good reason and even have more downside, at a certain point some selloffs become emotionally driven. This can create a disconnect between the fundamentals of a company and the price at which its stock is trading.
Here we look at three stocks that are down at least 40% this year and have entered oversold territory. All participate in long-term growth markets and at current levels offer investors a bargain entry point.
Is the Peloton Interactive Stock Selloff a Buy Opportunity?
Few stocks performed as well as Peloton Interactive (NASDAQ:PTON) did last year. Few have performed as poorly in 2021. After soaring more than 400% in 2020, the maker of technology-based exercise equipment is down 45% year-to-date. But while the company has hit a rough patch, it has the endurance to keep moving higher over the long haul.
Part of the decline relates to Peloton's association with the stay-at-home economy. The near-term boost of COVID demand is fading as anticipated, but that doesn't mean the company can't build upon its leadership position in the interactive home exercise space. Another factor has been the attack on high P/E stocks as investors rotate into low multiple, cyclical names. It also hasn't helped matters that Peloton announced a voluntary recall on its Tread+ treadmills—and soon after refuting the Consumer Product Safety Commission's concerns stemming from a tragic death of a child and dozens of other non-fatal incidents.
While these matters are not to be taken lightly, in the long run, they will likely amount to a temporary bout of reputational damage for Peloton. Its expanding lineup of fitness equipment and subscription-based services should continue to be an effective business model in a world that is now hyper-focused on health and wellness. Peloton has planted strong roots as an alternative or complement to gym memberships and will have ample opportunity to leverage its platform in the post-pandemic economy.
Is JFrog Stock Oversold?
After the usual IPO euphoria faded after a few weeks, JFrog (NASDAQ:FROG) shares have plummeted. The self-proclaimed "liquid software" company has seen its share price cut in half compared to its September 2020 debut amid a weakening investor appetite for high priced, unprofitable tech stocks.
JFrog's comprehensive platform for software developers certainly has potential to deliver growth. It has already gathered over 6,000 customers and millions of users that find value in its continuous software release solutions. This has coincided with 40% revenue growth over the last 12 months and a strong 130% net dollar retention rate, a common measure of customer 'stickiness'.
Last week JFrog reported a strong start to fiscal 2021 reporting a much narrower net loss than the Street expected. This went largely unnoticed as inflation worries caused the market to selloff anything with a high valuation.
Eventually the market will recognize it has unjustly pummeled a company with a leading position in a growing $22 billion market. It should also gain an appreciation for JFrog's robust annual recurring revenue (ARR) numbers that represent a steady stream of visible income.
At some point in the near future investors will find high growth tech names attractive again. With JFrog trading outside its lower Bollinger band and having good sell-side backing, it is likely to take one of the biggest leaps forward. Even the most bearish price target on the Street, $44, is $10 above where JFrog is currently priced.
From Where will Haemonetics Derive Growth?
Healthcare stock Haemonetics (NYSE:HAE) has plunged 50% this year. The main dagger was the company's announcement that key customer CSL Plasma would not be renewing its contract with Haemonetics in June 2022. This is undoubtedly a devastating blow given the volume of Plasma Collection System (PCS) devices and disposable kits that CSL is receiving.
In response, Haemonetics dropped 36% on April 19th and investors has since wanted nothing to do with it. But sometimes when a stock is woefully out of favor, it is a good time to scoop up some cheap shares.
That seems to be the case with Haemonetics. The provider of blood management solutions for hospitals and plasma collection centers not only has more than a year to make up for the lost CSL revenue but opportunities to derive growth from other areas.
Haemonetics is trading well below its historical P/E averages and patient investors have an opportunity to get an established player in a steadily growing part of the healthcare sector. The company holds the top position in both the plasma collection equipment and software markets and has few competitors.
Plasma-based therapeutics are increasingly being developed to treat a range of medical diseases and conditions with hundreds of clinical trials underway. As this space continues to grow, Haemonetics will grow along with it as a supplier plasma collection technology and disposables.
With Haemonetics scheduled to report quarterly results on May 13th, investors may want to wait to hear what management has to say in case the market overreacts yet again. This could create an even cheaper entry point.
Featured Article: What is a put option?