3 Beaten-Down Stocks Rising from the Ashes
Trying to pick a bottom in the stock market is one of the quickest ways to lose money. That’s because it’s impossible to predict exactly when a stock price will...
These 3 Stocks Have Been Relentlessly Sold and Could Offer Upside
Trying to pick a bottom in the stock market is one of the quickest ways to lose money. That's because it's impossible to predict exactly when a stock price will stop going down, even though plenty of traders and investors try. A better approach to buying stocks that have faced heavy selling pressure for a period of time is to wait until buyers start stepping back in. With this strategy, you won't necessarily pick the exact bottom, but you will be able to see the signs of a trend reversal and will have an exact level in mind that helps you judge whether or not your trade is working.
Several of the big growth winners from years past have been beaten down to a pulp over the last few quarters, offering a potentially intriguing entry point for long-term buyers. Some of these stocks have even started to rally following months of distribution, which means it could pay off to monitor their status going forward. That's why we've put together the following list of 3 beaten-down stocks rising from the ashes to help you recognize areas of the market with a lot of upside potential. Let's take a deeper look below.
Block Inc (NYSE: SQ)
This fintech company has an interesting business model that involves providing payment and point-of-sale solutions to merchants all over the world. That means Block is a company playing a pivotal role in the electronic payments space, which is a trend that investors should definitely consider tapping into over the next decade. There's also a lot to like about Block's person-to-person payment network called Cash App, which allows people to make quick digital transfers of cash, trade Bitcoin, and even purchase fractional shares of stocks with no commissions.
Additionally, Block has acquired the global Buy Now, Pay Later platform Afterpay in order to take advantage of cross-selling opportunities and expand its product portfolio. BNPL is a big trend in the fintech space at this time given how these platforms allow consumers to make purchases while avoiding interest and service fees, and it's easy to see how Afterpay can fit into Block's existing network. Finally, Block recently reported Q4 revenue of $4.08 billion, up 29% year-over-year, thanks to strong transaction-based, subscription, and bitcoin revenues, which could have finally marked the bottom for this beaten-down name.
Meta Platforms (NASDAQ: FB)
Meta Platforms, formerly known as Facebook, is another perfect example of a beaten-down stock with a valuation that has gotten too good for buyers to pass up. The social-media giant's stock is trading at a P/E ratio of 16.09, which is very attractive compared to many of the other major mega-cap tech stocks and reason enough to consider adding shares. Then there's the fact that the company's social networks have nearly 3 billion monthly active users, which is a truly staggering figure that speaks volumes about how big its reach has gotten.
Marketers should continue leveraging Meta's massive user base and data to sell their products and services via social media, which should likely lead to stronger advertising revenue for the company in the long run. Keep in mind that the long-term trend of businesses allocating more money for online marketing and advertising spending will benefit Meta in a big way, especially given the company's apps like Instagram and WhatsApp, which are some of the most widely used smartphone applications in the world. There are still some risks to note here, particularly regulatory risks and issues related to iOS ad tracking changes, but bargain hunters that are looking for a long-term tech play should still be very excited about this company.
Lululemon Athletica (NASDAQ: LULU)
Lululemon is one of the strongest brands in the retail apparel space, and the recent sell-off could end up being a nice buying opportunity for long-term investors to consider. The company primarily designs clothing intended for people that live a healthy and active lifestyle, which includes pants, shorts, tops, and jackets that can be used for yoga, running, training, and more. Lululemon's eCommerce channel has been nothing short of impressive since the onset of the pandemic, and the company has plenty of room for growth in international markets like China which should interest investors.
Direct-to-consumer sales rose by 23% year-over-year last quarter, and it's quite clear that the company's path towards stronger margins and more customers is through eCommerce. That's why it's good to see such strong growth coming from that area of the business. Lululemon recently reported Q3 net revenue of $1.45 billion, up 30% year-over-year, and beat the consensus EPS estimates for the quarter. The athleisure powerhouse will report its Q4 earnings this week, so make sure to keep an eye on how shares perform following the report.
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