2022 is almost over and while 2023 brings with it a lot of uncertainty, most investors will no doubt be happy that a tumultuous year for the stock market is finally coming to an end.
The selling pressure was so strong at times that it didn’t really matter whether a stock had solid fundamentals or not, the reflex was to throw the baby out with the bathwater.
The upshot of the relentless selling is that investors now have the ability to load up on their favorite names at a big discount. As the saying goes, if you liked a stock when it was growing, you’ll surely like it even more when it’s down 60% or more. And for those looking for such bargains, the stock market is currently one big candy store.
With that in mind, we pulled from the TipRanks database three stocks that are down significantly for the year – by 60% or more – but which analysts believe are too cheap to ignore right now – all three are rated as Strong Buys by analyst consensus. Let’s see what makes them attractive turnaround stories right now.
Expensify, Inc. (EXFI extension)
If we’re looking for stocks that have taken a beating, then the first name definitely fits the bill. Expensify’s shares are down 80% year-to-date.
As the name suggests, the company provides an online tool for businesses to manage expenses, with its tagline “expense reports that don’t suck!”
While expense management software is nothing new, what sets Expensify apart is that it primarily targets the SMB (small to medium-sized business) market, a segment that contributes heavily to the global economy.
Expensify, however, hasn’t been immune to the recession, and the company missed targets in its latest quarterly report. In the third quarter, revenue was $42.5 million, up 13.6% year over year, but below consensus estimates of $3.44 million and also a decrease from $ 43.2 million delivered in the prior quarter. The figure was also some distance below the company’s long-term revenue outlook for annual growth of between 25% and 35%. At $9 million, Adjusted EBITDA also missed consensus calls by $12.6 million. Additionally, the company added only ~7,000 new members from a second quarter record of ~48,000 to end the quarter with ~761,000 paying members.
While aware of the quarter’s soft metrics, JMP analyst Patrick Walravens remains in the Expensify corner. He writes, “Although 3Q22 was ‘a little slow’ with modest user growth due to headwinds from the challenging macroeconomic environment, we continue to like this story as Expensify targets a $15 billion market opportunity for the SMB spending software, including native credit cards and travel, with an innovative, bottom-up business model; and we like the leadership of founder and CEO David Barrett, who founded Expensify in 2008 and seeks to evolve the business from an SMB expense management app to a payments “superapp” with new solutions like Expensify Payroll.”
In keeping with its optimistic stance, Walravens rates EXFY as Outperform (aka Buy) and its $20 price target implies room for 127% upside potential over the next 12 months. (To look at the Walravens track record, click here)
Most analysts agree; based on 5 Buy vs. 1 Hold (i.e. neutral) ratings, the stock claims a Strong Buy consensus rating. Going from the $16.17 average target, the stock has room for about 83% growth over the next few months. (See EXFY stock forecast on TipRanks)
Digital Turbine, Inc. (APP)
The next downed stock we’re looking at is Digital Turbine, a company that works in the digital advertising space. Digital Turbine offers end-to-end products and solutions to facilitate the monetization of mobile content for advertisers, mobile operators, original equipment manufacturers (OEMs) and third parties. Essentially, the company connects app developers and advertisers with publishers, mobile carriers and OEMs.
The company previously mainly focused on the pre-installed apps of Android phones. However, after making a series of acquisitions that have significantly increased its total addressable market, it is now a major player in the digital advertising industry.
The company’s most recent financial statements, for the second fiscal quarter of 2023, contained a little bit of everything. On the one hand, revenue was down 7.3% from the year-ago period to $174.86 million. However, the company excelled on the other end of the spectrum, posting adjusted net income of $35 million and boasting an all-time high adjusted EBITDA margin of 28%. Adjusted gross profit margins showed sequential improvement from 50% to 52%, exceeding the 48% generated in the same period last year.
Evidently buoyed by the strong profitability profile, the stock has rallied since the release of the report, but this year hasn’t been enough to stave off the bears. All told, the shares are down 76% over the course of 2022.
However, Craig-Hallum analyst Anothony Stoss highlights the company’s “strong profit margins” while also laying out the bull case for its SingleTap technology, which allows smartphone users to instantly install an app on their Android device with, yes, one touch.
“Profits are king in a weakening macro,” the 5-Star analyst said after scanning the third-quarter printout. “APPS leads to seventh consecutive sequential increase in EBITDA margins. We still believe that APPS’ SingleTap software is a game changer for the in-app advertising market, and the title could be a multi-bagger again… Overall, the slowdown in ad spending causes short-term concerns, but We believe APPS has all the pieces in place to be a leading end-to-end full-stack advertising platform with a significant edge over SingleTap.
Considering the disconnect between the company’s stock performance and its financial results, Stoss rates APPS as a Buy and sets a $30 price target that implies a one-year upside potential of about 104%. (To look at Stoss’ track record, click here)
None of Stoss’ colleagues are going to argue with his opinion; all 5 recent analyst reviews are positive, leading to a Strong Buy consensus rating. The stock is expected to rise about 65% over the next year as the average target is $24.20. (See APPS stock predictions on TipRanks)
Global-e Online (GLB extension)
We’ll stay in the online realm for the next cheap looking stock. Global-e Online enables cross-border direct-to-consumer (DTC) e-commerce, with its cloud-based offerings helping businesses manage the end-to-end complexities of selling internationally. Pricing, customs/duties calculation and remittance, shipping and logistics, and localized messaging are all services offered.
In place of Global E is its exclusive partnership with Shopify, which also holds a 9% stake in the company. Big names like Disney, LVMH and Hugo Boss have also partnered with the e-commerce infrastructure platform.
His latest cash flow statement, for the third quarter, was a mixed bag. Driven by gross merchandise volume (GMV) up 77%, revenues increased 79% over the same period a year ago to $105.6 million. However, the company reported a net loss of $64.6 million, translated into EPS of -$0.41, a worse result than the -$0.30 that forecasters were looking for. Further disappointing investors, the company also lowered its full-year forecast.
The shares touched the downward escalator after the reading and not for the first time this year. In total, the stock is down 68% year-to-date.
However, Raymond James analyst Brian Peterson sees a lot to like here. He writes, “While challenger macro (including FX) and difficult pandemic comps should persist, we continue to see multiple avenues for above-market growth rate for the foreseeable future (logo growth, SHOP partnerships, geographic expansion, shift to D2C ) .”
“Despite a more measured outlook towards YE22 (~+40% y/y, implied 4Q organic guidance), we continue to believe that GLBE will grow much faster than overall e-commerce over the next few years, with several catalysts (M&A, Shopify partnership “) still in its infancy in terms of contributing to the model. Given these dynamics, we believe the risk/reward ratio remains attractive,” added Peterson.
All told, Peterson estimates GLBE shares an Outperform (aka Buy) to go with a $35 price target. Investors are eyeing 12-month returns of 74%, if the forecasts work out as expected. (To look at Peterson’s track record, click here)
And the rest of the way? All are on board. With a full house of buys — 9, total — the analyst consensus rates the stock as a Strong Buy. The forecast calls for 12-month gains of 75%, given that the average target is $35.44. (See GLBE stock forecast on TipRanks)
Not to be missed: Goldman Sachs sees gains of more than 70% in these 2 stocks – here’s why they could jump
Disclaimer: The views expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.