Down More Than 50%: Analysts Say Buy These 3 Beaten-Down Stocks Before They Rebound
Now that we are in the second half of 2022 and the Independence Day holidays are behind us, we can take stock of the changes that the last six months have brought. And those changes have been dramatic. Earlier this year, the S&P 500 was up 27% for the year. Today the index is down 20%, putting it in a bear market.
The losses were broad-based, causing many otherwise solid stocks to languish at low prices. It's a fact that has many dissatisfied investors wondering what their options are - but it's also opened up opportunities for anyone willing to take on extra risk in a difficult investment environment.
With that in mind, we used the TipRanks database to locate three stocks that have posted hefty losses in the range of 50% to 75% this year, but each also has a strong analyst consensus rating and strong upside potential. Let's dive deeper.
PLBY Group (PLBY)
The first stock, PLBY Group, defines itself, without irony, as an "amusement and leisure company." Founded in 1953 by Hugh Hefner, PLBY Group owns Playboy, one of the most distinctive and recognizable brands in the world. While the magazine is the company's most recognizable product, Playboy also boasts over 1 million active digital customers, more than 50 million global social media fans and operations in over 180 countries. The company's products include style and apparel, gaming and lifestyle, and beauty and personal care products.
The company's strong brand supports its growing revenue stream. Playboy reported revenue growth of 63% year over year topping out at $69.4 million in its most recent 1Q22 report. This was due to a 125 percent increase in direct-to-consumer revenue, which reached $49.6 million. Bottom line, the company reported earnings of 12 cents per share, a significant reversal from the 15 cents per share loss reported in Q1'21.
Despite solid results, PLBY is down 76% year-to-date. In the past 12 months, the company has made expansion efforts, acquiring new subsidiaries and entering the Chinese and Indian markets. Playboy already has $1 billion in e-commerce spend in China as part of its move to that country, and the company has been working to bring a virtual version of the iconic Playboy Mansion online in the Metaverse.
What that means, according to Craig Hallum analyst Alex Fuhrman, is a clear opportunity for investors looking for a ground-floor entrance.
“PLBY is undervalued and the company continues to perform well. Q1 sales were above our estimate and adj. EBITDA was within a few hundred thousand dollars of our estimate -- an impressive result at a time when many other e-commerce retailers are missing estimates and/or lowering guidance," said Fuhrman.
“Despite strong performance and ownership of one of the most recognized brands in the world, PLBY is trading at a significant discount to its peers. Given the year-long opportunity for the Playboy brand to catch up on years of poor management and insufficient monetization, we see this discount as an attractive buying opportunity," the analyst added.
These comments support the analyst's buy rating and are quantified by his price target of $30, indicating his confidence in a whopping 366% upside potential over the next 12 months. (To view Fuhrman's track record, click here)
Sometimes a company's product will get The Street analysts to agree, and PLBY does just that. All 5 of the most recent analyst ratings are positive, leaving the consensus rating of "Strong Buy" unanimous. The average target price of $20.60 indicates a ~220% increase from the current trading price of $6.44. (See PLBY Stock Prediction on TipRanks)
The next down stock we look at is Ambarella, a semiconductor chip maker. The company operates in the fabless niche, which means that the company designs, promotes, markets and sells its chip products and manufactures a small number of prototypes for testing purposes, but contracts with the major chipmakers for full production orders. Designed for video applications, Ambarella's chips specialize in advanced image processing and high definition video compression. The chipsets have found application in a variety of small camera systems, including handheld cameras, vehicle dashboard cams, pocket video cameras, and even drones. The common denominator here is low-power, high-definition video.
So far this year, Ambarella's shares are down about 68%. A big part of that drop, about 31%, came in late February, when the company announced revenue guidance of $88.5 million to $91.5 million; at the median of $90 million, this was below the ~$91 million forecast. Management was forecasting lower margins for the remainder of the calendar year, which didn't help matters.
The company is facing headwinds from the general market environment, but also from the shortage of semiconductor chips. As a fabless company, Ambarella is dependent on its foundries, and they are heavily behind.
However, Ambarella met its guidance when it released its Q1 report for fiscal 2023, the quarter that ended on April 30. The company reported revenue of $90.3 million, or a 29% year-over-year increase. Bottom line, non-GAAP EPS was 44 cents per diluted share, nearly double the 23 cents reported in the year-ago quarter.
On a positive note for the company, in June Ambarella announced a new partnership with Inceptio, a pioneer in autonomous trucking. Under the terms of the agreement, Ambarella will supply chips for an automotive-grade core computing platform capable of simultaneously processing as many as seven 8MP cameras for surround perception and collision avoidance.
This chip company and its automotive applications have caught the attention of 5-star Wells Fargo analyst Gary Mobley, who writes, “We see AMBA as one of the purest ways in the chip space to play AI/ML computer vision on the edge, and one of the best ways to leverage growing L2+ ADAS/AV capabilities in the automotive market (e.g. computer vision processing and sensor fusion). We view AMBA as a strategically important asset for automotive OEMs looking to support L2+ ADAS/AV, as well as for incumbent auto chip suppliers focused on MCUs and sensor technology (e.g. image and radar).”
Mobley doesn't stop with bullish comments, he also gives AMBA stock an Overweight rating (i.e., Buy), along with a price target of $110, which implies upside potential of 72% for one year. (To view Mobley's track record, click here)
Wall Street is clearly interested in this stock, recently giving it 13 analyst ratings. These break down into 11 buy, 1 hold and 1 sell for a strong buy consensus rating. The shares are selling for $63.93 and their average price target of $119.62 suggests an 87% gain this year. (See Ambarella Stock Prediction on TipRanks)
Ichor Holdings (ICHR)
Last on our list, Ichor Holdings has a number of subsidiaries involved in the design and manufacture of critical systems. Ichor operates in the semiconductor, manufacturing and integrated solutions niches, where it offers devices and processes as diverse as gas modules and chemical process subsystems. The company's products can also be found in the manufacturing process of alternative energy sources, biomedical devices and LED displays.
A wide-ranging, varied business is an advantage for manufacturers, especially when it comes to the manufacture of special products. Ichor has seen overall sales growth over the past two years and the latest print for 1Q22 was just over $293 million. This was an 11% year-over-year increase and the best result of the final 9th quarter. However, non-GAAP EPS was reported at 70 cents, down from 76 cents in 1Q21 and well below the 90 cents forecast.
Disappointing earnings made investors nervous, with shares down 52% year-to-date.
The weakness of the latest earnings report hasn't bothered DA Davidson analyst Thomas Diffely, who wrote of the stock: "Despite a challenging operating environment, market demand remains robust, indeed the company has increased investments in direct labor and manufacturing capacity. Additionally, ICHR will again outpace 2022 WFE growth (~15%) thanks to its leverage on key tool segments (Etch and Dep). Therefore, our optimistic thesis on ICHR remains intact.”
To that end, the 5-Star analyst has a Buy rating on ICHR stocks while setting a price target of $60 to suggest an impressive potential one-year gain of 171%. (To view Diffely's track record, click here)
Overall, 4 out of 5 analyst ratings available for ICHR give the stock a Buy rating, giving the stock the analyst consensus "Strong Buy." The shares trade for $22.14 and their average price target of $43.60 implies ~97% upside potential in the coming year. (See Ichor Stock Prediction on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.
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