These 2 “strong buy” stocks are trading at deep discounts

These 2 “strong buy” stocks are trading at deep discounts

Buy cheap? Even in the stock market, buyers like to find a bargain. Defining a bargain, however, can be tricky. There is a stigma attached to low stock prices, based on the reality that most stocks don’t go down without a reason. And those reasons are often rooted in some facet of the company’s underperformance.

That said, you can still find stocks trading at deep discounts, stocks whose stock price has been pushed down — perhaps by fundamentals, perhaps by market conditions, perhaps by sheer bad luck — and these discount prices are tied to some of the best. upside potential in the market.

Using the TipRanks database, we identified two stocks that have low prices right now – and powerful upside potential for next year. Not to mention that each receives a “Strong Buy” consensus rating from the analyst community. Let’s dive in and find out what is driving this perspective.

Luminary Technologies (LAZR)

The first action we’ll see is Luminar Technologies, a high-tech company from Silicon Valley in Palo Alto that works in the autonomous vehicle segment. Luminar is a designer and manufacturer of Lidar systems, the cutting-edge sensor technology that acts as ‘eyes’ for self-driving cars. Luminar is involved in all levels of Lidar technology, from the semiconductor chips in the guts of the hardware to the sensors, transceivers, receivers and electronics that make it all work.

Luminar went public through a merger of SPAC in December 2020, and in that time, the company’s shares have peaked above $40. Since then, however, the shares have dropped 77%. During this period, the company’s net loss also deepened in five consecutive quarters. Revenues remained low, reflecting the company’s low level of sales, which is positioned to supply an industry that is not yet ready for mass production.

It’s not all doom and gloom however. Luminar offers high potential for investors. For starters, Lidar is essential in autonomous vehicle technology – and Luminar’s systems are well regarded. Furthermore, the company’s revenues, while modest, are moving in the right direction; 2Q22 revenue of US$9.9 million increased 45% from the previous quarter and 57% from the prior year – and exceeded forecasts by 12%. EPS was reported at negative 18 cents, on a non-GAAP net loss of $65 million. Luminar managed to end the quarter with a lot of money in the bank, $605.3 million as of June 30th.

On another positive note for investors, Luminar has raised its forward-looking revenue guidance for the full year 2022 from $40 million to the $40 million to $45 million range.

Overall, Luminar shares are down 49% year-to-date. The drop, however, did not discourage Austin Russell, president and CEO of Luminar, from increasing his stake. Russell has made a series of purchases over the past two weeks, each for a six-figure sum. Together, Russell spent over $1.6 million on various LAZR blocks, totaling 175,000 shares.

Deutsche Bank analyst Emmanuel Rosner is also optimistic about Luminar and its prospects, writing: “We are impressed with LAZR’s continued success in winning new business and increasing order backlog by the magnitude of +60% this year. The company also continues to form partnerships with leading OEMs and mobility providers, which should provide a clear path to scale towards profitability and market expansion. We anticipate revenue to be $44M/$133M in 2022-23E and then increase to >$385M by 2024E… We continue to believe that LAZR is one of the best positioned LiDAR providers to capture big gains of business for L3+ autonomy in the short-term.”

All of this has led Rosner to rate LAZR shares as a buy along with a $15 price target. This target conveys his confidence in LAZR’s ability to rise ~74% further in the coming year. (To see Rosner’s background, Click here)

Strong Buy’s analyst consensus rating on LAZR shows that Street is broadly in line with this bullish view. The 8 recent analyst reviews split 6 to 2 in favor of Buys over Holds, and the average share price of $15 is pretty much the same as Rosner’s. (See LAZR stock forecast on TipRanks)

AppLovin (APP)

Next, AppLovin, is a software platform that provides optimization tools for mobile app developers. The proliferation of smart mobile devices and their fulfillment apps has opened up a huge opportunity for app creators – and these, in turn, form AppLovin’s customer base. In addition to app creation tools, AppLovin offers advertising, analytics and publishing services.

A few numbers will tell the story. AppLovin recorded over 4 billion downloads in the last 12 months and generated $776 million in top-tier revenue in recent 2Q22. This revenue figure increased 16% year-over-year and included a massive 118% y/y increase in Software Platform revenue, which represented $318 million of the total.

On earnings, the story was different. AppLovin reported a net loss of $22 million, compared to a gain of $14 million a year earlier. The company faced serious obstacles in the mobile app industry, including reduced consumer spending and changes to general privacy policies that impacted app discovery rates.

Overall, investors are cautious and stocks are down 73% this year. However, AppLovin has been attracting positive attention from Wall Street analysts, who see the low price as an attractive entry point.

Among the bulls is 5-star analyst Youssef Squali of Truist, who writes: “The software segment was again the bright spot in 2Q22 as APP’s ML AXON engine continues to drive its growth. This was offset by weakness in Apps rotations, impacted by lower consumer demand/optimization of mktg spend to increase margins while this segment remains under strategic review. This mix change should lead to higher quality earnings/margins, which over time should help reclassify the stock and increase shareholder value, in our view.”

To that end, Squali places a buy rating on the APP and adds to it a price target of $65, which indicates room for a 154% increase in 12 months. (To see Squali’s history, Click here)

The mood on the street is as bullish as the Truist view, with 13 positive analyst reviews giving a unanimous strong buy consensus rating. The current trading price is $25.55 and the average price target of $60.38 implies gains close to 136% over the one-year horizon. (See AppLovin’s stock forecast on TipRanks)

To find good stock trading ideas with compelling valuations, visit TipRanks’ Best Stocks to Buy, a newly released tool that brings together all of TipRanks’ stock insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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