After finishing in the black on Friday, markets started this week with additional gains, although the S&P 500 has slipped back into bear territory since the start of the year. The recent high volatility comes in the wake of the Fed’s rate hike last week and its intent to keep rates high in its fight to curb inflation.
It’s hard to say where the markets are headed right now, but according to market expert Ed Yardeni, at least we’re already at the bottom of the bear market. Yardeni doesn’t think the Federal Reserve will raise rates much further and that the bad news about interest rates has already been taken into account.
“It looks like we are at a low point. I think the market has certainly discounted a lot of what the Fed is going to do,” Yardeni noted.
If Yardeni is right, investors now have a chance to live up to the oldest investment advice: buy low, sell high. Numerous stocks fit the profile of the ‘bottom fish’; we pulled two from the TipRanks database, stocks with Strong Buy consensus ratings and this year with about 70% share price drops. In fact, the analysts see them both rising more than 90% in the coming year. Let’s take a closer look at that.
Thought Works Holding (TWK)
We start in tech, where digital consulting firm Thoughtworks brings adaptive expertise to its clients. The company’s services include digital strategies, design and software engineering, which together make Thoughtworks a valuable partner for enterprise customers and tech disruptors. The company has a presence in 17 countries and its customers include big names such as Paypal, Daimler and Bayer.
For bottom fishing investors, the first thing to know about Thoughtworks is that the stock is down 70% so far this year. The second thing to know is that even though its stock price has fallen, the company has reported modest sequential sales growth in every quarter of this year so far.
In its most recent quarterly report, of 2Q22, the company posted revenue of $332.1 million, for a 3.8% sequential gain and a stronger year-over-year profit of 27.5%. The company’s adjusted diluted earnings per share rose 10% year-over-year, from 10 cents in 2Q21 to 11 cents in 2Q22. On the balance sheet, Thoughtworks was able to repay $100 million of its permanent debt in the second quarter, bringing the total to $406.1 million, and boasted cash and cash equivalents of $274.5 million. The company also has access to $165 million in borrowing capacity, in a revolving line of credit. Thoughtworks has scheduled its 3Q22 report for Nov. 14.
Analyst Daniel Perlin, aligning with RBC Capital, describes TWKS stocks as “constructively positioned” en route to the release of Q3 results, with currency exchange issues due to the rising dollar being the strongest headwind.
“Despite the potential challenges associated with FX volatility and a tight labor market, we believe current valuations provide an attractive entry point given TWKS’ unique position to capture market share in a large and growing totally addressable market with an attractive underlying business model with strong expected growth,” Perlin said.
All of the above makes it clear why Perlin is now with the bulls. The 5-star analyst rates TWKS as outperforming (ie buying), while its $16 price target implies a ~98% gain for the coming year. (To view Perlin’s track record, click here)
Overall, 8 Wall Street analysts have expressed their views on Thoughtworks’ stock, and their ratings include 6 buys and 2 hold positions – for a Strong Buy consensus rating. The stock is currently selling for $8.09 and the average price target of $17.13 implies a gain of ~112% in the coming months. (See TWKS stock forecast on TipRanks)
cryoport, inc. (CYRX)
We now move into the healthcare world and look at Cryoport, a company that has built a solid niche in the cold market. That is, in the cold storage and transport of biological tests and samples. These are highly perishable, time-sensitive items and reliable cold storage and courier services are essential for the labs, medical offices and research facilities that leverage Cryoport’s capabilities. These capabilities include shippers of liquid nitrogen dry products and refrigerated transportation solutions for various materials in the range of 2 degrees to 8 degrees Celsius. Cryoport’s transportation services are end-to-end and the company backs this up with extensive cold chain experience and 24/7 customer support.
Cryoport has an essential niche in healthcare, but that hasn’t stopped the company from facing economic and situational headwinds. Lockdowns in China have put pressure on the company’s product supply and production chains; the strong dollar, and the resulting negative impact on foreign exchange, cost the company $2.6 million in the third quarter; and the effects of inflation and tighter money are visible in reduced customer orders for freezers and refrigerators, despite high demand for cryogenic bottles (Dewars).
These headwinds were partially offset by the reopening, in March, of the company’s Prague, Minnesota plant (part of its 2020 MVE purchase), which was badly damaged by fire early last year.
All in all, the pressure has pushed stock in CYRX down 70% this year — and the recent 3Q22 report showed both a revenue and earnings miss and a diminution in the full-year outlook, further fueling the stock’s decline. aggravated.
In revenue, the company’s revenue was $60.5 million ~ 7% higher than last year’s quarter, but nearly $9 million lower than the consensus forecast. In terms of earnings, GAAP EPS came in at a loss of 15 cents, 7% worse than expected. While these indicators have been poor, the company’s forward guidance seems to startle investors; Midway through, Cryoport cut its full-year revenue forecast by 10%, to a range of $232 million to $238 million. This expectation was also well below the $251.7 million forecast.
Despite all this, BTIG analyst David Larsen remains optimistic about Cryoport’s prospects, noting, “While the quarter was disappointing, we would encourage investors to buy on weakness as we believe management has good control over the company, And we see the headwinds in the quarter as temporary.”
“Since the MVE factory in China that was closed has reopened and as the demand for Dewars is high, we expect some relief with the construction of MVE. We also like that there has been no weakness with Dewars shipping, and we believe it’s only a matter of time before the demand for large refrigerators picks up again. Management has a plan to move CRYOPDP services to countries other than Eastern Europe. We like the actions management is taking,” the analyst added.
Looking ahead from here, Larsen rates CYRX stock as a buy, and his $40 price target implies an impressive 130% year-round upside potential. (To view Larsen’s track record, click here)
Clearly the headwinds here have not deterred Street analysts, as all 6 recent analyst reviews on CYRX are positive, for a Strong Buy consensus rating. The stock has a trading price of $17.38 and the average price target of $34.67 suggests a 99% gain over the next 12 months. (See CYRX stock forecast at TipRanks)
Want to identify the stocks that have received the most bullish recent reviews off the street? Check out the TipRanks’ Analysts’ Top Stocks tool. The tool also shows which stocks have fallen in the past three months, so you can locate the best stocks trading at attractive levels.
Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.