3 stocks poised to rebound

0

When looking for stocks to add to a portfolio, it’s tempting to pick out the most popular players of the day. The idea is this: they’ve done well so far – and that momentum will continue. It is true in some cases. But another way to find good long-term buys is to look at stocks that haven’t performed so well lately. How to identify those who are likely to heal? Go for companies with strong future prospects and don’t be scared off by their recent stock market performance.

Here, I’m going to talk about three of my favorites: a biotech company that just released its profitable first quarter, a leader in two growth markets, and a giant in the electric vehicle (EV) world. Given the revenue and earnings potential ahead, each of these players could be poised to rebound.

Image source: Getty Images.

1. Novavax

Novavax (NVAX -20.31%) the stock has struggled since the company lagged in regulatory submissions for its coronavirus vaccine candidate. Today, more than 35 countries have authorized the product. And Novavax just posted its first profitable quarter as a commercial-stage company thanks to the vaccine. The United States Food and Drug Administration has not yet approved the vaccine. But the agency’s advisory committee is due to meet on June 7 to discuss the vaccine. A decision could therefore be on the horizon.

It all sounds positive. Still, Novavax shares have yet to show signs of rebounding. Investors were disappointed with first-quarter earnings as they fell short of analysts’ estimates. Novavax’s vaccine is still trying to gain traction in a competitive market. But I think it’s a short term problem. Novavax needs time to carve out market share worldwide and win additional orders.

I expect Novavax to show its strengths over the long term. It’s important to remember that the company is leading the development of a combination coronavirus and influenza vaccine candidate. It has announced positive initial trial results and aims to launch phase 2 later this year.

Novavax shares have plunged 62% this year. This means it is trading at less than three times forward earnings. That’s a godsend considering the role Novavax can play in the long-term coronavirus market.

2. Amazon

Investors got used to huge earnings growth Amazon (AMZN -3.20%) at certain stages of the pandemic. But in recent quarters, this trend has faded. The e-commerce giant has struggled with the same issues as other retailers: supply chain issues, labor supply and inflation. The company has also made significant investments in its business. For example, it has almost doubled its distribution network since the start of the pandemic.

As a result, Amazon shares have lost 34% since the start of the year. Even news of an upcoming 20-to-1 stock split didn’t help restore momentum. The split will lower the price of each individual stock, making it easier for a wide range of investors to buy the stock.

So why might Amazon bounce back? It is a leader in two growing markets: e-commerce and cloud computing. And cloud computing is actually a big revenue driver for Amazon. Last year, its Amazon Web Services (AWS) unit accounted for more than 70% of Amazon’s total operating revenue. AWS continued to post double-digit revenue and operating income growth in the last quarter.

When it comes to e-commerce, the issues Amazon is currently facing are temporary. And the number of its Prime subscriptions continues to grow. Once those headwinds ease, Prime member loyalty and Amazon’s investment in a broad fulfillment network should lead to greater revenue growth.

3.Tesla

You’re here (TSLA -8.26%) stocks have fallen for a variety of reasons lately. Some investors fear CEO Elon Musk’s buying decision Twitter will divert his attention from his role at Tesla. Investors are also concerned about the competition Tesla could eventually face in the electric vehicle market. For example, volkswagen said it aims to be the world’s largest seller of electric vehicles by 2025, according to Reuters.

But it’s important to keep in mind that other automakers’ goals don’t necessarily weaken Tesla’s position. Tesla has dominated the US electric vehicle market over time. And in the first quarter of this year, it still is. Kelley Blue Book data shows Tesla had a 75% market share. Tesla also had a record quarter on many levels, including revenue and vehicle deliveries. Total revenue increased 81% to over $18 billion. And vehicle deliveries soared 68% to more than 310,000.

Tesla also increased key metrics such as quarterly revenue and operating margin.

Chart showing Tesla's revenue and operating margin up since mid-2019.

TSLA Net Income (Quarterly) given by Y-Charts

As for the Twitter operation, Musk is unlikely to neglect his work at Tesla. We saw that he was able to manage several projects simultaneously.

Tesla shares have fallen 25% so far this year. And they are trading for 63 times forward earnings estimates. That’s down from over 160 just six months ago. Tesla’s growth, market share and share price mean one thing: maybe it’s time to buy this innovative automaker and bet on a rebound.

Share.

Comments are closed.