After ending in the dark on Friday, markets started this week with further gains – although year-to-date the S&P 500 has fallen back into bearish territory. The recent elevated volatility comes on the heels of the Fed raising interest rates last week and intending to keep rates high as it struggles to rein in inflation.
It’s hard to say where the markets are heading right now, but at least according to market expert Ed Yardeni, we’re already near the bottom of the bear market. Yardeni believes that the Federal Reserve should not raise interest rates much more and that the bad news on interest rates has already been factored in.
“It seems that we are in a trough process. I think the market has certainly ignored a lot of what the Fed is going to do,” Yardeni noted.
If Yardeni is correct, investors now have the opportunity to follow the oldest of all investment advice: buy low, sell high. Many stocks fit the “groundfish” profile; we pulled two from the TipRanks database, stocks with consensus ratings of strong buy and about a 70% drop in the stock price this year. In fact, analysts see them both jumping over 90% in the coming year. Let’s take a closer look.
Reflection work (TWKS)
We’ll start with technology, where digital consulting firm Thoughtworks brings adaptive expertise to its clients. The company’s services include digital strategy, design, and software engineering, which combine to make Thoughtworks a valuable partner for enterprise customers and technology disruptors. The company is present in 17 countries and counts among its customers 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 the stock price is down, the company has seen a modest sequential gain in revenue so far in each quarter of this year.
In the latest quarterly report, starting in 2Q22, the company posted revenue of $332.1 million, a sequential gain of 3.8% and a larger gain of 27.5% from a year to year. The company’s adjusted diluted EPS increased 10% year-on-year, from 10 cents in 2Q21 to 11 cents in 2Q22. On the balance sheet, Thoughtworks in the second quarter was able to repay $100 million of its permanent debt, reducing the total to $406.1 million, and had cash and liquid assets of $274.5 million. The company also has access to borrowing capacity of $165 million, in a revolving line of credit. Thoughtworks has scheduled its 3Q22 report for November 14.
Analyst Daniel Perlin, coming from RBC Capital, describes TWKS shares as “constructively positioned” ahead of the third quarter earnings release, with currency issues from the rising dollar presenting the headwind on stronger.
“Despite the potential challenges associated with currency volatility and a tight labor market, we believe current valuations provide an attractive entry point given TWKS’ unique position to capture share of a large total addressable market. and growing with an attractive underlying business model with strong growth projections,” Perlin said.
All of the above makes it clear why Perlin now stands with the bulls. The 5-star analyst rates TWKS as an outperformer (i.e. a buy) while its price target of $16 implies a roughly 98% upside for the year ahead. (To see Perlin’s track record, Click here)
Overall, 8 Wall Street analysts have weighed in on Thoughtworks shares, and their reviews include 6 buys and 2 holds – for a consensus strong buy rating. The stock is currently selling at $8.09 and its average price target of $17.13 implies a gain of around 112% in the coming months. (See TWKS stock forecast on TipRanks)
Cryoport, Inc. (CYRX)
Now let’s move into the world of healthcare and look at Cryoport, a company that has built a solid niche in the refrigeration space. That is to say in the cold storage and transport of biological tests and samples. These are highly perishable and time-sensitive items, and reliable cold storage and courier services are essential for laboratories, medical offices, and research facilities using Cryoport’s capabilities. These capabilities include liquid nitrogen-based dry shippers and refrigerated transport solutions for various materials in the 2 to 8 degree Centigrade range. Cryoport’s transportation services are end-to-end, and the company backs them up with extensive cold chain experience and 24/7 customer support.
Cryoport fills a critical niche in the healthcare industry, but that doesn’t insulate the company from economic and situational headwinds. Lockdowns in China have put pressure on the company’s product supply and manufacturing chains; the strong dollar and the resulting negative impact on exchange rates cost the company $2.6 million in the third quarter; and the effects of inflation and monetary tightening are visible in reduced customer orders for freezers and refrigerators despite strong demand for cryogenic bottles (Dewars).
These headwinds were partially offset by the March reopening of the company’s factory in Prague, Minnesota (part of its 2020 MVE acquisition), which had been badly damaged by a fire earlier in the year. Last year.
Overall, the pressures have sent CYRX shares down 70% this year – and the recent 3Q22 report showed both a loss of revenue and earnings and a reduction in full-year guidance, compounding further decline in equities.
At the top of the company, revenue of $60.5 million was up about 7% from the year-ago quarter, but nearly $9 million below consensus guidance. On earnings, GAAP EPS recorded a loss of 15 cents, 7% less than expected. While those metrics were bad, the company’s forward guidance seems to be what spooked investors; Cryoport cut its full-year revenue forecast by 10% mid-term to a range of $232 million to $238 million. This guidance was also well below the forecast of $251.7 million.
Through it all, BTIG analyst David Larsen continues to take a bullish stance on Cryoport’s outlook, noting, “While the quarter was disappointing, we encourage investors to buy on weakness as we believe management has good control over the business, and we view the quarter’s headwinds as temporary.
“Given that the MVE plant in China which had been locked down has reopened and the demand for Dewars is high, we expect some relief with the construction of MVE. We also appreciate that there has been no weakness with the Dewars shipment, and believe it is only a matter of time before demand for large refrigerators picks up again. Management plans to move CRYOPDP services to countries other than Eastern Europe. We like the actions taken by management,” the analyst added.
From here, Larsen rates CYRX stock as long, and his $40 price target implies an impressive 130% year-over-year upside potential. (To see Larsen’s track record, Click here)
Clearly, the headwinds here haven’t deterred analysts from the high street, 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 its average price target of $34.67 suggests a 99% gain over the next 12 months. (See CYRX stock forecast on TipRanks)
Would you like to identify the stocks that have received the most recent bullish ratings from the street? Check out the Top Stocks tool from TipRanks analysts. The tool also reveals stocks that have fallen over the past three months, allowing you to identify top stocks that are trading at compelling levels.
Disclaimer: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.