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2022 is almost over and although 2023 brings with it plenty of uncertainty, most investors will no doubt be happy that a tumultuous year for the stock market is finally coming to an end.
The selling pressure has at times been so severe that it didn’t really matter whether a stock has strong fundamentals or not, the reflex has been to throw the baby out with the bathwater.
The upshot to the relentless selling is that now investors get a chance to load up on their favorite names at a big discount. As the saying goes, if you liked a stock when it was surging ahead, you’re sure to like it even more when it’s down by 60% or more. And for those looking for such bargains, the stock market is currently one big candy store.
With this in mind, we’ve pulled out of the TipRanks database three stocks that are down significantly for the year – by the order of 60% or more – but which the analysts believe are just too cheap to ignore right now – all three are rated as Strong Buys by the analyst consensus. Let’s see what makes them appealing turnaround stories right now.
Expensify, Inc. (EXFY)
If we’re after stocks that have taken a sound beating, then the first name certainly fits the bill. Shares of Expensify are down 80% year-to-date.
As its name suggests, the company provides an online tool for companies to manage expenses, with its slogan being “expense reports that don’t suck!”
While expense management software is nothing new, what makes Expensify stand out is that it caters mainly to the SMB (small- and medium-sized businesses) market, a segment that contributes in a big way to the global economy.
Expensify, though, has not been immune to the downturn and the company missed targets in its most recent quarterly report. In Q3, revenue came in at $42.5 million, amounting to a 13.6% year-over-year increase yet falling short of the consensus estimates by $3.44 million and also representing a drop from the $43.2 million it delivered in the previous quarter. The figure was also some distance below the company’s long-term revenue outlook of annual growth between 25% to 35%. At $9 million, adjusted EBITDA also missed the consensus calls for $12.6 million. Additionally, the company added just ~7,000 new members vs. Q2’s record ~48,000 to see out the quarter with ~761,000 paid members.
Although aware of the quarter’s soft metrics, JMP analyst Patrick Walravens remains in Expensify’s corner. He writes, “While 3Q22 was ‘a little slow’ with modest user growth due to headwinds from the challenging macroeconomic environment, we continue to like this story as Expensify targets a $15B market opportunity for SMB expense software, including native credit card and travel, with an innovative, bottoms-up business model; and we like the leadership of Founder and CEO David Barrett who founded Expensify in 2008 and who seeks to evolve the business from an SMB expense management app, to a payments ‘superapp’ with new solutions like Expensify Payroll.”
In line with his optimistic stance, Walravens rates EXFY an Outperform (i.e. Buy), and his $20 price target implies room for 127% upside potential in the next 12 months. (To watch Walravens’ track record, click here)
Most analysts agree; based on 5 Buy ratings vs. 1 Hold (i.e. Neutral), the stock claims a Strong Buy consensus rating. Going by the $16.17 average target, the shares have room for ~83% growth over the coming months. (See EXFY stock forecast on TipRanks)
Digital Turbine, Inc. (APPS)
The next beaten-down stock we’re looking at is Digital Turbine, a company working in the digital advertising space. Digital Turbine offers end-to-end products and solutions to make it easier for advertisers, mobile operators, original equipment manufacturers (OEMs), and third parties to monetize mobile content. In essence, the business links app developers and advertisers with publishers, mobile operators, and OEMs.
The company previously focused mostly on Android phones’ preinstalled apps. However, after making a number of acquisitions that significantly increased its total addressable market, it is now a major player in the digital advertising industry.
The company’s most recent financial statement – for the fiscal second quarter of 2023 – had a bit of everything in it. On the one hand, revenue fell by 7.3% from the same period a year earlier to $174.86 million. However, the company excelled at the other end of the spectrum, delivering adjusted net income of $35 million, and boasting an all-time high adjusted EBITDA margin of 28%. Adjusted gross profit margins showed a sequential improvement, rising from 50% to 52%, whilst surpassing the 48% generated in the same period last year.
Evidently encouraged by the strong profitability profile, the stock spiked following the report’s release but that hasn’t been enough to stave off the bears this year. All in all, the shares have shed 76% over the course of 2022.
However, Craig-Hallum analyst Anothony Stoss highlights the company’s “strong profitability margins” while also laying out the bull-case for its SingleTap tech, which allows smartphone users to instantly install an app on their Android device with, yep, a single tap.
“Profits are king in a weakening macro,” said the 5-star analyst after scanning the Q3 print. “APPS guides to 7th straight sequential increase in EBITDA margins. We continue to believe the SingleTap software from APPS is game changing for the in-app advertising market and the stock could be a multi-bagger again… Overall, slowing advertising spend does cause near-term concern but we believe APPS has all the pieces in place to be a leading full-stack end-to-end ad-tech platform with significant upside from SingleTap.”
Considering the disconnect between the company’s share performance and its financial results, Stoss rates APPS a Buy and sets a $30 price target that implies a one-year upside potential of ~104%. (To watch Stoss’s track record, click here)
None of Stoss’ colleagues are about to argue with his take; all 5 recent analyst reviews are positive, leading to a Strong Buy consensus rating. The shares are expected to appreciate by ~65% over the next year, given the average target stands at $24.20. (See APPS stock forecast on TipRanks)
Global-e Online (GLBE)
We’ll stay in the online realm for the next cheap looking stock. Global-e Online allows for cross-border DTC (direct-to-consumer) e-commerce, with its cloud-based offerings helping businesses manage the end-to-end intricacies around selling internationally. Pricing, custom/duties calculation and remittance, shipping and logistics, and localized messaging are all services offered.
Standing in Global E’s stead is its exclusive partnership with Shopify, which also has a 9% stake in the company. Big names such as Disney, LVMH, and Hugo Boss have also partnered with the e-commerce infrastructure platform.
Its latest financial statement, for Q3, was a mixed bag. Boosted by gross merchandise volume (GMV) surging by 77%, revenue increased by 79% from the same period a year ago to $105.6 million. However, the company delivered a net loss of $64.6 million, translated to EPS of -$0.41, a worse outcome than the -$0.30 the prognosticators were looking for. Further disappointing investors, the company also lowered its full-year guidance.
The shares hit the down escalator following the readout and not for the first time this year. In total, the stock is down by 68% year-to-date.
Nevertheless, Raymond James analyst Brian Peterson sees plenty to like here. He writes, “While the challenging macro (including FX) and difficult pandemic comps should persist, we continue to see multiple avenues for an above-market growth rate for the foreseeable future (logo growth, SHOP partnership, geographic expansion, shift towards D2C).”
“Despite a more measured outlook heading into YE22 (~+40% y/y implied 4Q organic guide), we continue to believe GLBE will grow much faster than overall e-commerce over the next several years, with several catalysts (M&A, Shopify partnership) still in their infancy in terms of contribution to the model. Given these dynamics, we believe the risk/reward remains attractive,” Peterson went on to add.
All told, Peterson rates GLBE shares an Outperform (i.e. Buy) to go with a $35 price target. Investors are looking at 12-month returns of 74%, should the forecast work out as planned. (To watch Peterson’s track record, click here)
And the rest of the Street? All are on board. With a full house of Buys – 9, in total – the analyst consensus rates the stock a Strong Buy. The forecast calls for 12-month gains of 75%, given the average target stands at $35.44. (See GLBE stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
