The last few days’ trading have been enough to make our heads spin. The markets have been shifting up and down with volatility, which has caused investors to wonder if this is the beginning of a sustained run in gains or a bear market rally.
Stiffel Chief Equity Strategist Barry Bannister believes that there’s less reason for fear and lays out a strong case for upside.
“We forecast the S&P 500 up to 4,200 in 3Q22E and recommend Cyclical Growth groups… for a relief rally. We see a decline for oil, inflation and rate futures as well as avoidance of significant 2H22 S&P 500 EPS concerns supporting a P/E ratio-led rally in advance of our view that the Federal Reserve slows rate hikes and pauses rates by late-2022. Recession fears are overblown and we don’t see any U.S. depression in the next 6-9 months,” Bannister said.
Bannister’s right, or wrong, is irrelevant. Investors still have an opportunity to purchase at discounted prices. There are many solid stocks trading at low prices that make them difficult to ignore.
We have used TipRanks’ platform to pull up the latest scoop on two such stocks; both are ‘Strong Buy’ stocks with recent positive reviews from the Street and plenty of upside potential. Here’s a closer look, alongside the analyst commentary.
Offerpad Solutions (OPAD)
We’ll start in the real estate sector, where Offerpad offers buyers and sellers an online real estate sales platform. It makes it easy to connect property owners with potential buyers and sellers to list their homes to help buyers find the right home. The platform allows you to upload photos, view virtual tours of your house and facilitate closing transactions.
However, the economic slowdown has had a broad impact on real estate and other sectors. One result: Offerpad’s shares are down 64% so far this year even as the company has swung into profitability and expanded its footprint in the US home sales market.
Offerpad recently expanded its service coverage in Florida and Colorado in June. The latter is especially important, as Florida is the third largest state by population and the fourth largest by size of the economy – and one of the fastest growing states.
Also in June, Offerpad posted its 1Q22 financial results, described as the best quarter in the company’s history. The top line was $1.37 billion, an increase of 384% year over year. Earnings turned positive at $410 million or 16 cents per share. This was the third quarter in a row since the company became public in September last year through a SPAC transaction.
Jay McCanless from Wedbush 5 star analyst said that all this caught Jay’s attention. He stated about Offerpad, “Since becoming public last year, Offerpad’s backdrop has changed from low mortgage rates for decades and an accommodative Federal Reserve, to high mortgage rates in more than a decade and tightening Fed. The shift in the Fed and in mortgage rates may be a near term hindrance, but we anticipate OPAD can continue producing full year GAAP profitability despite those risks…”
“In spite of the slowing pace of resale activity, OPAD’s market share has been increasing… For the 8 new markets OPAD is entering in 2022, we estimate pro forma transaction values YTD through June 2022 rose to $235 million versus $220 million for the same period in 2021,” McCanless added.
McCanless’s opening rating of Outperform, i.e. Buy and the $5 price target suggest a 118% upside in the next 12 month. (To watch McCanless’s track record, click here.)
This new stock received 5 analyst reviews within its first 10 month on the public market. The break down was 4 to 1, favoring Buys over holds, for a Strong Buy consensus rating. The stock is a ‘penny,’ priced low at just $2.29 per share, and the average target of $6.80 indicates potential for some impressive growth of ~197% in the next 12 months. (See Offerpad stock forecast on TipRanks)
Universal Electronics (UEIC)
Let’s stick with homes for now, and look at a stock in the ‘smart home’ tech segment. Universal Electronics manufactures remote controls, voice activated smart home hubs, smart thermostats and home sensors. They also offer software and cloud services that allow for device interoperability. The company’s products offer solutions for smart home systems, home security, climate control, entertainment systems – even household wireless connectivity. Universal claims to support more than 100,000,000 products each year.
Universal’s reputation in the sector is maintained by regular launches of new products. The company has launched new TV remotes, smart thermostats, and voice remotes in recent months. DNA, a leading Finnish telecom provider, chose the company to supply an award-winning Android television remote.
Despite these new launches, Universal has struggled with earnings and revenue growth and has experienced a gradual decline in top line results over the last few years. The company reported $132.4m in top-line revenue in the most recent 1Q22. This is 12% less than the year-ago. Adjust non-GAAP earnings per share fell from 89 to 47 cents y/y.
The company’s gradual drop-off in results has not gone unnoticed by investors, and the shares are down 44% over the past 12 months.
Rosenblatt analyst Steve Frankel Investors who are willing to take on the risk see this opportunity.
“Over the last three years, UEIC has rationalized its cost structure, moved a portion of its manufacturing from China to Mexico to lower costs and reduce cycle times and introduced multiple new products. Revenue growth has been a problem. The company reported a year-over–year decline in revenue in eight quarters. Frankel stated that the company appears to be on the verge of regaining a steady rate of revenue growth with the increasing number of design wins and improvements in the supply chain.
“Between the potential inflection point in revenue growth, a current valuation of just 8.6x our CY22 EPS, just above the stock’s five-year low of 7.7x, and management’s steady repurchases of its stock, we see limited downside from current levels,” Frankel summed up.
Frankel continues to rate UEIC shares a Buy and set a $40 price target for a potential 53% upside in one year. (To watch Frankel’s track record, click here)
Overall, the stock has managed not to be noticed. The stock only has three recent analyst reviews. All of these are positive and give the stock its unanimous Strong Buy analyst consensus rating. A 12-month upside potential of 76% is indicated by the average price target at $46. This is compared to $26.15. (See UEIC stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: These analysts’ opinions are theirs alone. This information is for informational purposes only. It is crucial to do your own analysis prior to making any investments.