More than one in four S&P 400 constituents are down at least 20% this year. On the flip side, less than two dozen names are up 20% or more year-to-date.
The rough start to 2022 for U.S. stocks is evident in virtually all broad indices (energy-focused benchmarks aside). Yet it is the mid-cap space where some of the most intriguing buy opportunities are forming.
Buyers beware. While there are plenty of stocks trading at steep discounts to where they began the year, not all are bargains. Plenty could very well see more downside as the market punishes companies with high valuations and unclear growth prospects.
Investors looking to pounce on the dip in individual names can use fundamental queues in combination with technical clues to find the biggest winners. These three oversold mid-caps check both boxes.
Is Lyft Stock a Buy?
Lyft, Inc. (NASDAQ:LYFT) is down more than 50% this year and 70% from last year’s peak. The ride-hailing operator sank to new lows last week after slashing its second-quarter EBITDA guidance from $83 million to $15 million at the midpoint. Rising gas prices and the resulting impact on driver retention are forcing Lyft to incur higher expenses.
The good news is that the sales side of the ledger is getting healthier—and could eventually far outweigh the near-term cost pressures. Revenue rose 44% last quarter as Lyft’s rideshare volumes rode to Covid-era highs. This confirmed that Americans are getting out more these days and increasingly turning to Lyft to usher them around town.
As demand continues to strengthen, analysts are expecting Lyft to turn a profit this year after incurring a loss in 2021. By 2023, Wall Street is projecting earnings per share of $1.20. This implies that as management works through the current headwinds, things will get better in the long haul. It also means that Lyft shares can be had for 17x next year’s earnings estimate.
Lyft also looks inexpensive from a technical standpoint. The stock price has slipped below the lower Bollinger band and the relative strength indicator (RSI) is well below the key 30 levels. It may be time to hitch a ride to the recovery rally.
Is Under Armour Stock Oversold?
Under Armour, Inc. (NYSE:UAA) has seen its market cap cut in half since the start of the year. The last shoe to drop for the athletic apparel maker was a $60 million first-quarter loss that caused Friday’s 24% selloff. Making matters worse, the company said that the supply chain disruptions impacting performance will likely persist for several more months.
Supply chain challenges aren’t the only problem at Under Armour. Higher shipping and labor expenses are also weighing on its financials, not to mention new Covid restrictions in the key China market. Things have become so bad that the company has been canceling orders to manage its capacity constraints.
Fortunately, there is a silver lining here. Under Armour still has a lifeline in the form of healthy consumer demand. Vendors around the world are ordering clothing and footwear to meet the consumer’s desire for comfortable, high-quality sports gear. Led by a fast-growing sneaker business, management expects sales will grow 5% to 7% this year. Imagine what this growth will look like when supply chain pressures ease.
Under Armour shares not only look attractive at 13x next year’s earnings but also because technically oversold conditions have set in. They are the furthest away from the lower Bollinger band than they’ve been since October 2017—which, like the present, was a great time to buy.
What is a Good Gaming Technology Stock?
International Game Technology PLC (NYSE:IGT) is down nearly 30% this year after surging 70% last year. The stock’s return to the $20 level presents a great opportunity for investors to get in on a leading gaming equipment provider with solid growth prospects.
While reopening casinos are a boon to IGT’s traditional slot machine business, it is the modern forms of gambling that are its most attractive opportunities. As casino operators looking to get into the emerging online sports betting and gaming space, IGT’s technology is a viable, lower-cost alternative to in-house development.
IGT entered 2022 with the wind at its back after Q4 revenue of more than $1 billion topped consensus expectations. As the company’s high-margin gaming business becomes a bigger part of the overall mix, analysts are anticipating 24% profit growth next year. This means IGT is trading at a mere 12x FY23 EPS estimates. This combined with the stock’s low volume 37% retreat since November makes it well worth the gamble.
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