Don’t count all beaten-down stocks out just yet. We mean the names that have seen share prices trend lower as a result of recent headwinds.
While a decline in share prices is often interpreted as a signal to steer clear, Wall Street pros remind investors that this doesn’t always hold true. Buying stocks on recent weakness can be a solid investing strategy as it provides investors with the opportunity to snap up shares before they take off on an upward trajectory. However, pinpointing the perfect time to get onboard is no easy task.
That’s why we recommend turning to TipRanks. The platform’s Stock Screener tool helped us zero in on 3 stocks that look like buying propositions given their recent shakiness. It gets even better as all the tickers have racked up considerable love from the Street in the last three months, enough to add up to a “Strong Buy” consensus rating.
Let’s dive in.
Etsy, Inc. (ETSY)
It has been a tough quarter for the e-commerce company, to say the least. Nonetheless, some members of the Street believe that the 14% year-to-date drop represents a unique buying opportunity.
While Etsy reported that gross merchandise sales and revenue for the quarter fell below the consensus estimates, it should be noted that this is likely as a result of the marketplace sales tax addition in 11 states and the slower-than-expected transition from shipping costs to item price. The company has also had to make up for a more condensed holiday window as well as accounting changes for Reverb, the online musical instrument marketplace it acquired back in August.
Wedbush analyst Ygal Arounian highlights the fact that Etsy has yet to reap the benefits from its free shipping and ads segment. “We see a critical mass of new initiatives, highlighted by Etsy Ads and free shipping, that can drive stronger GMS growth and margin expansion over time. We particularly like the timing with both Etsy Ads and free shipping launching into the holiday season supported by Etsy’s brand marketing push, where it is seeing early signs of strong ROI on TV and Social,” he explained.
As a result, Arounian argues that the pullback represents the ideal time to buy. Bearing this in mind, the analyst upgraded the rating to a Buy and set a $66 price target. At this target, Etsy shares could jump 62% over the next twelve months. (To watch Arounian’s track record, click here)
Similarly, Wall Street is bullish when it comes to the e-commerce stock. With 13 Buy recommendations and 1 Hold assigned in the last three months, the message is clear: Etsy is a ‘Strong Buy’. To top it all off, its $67 average price target indicates 65% upside potential. (See Etsy stock analysis on TipRanks)
Diamondback Energy, Inc. (FANG)
Diamondback is an independent exploration and production (E&P) oil and gas company. Given its recent stumble, Wall Street wants to find out if FANG is gearing up for a recovery.
FANG failed to impress investors with its performance in its most recent quarter, posting revenue that fell below estimates thanks to lower-than-expected realized oil, natural gas and NGL prices. Actual adjusted EPS/EBITDA also didn’t meet the Street’s expectations.
Even so, Roth Capital analyst John White tells investors that FANG’s long-term growth narrative remains strong. “FANG expects realized prices to improve relative to the WTI crude oil price through the remainder of 2019 and 2020 as fixed differential contracts roll off and convert to FANG's commitments on the EPIC and Gray Oak pipelines or move to the current Midland market price,” he wrote in a note to clients.
White adds that management’s full year 2020 average daily production guidance falls in-line with his forecasts. Taking all the above factors into consideration, the analyst decided to stay with the bulls. Along with the Buy rating, his $147 price target brings the upside potential to a whopping 91%. (To watch White’s track record, click here)
All in all, other Wall Street analysts are betting on FANG. 14 Buys and 1 Hold received in the last three months add up to a ‘Strong Buy’ consensus. In addition, its $127 average price target suggests shares could climb 65% higher in the next twelve months. (See Diamondback Energy stock analysis on TipRanks)
Agios Pharmaceuticals (AGIO)
Agios is developing treatments for cancer and other rare diseases characterized by an identifiable genetic mutation. On the heels of this year's setback, BMO Capital’s George Farmer is coming to the biotech stock’s defense.
Part of AGIO’s 26% year-to-date decline can be blamed on the delayed Tibsovo regulatory filing. The company announced on November 3 that the sNDA for its drug to treat advanced IDH1+ cholangiocarcinoma, a rare form of bile duct cancer, wouldn’t be filed before the end of the year like it previously planned. Instead, there will be a protocol-specified final OS (the length of time from the date of diagnosis or start of treatment that patients are still alive) analysis from the Phase 3 ClariIDHy trial before the filing takes place.
Farmer argues that the FDA likely wants to be sure that Tibsovo doesn’t have a negative impact on OS before the agency reviews the sNDA. “In our view, results to date highly suggest that final data will ultimately support a neutral-to-positive impact of Tibsovo on overall survival in this Phase 3 trial,” he commented.
He points out that AGIO also has other pipeline readouts slated for December that are capable of driving possible gains. To this end, Farmer advocates buying the dip in AGIO shares. On top of this, the analyst’s $45 price target leaves room for 31% upside potential. (To watch Farmer’s track record, click here)
Based on the 7 Buys and 1 Hold published in the last three months, the consensus on Wall Street is that AGIO is a ‘Strong Buy’. It doesn’t hurt that its $60 average price target puts the potential twelve-month rise at 75%. (See Agios Pharmaceuticals stock analysis on TipRanks)