These 2 “Strong Market” stocks are trading at steep discounts

Buy cheap? Even in the stock market, buyers want to find a deal. Determining an agreement, however, can be difficult. There is a stigma attached to low stock prices, based on the reality that most stocks do not fall for no reason. And these reasons are usually rooted in some aspect of the company’s poor performance.

That said, you can still find stocks trading at deep discounts, stocks whose share price has been pushed down – maybe by fundamentals, maybe by market conditions, maybe by just plain bad luck – and those discount prices are associated with some of the best upside potential on the market.

Using TipRanks’ database, we’ve identified two stocks that are underpriced now – and have strong upside potential over the next year. Not to mention that each receives a consensus “Strong Buy” rating from the analyst community. Let’s dive in and find out what’s driving this outlook.

Luminar Technologies (LAZR)

The first stock we’ll look at is Luminar Technologies, a Silicon Valley-based high-tech company based in Palo Alto in the autonomous vehicle space. Luminar is a designer and manufacturer of Lidar systems, the cutting-edge sensor technology that acts as the “eyes” for self-driving cars. Luminar is involved in all levels of Lidar technology, from the semiconductor chips in the guts of the hardware to the sensors, transceivers, receivers and electronics that make it all work.

Luminar went public through a SPAC merger in December 2020, and during that time the company’s shares peaked above $40. But since then the shares have fallen 77%. During this period, the company’s net loss has also deepened for five consecutive quarters. Revenue remained low, reflecting the company’s low-level sales as it positions itself to supply an industry not yet ready for mass production.

But it’s not all doom and gloom. Luminar offers high potential for investors. For starters, Lidar is essential to autonomous vehicle technology – and Luminar’s systems are well regarded. Moreover, the company’s revenue, although modest, is moving in the right direction. 2Q12 top line of $9.9 million was up 45% quarter-over-quarter and 57% year-over-year – and beat forecasts by 12%. EPS was reported at negative 18 cents, with a non-GAAP net loss of $65 million. Luminar was able to finish the quarter with plenty of cash in the bank, $605.3 million as of June 30.

On another positive note for investors, Luminar raised its full-year 2022 full-year revenue guidance from $40 million to $40 million to $45 million.

Overall, Luminar shares are down 49% year-to-date. The drop, however, hasn’t deterred Austin Russell, Luminar’s president and CEO, from raising his stake. Russell has made a series of purchases over the past two weeks, each for six figures. In total, Russell has spent over $1.6 million on several blocks of LAZR, totaling 175,000 shares.

Deutsche Bank analyst Emmanuel Rosner is also bullish on Luminar and its prospects, writing: “We are impressed with LAZR’s continued success in winning new business and growing the order book by +60% this year. The company also continues to forge partnerships with leading OEMs and mobility providers, which will give it a clear path to profitability and market expansion. We forecast revenue to be $44M/$133M in 2022-23E and then increase to >$385M by 2024E… We continue to believe that LAZR is one of the best positioned suppliers LiDAR to win big business wins for L3+ autonomy in the near future -term.”

All of this prompted Rosner to rate LAZR shares a Buy along with a $15 price target. This target conveys his confidence in LAZR’s ability to climb ~74% higher over the next year. (To follow Rosner’s history, Click here)

The Strong Buy analyst consensus rating at LAZR indicates that the Street broadly agrees with this bullish view. The 8 recent analyst reviews split 6 to 2 in favor of Buys over Holds, and the stock’s average price of $15 is practically the same as Rosner’s. (See LAZR Stock Prediction on TipRanks)

AppLovin (APP)

Next, AppLovin, is a software platform that provides optimization tools for mobile app developers. The proliferation of mobile smart devices and their apps has opened up a huge opportunity for app creators – and they, in turn, make up AppLovin’s customer base. In addition to app creation tools, AppLovin offers advertising, analytics, and publishing services.

Some numbers will tell the story. AppLovin has seen more than 4 billion downloads in the past 12 months and generated $776 million in peak revenue for its recent 2Q12. That top-line value was up 16% year-over-year and included a whopping 118% year-over-year increase in software platform revenue, which totaled $318 million.

In terms of earnings, the story was different. AppLovin reported a net loss of $22 million, compared to a profit of $14 million last year. The company has faced serious headwinds in the mobile app industry, including reduced consumer spending and changes in overall privacy policies that have affected app discovery rates.

Overall, investors are wary and the stock is down 73% this year. However, AppLovin has attracted positive attention from Wall Street analysts, who see the low price as an attractive entry point.

Among the bulls is 5-star analyst Youssef Squali of Truist, who writes: “The Software segment was again the bright spot in 2Q12 as APP AXON’s ML engine continues to fuel its growth. This was offset by weakness in application turns, impacted by softer consumer demand/mktg spend optimization to increase margins, while this segment remains under strategic review. This shift in mix should lead to higher quality revenues/margins, which over time should help revalue the stock and increase shareholder value, in our view.”

To that end, Squali places a Buy rating on APP and adds a $65 price target to it, suggesting room for a 12-month upside of 154%. (To watch Squali’s record, Click here)

Sentiment on the Street is just as bullish as Truist’s view, with 13 positive analyst reviews giving a unanimous Strong Buy consensus. The current trading price is $25.55 and the average price target of $60.38 implies gains approaching 136% over a one-year horizon. (See AppLovin stock prediction on TipRanks)

To find good ideas for trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock information.

Denial of responsibility: The views expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

Leave a Reply

Your email address will not be published.