These 2 “Strong Market” stocks are trading at low prices

A strong bearish trend defined the markets in the first half of the year. Since then, the key point has been volatility. Stocks bottomed in June, when the S&P 500 fell into the 3,600s. This has proven to be a support level over the past couple of months, and at least one strategist believes the market will not test these lows again this year.

JPMorgan’s Jason Hunter believes that inflation may have peaked and that the upcoming CPI report will provide additional evidence of this.

“We continue to see the prospect that continued evidence of headline inflation data in the August CPI report may fuel an improvement in risk-on sentiment, which in turn may prevent the market from fully reexamining its low June 3,636,” Hunter wrote.

With that in mind, we used the TipRanks database to identify two stocks that have experienced big losses this year, of 40% or more, but each also have a Strong Buy analyst consensus rating and strong upside potential. Let’s take a deeper dive.

XPeng, Inc. (XPEV)

We’ll start with a close look at XPeng, a Chinese automaker focused on the electric vehicle (EV) market. XPeng has several models in production and has delivered the P7 and P5 sedans since last year. In recent months, the company’s delivery numbers have soared, reaching a total of 90,085 for the first eight months of this year, with 9,578 deliveries in August alone. August’s number represents a 33% year-over-year increase. the 8-month figure is up 96% from the same period in 2021.

XPeng’s strong delivery numbers have fueled strong revenue. The company reported $1.11 billion at the top in 2Q12. While that was down from the $1.34 billion peak in 4Q11, it was still up 90% year-over-year. The company’s quarterly loss came in at $403 million, an unfavorable comparison to a net loss of $184 million in the previous quarter.

Although profits are down, XPeng has been successful in expanding its sales and support network. The company reported a total of 388 stores in 142 cities at the end of Q2, and its network of charging stations reached 977 stations. This number includes 793 self-operated supercharging stations and 184 destination charging stations.

That’s the backdrop for XPeng’s stock performance – which has underperformed badly this year, losing 69% year-to-date.

Covering this stock for Deutsche Bank, analyst Edison Yu notes that XPEV shares are falling as the company has faced headwinds in the form of increasing competition in the Chinese electric vehicle market and fickle customer tastes. Even so, Yu believes that XPeng has the potential to meet these challenges.

“Demand concerns can potentially ease closer to the end of the year with deliveries of the G9 SUV starting in October, but investor focus will likely shift to next year… We see undervalued long-term in ADAS/AD technology of XPeng, and don’t think demand trends can worsen from here on out, as the seasonality of 4Q should provide at least a small headwind for older models,” Yu said.

In Yu’s view, this supports a Buy rating on XPEV, while the $33 price target implies upside of 111% over the next year. (To follow Yu’s history, Click here)

Wall Street analysts broadly agree with Yu’s bullish view, with 9 out of 12 recent analyst reviews recommending Buy on XPEV – giving the stock a Strong Buy consensus. Shares are priced at $15.60 and the average price target of $44.02 suggests that the stock has a strong upside of 182% ahead of it. (See XPeng Stock Prediction on TipRanks)

Daseke, Inc. (DSKE)

The second stock we’ll look at is North America’s largest operator of specialized transportation and flatbed trucks. Daseke operates as a holding company and its subsidiaries own and control over 4,500 tractors, 11,000 flatbeds and specialty trailers and over one million square feet of industrial warehouse space. Daseke’s activities are mainly in the field of industrial trucks.

Recent 2Q12 financial results showed a top price of $481.3 million, up ~19% year-over-year. The company generated $22.7 million in cash from operations, including $15.2 million in free cash flow. Profits, however, while up from both 1Q22 and 4Q21, are down year-on-year. The company’s net income was $17.7 million, 24 cents per diluted share, or about half of 2Q11 results.

The earnings report, and especially management’s comments, highlighted Daseke’s exposure to industry-specific headwinds. The company’s CEO called attention to “disruptions in the global supply chain, slowing [the company’s] access to new equipment and creation of inflationary pressures’. These headwinds led to delays in acquiring new equipment, which in turn led to a decrease annually in total miles driven.

Disappointing earnings put investors on edge, with shares sliding 43% year-to-date. That means, in the eyes of Stifel analyst Bert Subin, an opportunity for investors looking to get in on the ground floor.

“We continue to like the company’s outlook as the flat/specialty market will likely be strong enough for Daseke to weather at least some of its inflationary headwinds. Management’s commentary helped to dispel our concern that this would be a negative FY23 reading, pointing to an expectation of EBITDA growth next year as inflationary headwinds should eventually be offset (mostly) by higher interest rates. Management will likely need to prove this, but it’s a step in the right direction. We see backwards [on current low prices].”

To that end, Subin assigns a Buy rating to DSKE stock and quantifies his bullish view with a $10 price target that suggests a 73% one-year upside. (To follow Subin’s history, Click here)

In total, there are 4 recent analyst reviews recorded for Daseke that are unanimous that this is a buy stock – giving DSKE shares a strong buy consensus. The stock is priced at $5.77 per share and has an average price target of $11.88, suggesting a 106% upside over the next 12 months. (See Daseke 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.

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