Investor concerns have yet to ease, with worries gaining more momentum this week when Fed Chairman Jerome Powell said the central bank was expecting interest rates to rise to 5.1% by the end of the year. 2023. At that rate, many economists fear a recession will ensue. is inevitable.
In fact, as a sign that a recession may be imminent, November retail sales data showed the biggest drop in more than a year.
The immediate result is an abrupt drop in stocks across the board, but the unintended consequence can be a new opportunity for investors. With the market back on track, it may be time for investors to bottom out.
So let’s take a look at some stocks languishing in the doldrums. Use TipRanks Platform, we’ve gathered details on three stocks that are down more than 40% year-to-date – but that are still rated Strong Buy by Street analysts – and the upside potential starts at 40% or more. This is the lowest level.
Tricon Residential Company (BC)
We’ll start in the real estate business, where Tricon Residential is the largest rental property owner/manager/operator in North America. The company, which operates as a real estate investment trust (REIT), has a portfolio that includes more than 35,000 single-family rental units, 7,700 multi-family rental units. , as well as more than 4,200 additional apartments in development, across 21 US states plus the Canadian province of Ottawa. The company’s total assets under management (AUM) amounts to $17.6 billion, with another $9.4 billion in third-party AUMs.
The company’s financial results are driven by the fundamentals of SFR (single-family rental) – the core of the company’s business. For the third quarter of 2022, Tricon generated $170.8 million in revenue from that source, compared with $115.1 million in the previous quarter. The increase built on two factors – a 29.7% year-over-year expansion in the single-family rental category and an 11.4% year-over-year increase in average effective rents. monthly average.
Rising rents reflect a persistent inflationary environment; but while that helped boost Tricon’s top returns, the Fed’s response – higher interest rates – hurt profits. Tricon’s net income grew only modestly over the same period, from $174.3 million to $178.8 million, while diluted EPS fell from 80 cents to 49 cents.
As for the stock’s performance, Tricon is not immune to the negative trends of 2022; The stock is down 48% this year.
However, assessing the company’s prospects, analyst Canaccord Christopher Koutsikaloudis see much to be optimistic about.
Koutsikaloudis explains: “We remain optimistic about the long-term outlook for the SFR fundamentals and believe that Tricon is well-positioned for healthy organic growth over the next few years, which should offset many of the benefits. more negative impact on cash flow from higher interest rates”. “Moreover, management has done an excellent job of clearing the balance sheet over the past two years, which helps the company capitalize on future acquisition opportunities…”
Following these comments, Koutsikaloudis has a Buy rating on Tricon stock, with a $12.50 price target to suggest a ~61% upside next year. (To see the achievements of Koutsikaloudis, click here)
Overall, there are 9 recent analyst reviews of this top real estate company, including 6 Buy reviews and 3 Hold (i.e. Neutral), for a moderate Buy consensus rating. The stock is currently trading for $7.78 and an average price target of $10.90 suggests a 12-month upside potential of 40%. (View TNC stock forecast on TipRanks)
arteries, Inc. (AIP)
The second bearish stock we’re looking at is Arteris, a technology company with an interesting niche in the silicon semiconductor chip industry. Arteris manufactures network on chip (NoC) technology, along with its semiconductor intellectual property and IP implementation technology; In short, the company produces high-end, specialized vessels for a variety of applications, including AI and IoT, mobile phones, cameras, and SSD controllers. Arteris counts in its customer base with big names like Baidu, Mobileye and NXP Semiconductors.
A look at Arteris’ recent quarterly report, for Q3 of 22, shows some solid results, including a 41% increase in revenue year over year, to $12.6 million. Two additional metrics that support revenue flow are annual contract value (ACV) and subsequent 12-month royalties (TTM), both of which are up 17% year over year. Looking at future revenue, the company’s remaining performance obligation (RPO), or backlog, also saw a 17% increase year-over-year, to $59.3 million.
So Arteris has a good source of revenue, but is currently suffering a heavy net loss. The quarterly net loss was $7.7 million, up 71% year-over-year. On a non-GAAP basis, the company recorded a loss of 13 cents per share, compared with 12 cents in the previous year.
The lack of profitability in the current situation is not a welcome one, and Arteris shares are down 84% year-to-date.
Despite a year-long stock price decline, Cowen . 5-star analyst Matt Ramsay finds Arteris in a strong position to turn a profit in the future.
“We recorded strong royalties-based revenue for the quarter despite ongoing macro weakness as seen elsewhere in the semi-finals. Management expressed confidence in the resilience of the business model not only in terms of royalties but also on the licensing side. In fact, with ten new licensing deals signed during the quarter, this is one of the most positive periods on record for the company. In our view, this is a positive indicator of customer behavior during any potential downturn. We also note that Arteris maintains a retention rate of over 95%, which provides an established design win chance and revenue visibility for the year,” said Ramsay.
Quantifying his bullish stance, Ramsay gives the AIP an Outperform (i.e. Buy) rating, along with a $12 price target that shows his belief in a strong 248% upside in 12 months. next month. (To see Ramsay’s achievements, click here)
Overall, Arteris receives a moderate Buy from Wall Street consensus, based on 3 recent analyst ratings including 2 Buys and 1 Hold (i.e. Neutral). The stock has an average price target of $13.33, suggesting an impressive 286% upside potential from its current share price of $3.45. (View AIP stock forecast on TipRanks)
Outbrain Inc. (OB)
Outbrain is a web recommendation platform that uses complex algorithms to include the recommended links you see on the websites you visit. This is an important segment, one that web publishers will pay a lot of money to acquire, as it can enhance the ability to attract, engage, and retain viewers. The company was founded in 2006 with the aim of replicating the page-turning experience in a newspaper and works with both online advertisers and web publishers. Outbrain’s network is active in more than 55 countries, across more than 7,000 properties online, and issues over 344 billion recommendations monthly.
High inflation has put pressure on advertisers’ budgets as well as customer purchases. As a result, for Outbrain, revenue has declined since Q4 2021.
The most recent quarter, Q3 of year 22, posted revenue of $229 million, down 9% year over year. Gross profit reached $41.9 million, down 30% over the same period. At the same time, the company’s net loss, reported at $4.6 million, marked a 91% improvement from a net loss of $53.9 million from the previous quarter.
The drop in net loss is a good sign – but Outbrain also reported a cash burn for the quarter. The company’s free cash flow was negative $15.8 million, an unfavorable comparison with a positive $30.7 million in net cash from Q3 2011.
Here’s another stock that has been hit hard during the 2022 drop; Outbrain stock has lost 76% year-to-date. However, clearly seeing the current situation of Outbrain, JMP analyst Andrew Boone still optimistic.
“While demand remains challenging and revenue visibility is limited, Outbrain continues to strengthen the industry as they are now the exclusive recommendation partner for four of the top five publishers in the U.S. and Israel, eight of the top ten publishers in France and six of the top 10 in Germany, and in total have added more than $100 million in annual revenue to new publishers from recent wins,” Boone noted.
“With CTR (click-through rate) also improving in Q3 and SmartLogic adoption continuing to grow, we consider recent challenges to be macro (rather than execution) related and believe that as the ad cycle changes, revenue can accelerate in multiples that also rank higher,” the analyst sums up.
Looking ahead, Boone rates OB stock at Outperform (i.e. Buy), backed by a $9 price target, implying a massive 159% upside potential over the next year. (To see Boone’s achievements, click here)
Overall, this web recommender has 5 recent analytical reviews on file and they scale it from 3 to 2 in favor of Buy over Hold (i.e. Neutral), giving OB a consensus rating by analysts Buy Moderately. Shares are selling for $3.39 and an average price target of $6.40 shows a ~89% gain over a one-year period. (View Outbrain stock forecast on TipRanks)
To find great ideas for trading stocks at attractive valuations, visit TipRanks’ Best stocks to buyone tool that unifies all of TipRanks’ equity insights.
deny the responsibility: The opinions expressed in this article are those of prominent analysts only. Content is used for informational purposes only. It is very important that you do your own analysis before making any investment.