Is the market really ready for a shift in sentiment? According to a recent survey by BofA, there are signs that the foundation of a company is taking shape right now.
The survey found that the average cash level in investors’ portfolios in October hit 6.3%, levels not seen since April 2001 and somehow above the average. The long-run average is 4.8%.
So there is a lot of cash waiting on the sidelines and ready to be deployed. Given the possibility that the Fed will ease monetary policy next year, BofA sees a rally in the first half of 2023 as a real possibility.
A sustained rally would benefit scores of stocks that have plummeted in 2022 and are now trading at a steep discount.
With this in mind, we dived into TipRanks database and draw three names that match a particular profile; all have fallen significantly this year but hold a ‘Strong Buy’ rating from Street analysts and boast triple-digit upside potential next year. Then, let’s dive into the details and find out why the pundits are now praising these stocks.
PLBY Group, Inc. (PLBY)
We’ll start with one of the most recognizable brands in the world. The pages of Playboy magazine are world-renowned for their combination of nudity and cryptic content with central people sitting comfortably next to some of the world’s best writers. The magazine itself is no longer in print, but in recent years Playboy has adapted to the modern era. Describing itself as a “fun and relaxing” service, the company has transitioned to the internet and now owns and operates a number of digital commerce retail platforms, in addition to internal ones. online content. It also sells a variety of sexual wellness products and licenses content for Playboy television, among other endeavors.
Playboy went public via blank check route last February. 2021 was a good year for new SPAC stock, but it was hit hard into the 2022 bear market. The stock has fallen as much as 87% since the start of the year, a performance not backed by lackluster earnings. pale as in the latest financial statements – for the second quarter of year 22.
While revenue grew 31.1% year-over-year to $65.4 million, this represents a slowdown from the previous two quarters. Additionally, the company has a net loss of $8.3 million, which equates to an EPS of – $0.18. Both figures fell short of consensus estimates, and with the economic backdrop deteriorating, Playboy also scrapped its fiscal 22-year outlook. The company said it carried out a strategic review to pinpoint areas where it could reduce costs and took steps to strengthen its balance sheet.
While being aware of current issues and exercising patience, Canaccord analyst Jason Tilchen still firmly in the corner of Playboy.
“PLBY stock remains under pressure due to operational flaws combined with a drop in demand and lack of short-term vision. While it may take several quarters for PLBY Group to show investors that it is making progress on strategic initiatives, the share price is likely to largely reflect these challenges and we continue to continues to find the current valuation attractive for an iconic global brand like this one,” said Tilchen.
Accordingly, Tilchen rates PLBY stock as Buy while his $14 price target suggests the stock is undervalued 324%. (To see Tilchen’s achievements, click here)
Overall, PLBY has garnered 5 analyst reviews over the past few months, split 4-1 in favor of Buy over Hold, all of which culminate in a Strong Buy consensus rating. At $9.2, the mean target implies a one-year stock price gain of 178%. (View PLBY stock forecast on TipRanks)
Group Porch (PRCH ONLY)
Next is Porch Group, a company that started out as a home services market. However, over the years, it has transformed itself into a software company that specializes in providing solutions for home service companies while also providing insurance and warranty products. All are designed to connect the points between homeowners and service providers and provide a better home buying and ownership experience. Such was its reach, that today Porch plays a role in about 2 out of 3 US homebuyer activities every month.
The housing market has felt the power of the recession, and the company cites the downturn and a faster-than-anticipated inflation environment as the reasons behind a disappointing Q2 report.
While revenue grew ~37.8% year-over-year to $70.8 million, that was down 9.4% from Street expectations of $78.1 million. Likewise, the company has shown an adjustment. EBITDA loss – $14.3 million, lack of consensus at – $8.9 million. Based in part on ongoing macro difficulties, Porch also lowered its guidance for the full year 2022.
If we’re talking about the subject of falling stocks, Porch certainly fits the bill; The number of shares has been completely destroyed this year and has dropped 91 percent mercilessly.
However, despite the uncertain macro outlook, analyst Cantor Josh Siegler remains “very constructive to Porch’s business” and believes the company has what it takes to weather the current difficulties.
“Although a slowing housing market puts downward pressure on Porch’s revenue, we believe the company may be more insulated from the housing cycle than some other companies directly involved,” the analyst explained. to the housing market,” the analyst explained. “By 2022, Porch expects only ~30% of revenue tied to transactions, including migration and B2B2C services. It expects ~70% of the remaining revenue to come from software and recurring insurance. “
Conveying his confidence, Siegler’s Overweight (i.e. Buy) rating is backed by an $8 price target, suggesting massive ~452% growth over the next year. (To see Siegler’s track record, click here)
Other analysts were hardly more optimistic; at $7.88, the average target is just slightly below Seigler’s target and could deliver a 443% return in the coming months. Except for 1 Hold, all 5 other analyst ratings are positive, making the consensus view here to be Strong Buy. (View Porch stock forecast on TipRanks)
European Wax Center (EWCZ)
The European Wax Center, as its name suggests, offers in-home waxing services, and since its founding in 2004, the operator/franchise has grown at a rapid pace and now has more than 890 salons. spanning 44 states. The company’s leadership in its field is evident since, by center, it is six times larger than the nearest competitor. That name, however, is a bit misleading; The European Wax Center is headquartered in Plano, Texas.
The company believes that based on high-income customer demographics, its business model will be able to withstand an inflationary environment, although management noted after announcing its second-quarter financials that Average time between visits is increasing, which indicates that customers are feeling the pressure of an economic downturn.
For the quarter, total revenue came in at $53.4 million, up 11.4% year-over-year while same-store sales grew 6.7%. However, adjusted EBITDA decreased by 5.9% from 19.8 million in the same period last year to 18.6 million USD. In terms of outlook, the company is still following the previous guidance and raising the planned opening of the new center for the fiscal year 2022 from 83 to 85.
This is another name that has suffered heavily at the hands of market forces; The stock is down 48% year-to-date. However, echoing the company’s comments about its ability to withstand extreme macro conditions, the 5-star Truist analyst Scot Ciccarelli given that EWCZ is well established to do so.
“While inflationary pressures and growing economic concerns continue to weigh on consumers, the company’s sales trends remain strong, largely because many/most (female) customers consider Hair removal is an ‘essential service’. Given the nature of services and the customer base appearing to be more isolated, we expect the top trends to continue to be strong in an increasingly challenging macro environment,” emphasized Ciccarelli.
Overall, Ciccarelli believes this is a stock worth holding. EWCZ rating analysts share a Buy and his $30 price target shows solid upside potential of ~113%. (To see Ciccarelli’s achievements, click here)
Here’s another stock that Street analysts are chasing; EWCZ boasts a Strong Buy consensus rating based on 4 Buy vs 1 Hold. The average target is even more optimistic than Ciccarelli would allow; at $33.4, this represents a ~137% increase from current levels. (View EWCZ stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the featured analyst only. Content is used for informational purposes only. It is very important to do your own analysis before making any investments.