While every market advisor will tell you never to try to 'time' the market, timing is still important for success. Investors need to buy into low prices, and to do that, they need to know when prices are low. This doesn't necessarily mean low in absolute dollar terms, but low relative to a stock's recent past performance.
In recognizing that lower price range, investors can turn to Wall Street's pros for help. The analysts have been busy lately, picking out stocks that are in their lower price range, and are flirting with the bottom.
We've used the TipRanks database to look up two such stocks, Strong Buys with plenty of upside potential - and each one is trading at or near its one-year low. Are these the low prices investors should consider? Let's take a closer look.
LiveRamp Holdings (RAMP)
We'll start with LiveRamp, a San Francisco-based tech firm that offers its customers a data enablement platform, a product designed to make data accessible, easy to use - and secure. LiveRamp boasts more than 50 granted patents for its tech, and that its platform is used by more than 160 data providers. The system can connect data, devices, and people across the digital and physical worlds, making integration faster and more efficient without sacrificing digital security.
Despite offering a solid product in an essential niche, LiveRamp has seen its share value drop sharply this year, losing 53% in that time frame. While the fall has been long-term and sustained, RAMP saw a particularly sharp drop of 20% in the last few days, since releasing its Q1 results for fiscal year 2023. A look at the results may help to explain what happened.
First off, at $142.2 million, the top line grew 19% year-over-year. At the same time, earnings have been falling. In 1Q22, EPS was listed at 9 cents; the current report showed just 5 cents in per-share profit, a clear sign that margins are contracting. We should note, however, that the Q1 earnings beat the 1-cent forecast. Looking ahead, LiveRamp is guiding toward revenue gains of 13% in fiscal Q2 and the full fiscal year 2023, bringing expectations down from the current quarter's performance.
Despite the clear concern from investors, Morgan Stanley analyst Elizabeth Porter notes that the company did beat the forecasts on both the top and bottom lines in its fiscal Q1 report, and she goes on to point out that the company is showing solid execution on its sales plan.
"Offsetting some of the slowdown is LiveRamp's existing commitment to accelerating growth by investing in its sales force, expanding internationally, and accelerating their partner channel efforts. On the sales force front, management noted encouraging progress as the time to ramp for reps has shortened from 6 months to 4 months and reps are signing deals within their first quarter of joining," Porter explained.
"With the stock trading at a ~70% discount to the SaaS average, we see a favorable risk reward," the analyst summed up.
To this end, Porter rates RAMP an Overweight (i.e. Buy), describing the stock as 'attractive,' and sets a $36 price target that implies a 62% upside in the year ahead. (To watch Porter's track record, click here)
Even though this stock is down, Wall Street remains sanguine about its prospects. All 6 of the recent analyst reviews are positive, for a unanimous Strong Buy consensus rating, and the $42.33 average price target suggests a strong 90% upside from the current trading price of $22.20. (See LiveRamp stock forecast on TipRanks)
CarGurus, Inc. (CARG)
Next up is CarGurus, an online e-commerce website that specializes in cars. CarGurus connects buyers and sellers, in both the new and used vehicle markets, and provides both sides with the information needed to create a smoother experience in both buying and selling cars. The platform uses data analytics, and allows buyers to search for vehicles based on price, mileage, options, accident history, pre-owned certification status, location, and dealer reputation. The data is transparent, and reflects more than 5 million auto listings.
CarGurus operates mainly in the US, but also in Canada and the UK. The site boasts more than 36 million average monthly visitors and over 31,000 global paying dealers. At the beginning of last year, CarGurus made an important acquisition, buying a 51% interest in the CarOffer website. The move added wholesale vehicle purchase and selling to CarGurus dealer offerings.
Since then, CarGurus has seen its revenues increase steadily. In the most recent quarter, CarGurus saw more than $511 million in top line revenues, for a powerful 135% year-over-year increase.
While revenue growth is high, CarGurus' earnings have been stalling. Non-GAAP income attributable to common shareholders was down y/y, from $46.9 million to $38 million. Per share, this meant that the year-ago quarter's 39-cent EPS fell to 32 cents, a drop of almost 18%. On a positive note, CarGurus finished 2Q22 with $368.2 million in liquid assets and no debt on the balance sheet.
So the financial results are basically sound - and yet the stock has fallen 43% year-to-date. The company's forward guidance may be influencing that; investors were disappointed by the numbers projected for 3Q22. Management is guiding toward $460 million to $490 million in total revenue for Q3, along with EPS of 25 cents to 28 cents. These would represent significant drops from the Q2 results.
Jefferies analyst John Colantuoni notes the drop in guidance here, but believes that there is a disconnect between what CarGurus can currently offer and what investors are pricing in, resulting in a stock that is undervalued.
"Guidance for 3Q implies sizable downside to CarOffer estimates, driven by a reduction in purchases by rental car companies. While we expect the market to react negatively to the disappointing outlook, we believe the core Marketplace business continues to deliver remarkably durable results in a tough macro environment. Our SOTP also suggests that current valuation is pricing in little (or no) value for CarOffer, which creates an attractive risk-reward," Colantuoni opined.
At bottom, Colantuoni rates CARG a Buy, and his $32 price target implies a 12-month share gain of 67%. (To watch Colantuoni's track record, click here)
Cars are big business, and this automotive e-commerce site has generated no fewer than 9 analyst reviews. The reviews include 7 to Buy against just 2 Holds, to back up the Strong Buy consensus rating. Shares in CARG are selling for $19.16 and have an average price target of $31.88, indicating a one-year upside potential of 66%. (See CarGurus stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a newly launched tool that unites all of TipRanks' equity insights.
Disclaimer: The opinions 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.