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 primed for strong gains.
We've used the TipRanks database to look up two such stocks; each has fallen more than 50% over the past year, but each also boasts a Buy rating and solid upside potential, according to Wall Street's analysts. Here are the details.
CS Disco, Inc. (LAW)
We will start with CS Disco, a software company that puts AI, cloud computing, and data analytics at the beck and call of the legal profession. CS Disco's offerings include solutions for managing legal requests, strengthening the discovery process, reviewing documents, and building cases - and that's just the beginning. The company serves law firms, corporations, and educational institutions with a scalable system geared toward legal matters.
While there is never a shortage of need for legal services in our highly litigious society, LAW shares have had a hard time over the past 12 months, diving ~76%. The share drop comes as the company has seen increasingly steep quarterly losses, and last summer management cut full-year 2022 revenue guidance by 11% at the midline and predicted a deeper than expected annual net loss for '22.
Acknowledging the company's headwinds, Canaccord's 5-star analyst David Hynes writes, "We've reached the point with Disco that the stock is simply too cheap for the potential of this business... this is a stock that has gone from the next Vertical Giant to problem child in a matter of 18 months. Some of this has been self-inflicted, namely that the model and team don't provide enough forward-looking metrics to hang your hat on, but a lot of it to us feels like growing pains of a still sub-scale business."
"Whatever the culprit, with LAW shares now trading at roughly 1.0x EV/R on C2023E, we feel that it's time to get more constructive on the stock... With improving growth should come restored confidence, and if that's right, there's nothing to say this shouldn't be at least a 3-4x EV/R stock, which on current 2023 estimates would price LAW at $11-13," Hynes added.
It should be unsurprising, then, that Hynes rates LAW a Buy. Not to mention his $12 price target puts the upside potential at ~55%. (To watch Hynes' track record, click here)
Overall, there are 9 recent analyst reviews on file for LAW, and they include 5 Buys, 3 Holds, and 1 Sell - which gives the stock a Moderate Buy consensus rating. The share are selling for $7.75 and their $11.56 average price target indicates potential for ~49% appreciation in the next 12 months. (See LAW stock forecast)
Turtle Beach Corporation (HEAR)
Next up is Turtle Beach, a San Diego-based gaming accessories company. While computer gaming software firms tend to get the headlines, the games won't go anywhere without the hardware that companies like Turtle Beach design and turn out - headsets, controller units, simulation systems, microphones and other audio equipment. Turtle Beach got its start in the 1970s, and today is particularly known for its headsets and its console gaming audio.
Shares in Turtle Beach, however, are down 53% over the past year. At the end of 2021, and continuing into 2022, the company experienced a sharp decline in earnings and profitability, shifting from quarterly net gains to losses, and the share price started falling in response. By mid-summer, it was clear that demand - which had spiked during the pandemic period, when lockdowns kept people home and put a premium on home-based entertainment options such as computer gaming - was down, and not recovering - or at least, not recovering anytime soon.
In addition to the gaming sector headwinds, Turtle Beach explored the possibility of a buyout in 2022, but by late summer those moves had fallen through. In August, the company Board decided officially not to sell, at least for now, and shares dropped ~30% when that word got out. At the same time.
Analyst Sean McGowan, writing on Turtle Beach for Roth Capital, says that the 'headwinds are likely to dissipate' going forward, and gives some detail to back his stance: "Besides the broader market selloff, we believe HEAR's decline has two main causes: 1) Surprising weakness in the video game sector, leading to sales shortfalls and an industry-wide compression of stock prices; and, 2) A costly proxy fight and unsuccessful sale effort forced by an activist investor. We believe both of these factors will ease over the next 12-18 months, propelling HEAR to at least $18."
McGowan's comments support his Buy rating on the stock, and his $18 price target implies a gain of ~97% on the one-year time frame. (To watch McGowan's track record, click here)
Overall, the Street's analysts appear to be taking a more sanguine view of HEAR shares than investors are; the stock has 5 recent analyst reviews, with a 4 to 1 breakdown favoring Buys over Holds for a Strong Buy consensus rating. Shares are trading for $9.14 and the $11.70 average price target suggests an increase of 28% from that level. (See HEAR stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a 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.
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