It's Finally Time To Buy These 3 Undervalued Growth Stocks
Jesse Cohen | Jul 29, 2022 05:38AM ET
- High-growth technology stocks have struggled due to rate hikes
- Reset in valuations has created bargain-buying opportunities
- Consider buying the dip in Pinterest, Fortinet, and DraftKings ahead of earnings
- Earnings Date: Monday, August 1 after the close
- Year-To-Date Performance: -46.9%
- Market Cap: $12.8 billion
- Earnings Date: Wednesday, August 3 after the close
- Year-To-Date Performance: -17.4%
- Market Cap: $47.6 billion
- Earnings Date: Friday, August 5 before the market opens
- Year-To-Date Performance: -50.1%
- Market Cap: $5.7 billion
High-growth technology stocks were some of the market’s best performers over the last few years before the recent selloff dragged down the NASDAQ 100.
The steep year-to-date (ytd) declines, largely a result of the US Federal Reserve’s monetary tightening measures aimed at combating the highest inflation in decades, have created bargain-buying opportunities.
Here are three stocks which are reporting next week and have plenty of room to grow their respective businesses thus making them solid long-term investments.
Pinterest/h2
Pinterest (NYSE:PINS), which operates an image-sharing social media platform, has seen its valuation crumble in the last several months.
After soaring to an all-time high of $89.90 in February 2021, PINS stock is down 46.9% year-to-date and is 75% off its record peak.
Pinterest has either beaten or matched Wall Street estimates for eight consecutive quarters, dating back to Q1 2020. EPS is forecast to slide 28% yoy to $0.18.
Investors will be watching global monthly active users (MAUs) updates as the figure declined 9% yoy to 433 million in the last quarter, slightly missing expectations.
In addition, any comments from Pinterest’s management regarding sales guidance and user growth for the rest of the year amid the challenging macroeconomic and geopolitical environment will be noted.
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Despite worries over decreasing user metrics and a slowdown in digital ad spending, 33 out of 34 analysts surveyed by InvestingPro point to a gain of 34.8% bringing shares closer to their fair value of $25.81.
Fortinet/h2
Fortinet (NASDAQ:FTNT) develops and sells cybersecurity solutions, such as intrusion prevention systems and endpoint security components. Year-to-date, shares of the network-security firm have lost 17.4% as investors flee high-growth tech names with rich valuations.
FTNT stock—which just recently split 5-for-1—is trading about 20% away from its all-time high of $74.35 on Dec. 29, 2021.
Fortinet far exceeded Wall Street estimates in the previous quarter and gave strong guidance. It has also topped Wall Street’s profit and sales expectations for 17 straight quarters, dating back to Q4 2017.
InvestingPro stands at $62.36, a potential 5% upside from the current market value over the next 12 months.
DraftKings/h2
DraftKings (NASDAQ:DKNG), which is widely considered as the leader in the online sports gambling industry, has fallen out of favor with investors this year amid a broad selloff in tech stocks, especially those that are unprofitable or have lofty stands at $16.66, a potential 21% upside from the current market value.
Disclaimer: At the time of writing, Jesse had a position in FTNT shares. The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
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