When it comes down to it, all investing and trading is about nothing more than buying low and selling high. Ideally, you want to find stocks with as much upside as possible and just ride the wave.
Albemarle Corp. (NYSE: ALB), Match Group Inc. (NASDAQ: MTCH) and PayPal Holdings Inc. (NASDAQ: PYPL) are stocks from disparate industries, but all are undervalued relative to analysts’ forecasts of how high their prices may rise.
In fact, these stocks are significantly undervalued if you compare their current prices to analysts’ estimates.
However, it’s wise to use some caution with stocks that appear to be so inexpensive.
There’s a reason these stocks fell so far, and that adds risk. Revenue and earnings declines, an out-of-favor industry, economic challenges and negative news are among the reasons a stock’s price can fall far below prior highs.
Sluggish EV sales slowing Albemarle's roll
The world’s biggest lithium producer is currently trading at nearly half of analysts’ estimated value of $228.50.
Albemarle’s chart shows the stock making two failed breakout attempts since its high one year ago; if you compare that timetable with the Albemarle earnings data, you’ll notice that earnings growth has been slowing since the quarter ended in December 2022.
While electric vehicles are becoming more popular, they’re not rolling off dealer lots as fast as some policymakers had hoped. The company slashed its full-year guidance, citing soft EV sales.
"While the US and Europe make up only about one-third of total EV production in '23 and '24, near term we see potential challenges for EV growth in those regions related to economic softness and higher interest rates," CEO Kent Masters said in the most recent earnings conference call.
A drop in lithium prices also hurt the company’s revenue, as it was able to fetch less for its products.
Amid all that doom and gloom, don’t overlook the upside potential: EV adoption will continue to grow, even if more slowly than originally forecast. Albemarle has the option of slowing its investment in new production capacity while prices are down, which should help the bottom line while the company awaits the next EV growth cycle.
Analysts love the potential for Match
The dating app went public in July 2020, auspicious timing for the “stay at home” era.
The stock rallied to a high of $182 in October 2021 but is now trading 76.08%% below analysts’s consensus price forecast of $51.50. A glance at the Match chart shows you the two-year decline.
Match is still the leading company in the online dating space, and even in the post-pandemic era, plenty of people are still going online to meet that special someone. In addition to its flagship app, the company also owns Tinder, Hinge, Meetic, OkCupid, Pairs, Plenty Of Fish, Azar and Hakuna, among others. When the company most recently reported results, it said apps, including Hinge and Tinder were seeing faster rates of adoption.
That expansive reach is causing analysts to see a continued upside in the stock.
MarketBeat’s Match Group earnings data show revenue growth returning in the past two quarters after declining in late 2022 and early 2023. The company has also implemented cost controls to drive efficiencies; analysts expect earnings to grow by 121% this year to $2.76 a share.
Forecasting PayPal to bring in more money
S&P 500 component PayPal is trading 46.34% below analysts’ price target of $79.43.
The stock, which is among finance stocks tracked by the Financial Select Sector SPDR Fund (NYSEARCA: XLF), is down 23.10% year-to-date but has recently been holding above levels near $28 and may have found a floor.
In the most recent quarter, net income and revenue topped estimates, as the PayPal earnings data show. Earnings grew at double-digit rates in the past four quarters, with revenue growth in the mid-to-high single digits.
The company has a new CEO, Alex Chriss, who took the helm in August. A new CEO is frequently the catalyst for price growth, as that person often brings a fresh perspective, strategic ideas and innovative leadership that can drive organizational growth.
In the third-quarter news release, Chriss mentioned driving further efficiencies that will enable the company to “execute with higher velocity.”
Analysts expect PayPal to earn $4.98 per share this year, an increase of 21%.
The company’s Venmo digital wallet service has been growing at a fast pace, and analysts expect that trend to continue.