The market appears to be in re-calibration mode these days. Rising bond yields, mixed economic data, and ongoing pandemic uncertainty have been reasons to pause and evaluate where the market goes from here.
Many stocks that have banked huge gains in recent months have had to bear the brunt of some newfound volatility. In some cases, the selloffs have been warranted but in others the repricing has been overkill.
These are a few of the stocks that have been significantly discounted but whose long-term growth narratives remain unchanged.
Will Chewy Stock Run Up Ahead of Earnings?
Online pet products retailer Chewy (NYSE:CHWY) is having a 25% off sale on its stock. After climbing to $120 soon after Valentine's Day, the market has suddenly fallen out of love with Chewy. But expect the pair to soon get back together in recognition of Chewy's attractive growth profile.
Last quarter Chewy wowed investors with 45% revenue growth as the business continued to benefit from a surge in pet adoptions and online orders for its expanding product lineup. And while the top-line performance has yet to translate into a profit, an expanding gross margin suggests positive net income is not far off.
Chewy has surpassed Street expectations in each of the last four quarters. When it reports fourth-quarter results in a few weeks the market will be reminded of the company's stranglehold on the e-commerce pet market. Until then the pullback in its stock price should remain on a short leash as it prepares for a potential pre-earnings rally.
Is the Vroom Pullback a Buy Opportunity?
Last month automotive e-commerce innovator Vroom (NASDAQ:VRM) raced to its highest level since September as the online car buying space caught fire. It has since returned to the starting line amid a selloff in the group and an overreaction to the company's latest quarterly report.
Vroom's fourth-quarter performance was mixed as $406 million in revenue beat the Street but the $0.44 per share loss was a nickel worse than expected. Its e-commerce platform sold more than 11,000 vehicles during the period, a 74% increase over last year. Management's outlook was bullish but the market has chosen to glaze over it.
Since the Q4 report, three sell-side analysts have already reiterated their 'buy' ratings on Vroom. Piper Sandler said it sees "lots of upside potential" and gave the stock a $60 target which represents more than 60% upside from here.
In bidding Vroom shares back down into the $30's, the market is failing to see the forest from the trees. The pandemic has only accelerated a prevailing shift in the way consumers buy and sell used automobiles. People have embraced the convenience and transparency of services like Vroom and Carvana. As the auto retail market goes through a major transformation and Vroom's business scales, the company should emerge as one of several winners.
Is Beam Global Stock Oversold?
Like many electric vehicle plays, Beam Global (NASDAQ:BEEM) has been unplugged. With its share price now cut in half from its New Year's Eve peak, investors have a great opportunity to jump in on a clear EV charging leader.
All fours firms that cover Beam Global have maintained 'buy' ratings. Last month Maxim Group reiterated its 'buy' rating with a $90 price target. This suggests the stock can more than double from here.
While the market may have been exuberant in bidding up some of the EV names, its easy to understand why the valuations got to where they were. The global growth opportunity is huge in the EV space and EV infrastructure in particular. As the world pushes towards carbonless fuels and even traditional automakers move towards EV production, demand for EV charging solutions is likely to intensify.
Look no further than the U.K. which recently announced plans to phase out the sale of petrol and diesel vehicles by 2030. The plan includes government grants for homeowners and businesses that can be put towards the installation of EV charging stations as well as additional funding to incentivize the purchase of zero emission vehicles.
And while Beam Global's prospects in U.K. may be limited by homegrown competitors, it has ample opportunity to thrive in the U.S. market. The company's solar-based EV ARC product has been well received by the market. It provides sustainable EV charging in minutes in sharp contrast to competitors' electricity-based offerings which can take months to deploy by the time proper permits are obtained and construction is completed. The EV ARC's other advantage is that it can provide power during cloudy weather conditions or times when the electricity grid goes down.
Beam Global's customer list of government agencies and blue-chip corporations is impressive—and it has just scratched the surface on a massive growth opportunity in EV charging. The current weakness in the stock offers a great chance for long-term growth investors to power up their portfolio.
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