Over the last couple of weeks, we've seen the Nasdaq get dragged down by increasing concerns over inflation and Treasury yields. With the tech-heavy index now officially in correction territory many investors are wondering if this is yet another "buy the dip" setup.
While this remains to be seen, sell-side analysts have been busy reassessing which stocks just got more attractive. Here we highlight three of the names that have received some convincing support from the Street during their respective slides.
What is a Good Chinese Electric Vehicle Stock?
Li Auto (NASDAQ:LI) is one of several electric vehicle (EV) names that have been significantly repriced by the market. After climbing above $47 in November 2020, the Chinese automaker's stock has gone in reverse and is nearing its $15.50 IPO price of July 2020.
But while the market may have put the cart before the horse in giving Li Auto such a lofty valuation out of the gates, the company's long-term growth opportunity hasn't changed. As a manufacturer of premium smart electric SUVs, Li Auto stands to grab a meaningful slice of a Chinese EV market that according to S&P Global Platts is forecast to grow 40% this year. As the country continues to rebound from COVID-19, surging electric vehicle demand is expected to bring EV sales from 1.8 million units this year to 6 million units by 2025.
Its this opportunity that has analysts calling the downturn in Li Auto's stock an electrifying chance to gain exposure to the world's largest auto market. Over the last three months, six analysts have issued 'buy' ratings on Li Auto with price targets ranging from $34 to $60. Even the lone 'hold' rating from Deutsche Bank came with a $35 target that represents roughly 60% from here. Last week Daiwa upgraded the stock to a 'buy' giving more weight to the long-run market opportunity over the near-term expense headwinds.
Is Overstock Oversold?
Overstock (NASDAQ:OSTK) has been one of the most volatile Nasdaq components in recent years. A stunning 580% gain last year was fueled by the company's newfound exposure to the cryptocurrency market as well as heightened e-commerce demand for home furnishings and other household goods during the pandemic.
Despite a good fourth-quarter performance in which Overstock swing to a profit, the share price has retreated some $50 since mid-February. Some of 2020's biggest winners are getting hit hardest of late in a bout of profit-taking.
Since the Q4 report, four firms have presented Overstock as a 'buy' including Merrill Lynch which upgraded the stock from a 'hold'. The analyst cited several reasons for the bump including Overstock's above-industry growth, expanding customer base, supportive U.S. housing trends, and the hiring of a former Amazon executive as Chief Marketing Officer.
Although Overstock is starting to look like a big-time buy, investors may wish to wait for a possible technical pattern to play out. On February 22nd a bearish continuation wedge formed on the daily chart pointing to a downtrend move to the $48 to $58 range. The pattern has thus far been spot on. And so, there could be an even cheaper place ahead to stock up on Overstock.
Is Hydrofarm Holdings a Good Cannabis Play?
Hydrofarm Holdings Group (NASDAQ: HYFM) is another compelling pullback except this one is better termed a 'plunge'. The California-based maker of hydroponics equipment and supplies for the legal marijuana market and other environment-controlled growers has seen its share price nearly cut in half over the last couple weeks.
The downturn has been part of a broader pullback in heated cannabis-related stocks amid an assault on high stock valuations. The prevailing sentiment that space was bid up prematurely due to implications of a pro-legalization Biden administration has also contributed to the selling pressure.
The favorable timing of Hydrofarm's post-election IPO quickly turned the stock into a two-bagger. But now trading almost back at its Nasdaq debut level, the farming stock looks ripe for the picking.
Truist analyst Bill Chappell certainly hasn't been phased by Hydrofarm's sudden reversal of fortune. He recently reiterated his 'buy' rating on the stock and raised his price target by $30 to $95. Chappell considers Hydrofarm to be among the beneficiaries of the increasing demand for cannabis products in the U.S. and positive momentum in state legislation.
Last week Hydrofarm provided an outlook for fiscal 2021 noting strong growth ahead as the controlled environment agriculture (CEA) market expands. Management expects organic revenue growth of at least 20%. Achieving this target is certainly not a stretch given the company's 17% historic sales growth rate and leading position in the growing CEA market.
While there doesn't seem to be a drought of cannabis stocks in the market these days, Hydrofarm may be one of the more appealing names. Not only has it been in the business for more than 40 years, but approximately two-thirds of revenue comes from the sale of consumables like nutrients, additives, and pest control products. This is even more reason for investors to think about cultivating a position in Hydrofarm while its down on the ground.7 Infrastructure Stocks That May Help Rebuild America
Despite their disagreements (real or imagined) on almost everything, Democrats and Republicans alike love infrastructure projects. These are easy wins for Congressional leaders seeking re-election. And they typically spur job creation, which contributes to economic growth.
With that in mind, it’s ironic that, in the last four years, the United States Congress did not pass an infrastructure bill.
Nevertheless, even with (and maybe because of) the gridlock that looks to be in the country’s future, the infrastructure looks to be on the front burner again. The economic recovery is still far from complete. Unfortunately, neither are America’s roads, energy grid, telecommunications systems, and the like. That means that it would seem like a good policy for a Biden administration to look at an infrastructure bill.
Biden will be under pressure to endorse the $1.5 trillion infrastructure package that the Democrat-controlled House of Representatives passed in July. But the package may need to be tweaked a bit since it currently includes climate change initiatives that have kept the bill from advancing through the Senate.
However, it appears that the economy will need some significant juice after whatever this winter brings in terms of the virus. And if calmer heads prevail (we can always hope), there may be a major infrastructure bill to stimulate job creation. And we’ve identified seven stocks that should bear watching if this comes to pass.
View the "7 Infrastructure Stocks That May Help Rebuild America"
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