With the major indices nearing correction mode, many stocks have slipped well off their record highs. If this ugly stretch turns out to be yet another ‘buy the dip’ opportunity some stocks will recover faster than others. Often these are the companies that have the strongest fundamentals, the best technical traits—or both.
From a technical analysis perspective, there are several ways to gauge which stocks are oversold. The relative strength indicator (RSI) is among the most common and will be used here as our first criteria in identifying the most attractive oversold stocks.
Secondly, we’ll look at what sell-side analysts think of the most technically oversold stocks with a preference given to more recently issued opinions. Companies in which the Street is overwhelmingly bullish advance to the shortlist.
Using these criteria, here are three of the most compelling oversold large-cap names that investors can buy inexpensively.
Is Qualcomm Stock Oversold?
Qualcomm (NASDAQ:QCOM) currently has an RSI reading of 17. This means that the stock has woefully lagged the broader market. In fact, it ranks in the bottom 10 of all S&P 500 constituents in terms of the RSI.
The chipmaker now sits 24% below its January 2021 peak and the reason behind the downturn is largely tied to China. Demand from Chinese mobile phone manufacturers has been weak because the pandemic has slowed phone upgrade rates. In addition, as the world prepares for the transition to 5G, some customers are paring back on orders for Qualcomm’s 3G and 4G chips.
Qualcomm stock has also been weighed down by the supply chain struggles hampering the broader semiconductor industry. However, Qualcomm is in significantly better shape than most peers in this regard. Last quarter, its semiconductor business posted 70% revenue growth.
In the past month, five firms have reiterated their buy ratings including on Monday when Key Banc gave the stock a $175 target. Analysts see Qualcomm emerging as a major winner in the 5G networking space. That’s hard to refute considering all major smartphone makers license Qualcomm’s technologies. Longer-term growth opportunities in other emerging tech fields like Internet-of-Things make Qualcomm an easy buy decision here.
Is it a Good Time to Buy Walmart Stock?
Walmart (NYSE:WMT) sits firmly in the bottom decile of S&P 500 names with a 22 RSI reading. Since climbing to a record high late last year, the stock has struggled to reach new heights despite the broader market doing so on dozens of occasions. Absent the tailwind of pandemic-led stockpiling, can the discount retailer regain its footing?
While Walmart is unlikely to see the kind of growth it did over the last few quarters, it still has some growth drivers that can make the stock a top Dow performer. One should never discount the power of the U.S. consumer which August’s 12% retail sales growth figure confirmed. Shopper spending habits may not return to early pandemic levels, but Walmart should continue to benefit from a different pandemic-related tailwind for some time.
The dramatic shift to online shopping prompted Walmart to ramp its investments in its digital sales channels. In turn, services like store pick-up and same-day delivery became very popular. And even though shoppers have grown more comfortable venturing into Walmart stores, they’ve also become quite comfortable ordering online and getting items delivered to the trunk of their cars. These services aren’t going away and will make Walmart a stronger omnichannel retailer over time.
More recently, Walmart has invested in new technologies, supply chain improvements, and its workforce to further strengthen its brand. While these initiatives are limiting near-term earning estimates, they will ultimately make the company stronger. Look no further than the company’s pandemic-related investments that eventually paid off big-time.
Is Regeneron Stock Oversold?
Regeneron Pharmaceuticals (NASDAQ:REGN) is dead last in the S&P 500 with a paltry 11 RSI reading. Even though the stock is still up 15% year-to-date is has come down a lot from last month’s $686.82 record high.
Last week the biotech firm announced new data from its late-stage trial of COVID-19 treatment REGEN-COV. Although the results were largely positive including a 36% lower risk of death after 29 days, the market was underwhelmed. Although the therapy has been approved by the FDA for emergency use, slower than expected enrollment forced the trial to be paused. The stock gapped lower in above-average volume but seems to have stabilized in recent days.
The support of sell-side analysts has much to do with Regeneron searching for a bottom in the mid-$500’s. No one has yet to jump off the bandwagon with a sell rating and each of the last six Wall Street opinions have been buys. Most recently, H.C. Wainwright called the downturn in Regeneron stock a buy opportunity and gave it a stunning (and specific) Street-high target of $831. This points to a nearly 50% upside.
Although the recent REGEN-COV data was a setback in the eyes of some investors, others see the drug candidate eventually becoming a key cog in the fight against the coronavirus. It is currently available to qualified patients free of charge through a federally funded program. This is probably not the end of the road for REGEN-COV and even if it is, Regeneron has much more to lean on.
Regeneron has thus far secured FDA approval for nine drugs that are used to treat a range of serious diseases outside of the coronavirus. It also has an extensive pipeline of therapeutic candidates for eye diseases, inflammatory diseases, cardiovascular diseases, cancer, and more. In the near term the stock will continue to trade based on Covid developments. Given the strength of its platform and pipeline, weaknesses such as we are seeing now should be viewed as a long-term buy opportunity.
Before you consider QUALCOMM, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and QUALCOMM wasn't on the list.
While QUALCOMM currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
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