3 Cheap Stocks That Shouldn’t Be So

Rate Cuts

Key Points

  • As markets get scared from potentially delayed interest rate cuts this year. Though markets may find some relief in a few select stocks. 
  • These prospects stand out as potential winners, particularly now that Wall Street analysts see a double-digit upside. 
  • Discounted on relatively all metrics, these stocks all project likely interest rate cuts coming around the corner. 
  • 5 stocks we like better than Spotify Technology

Certain stocks fall out of favor once every business cycle, whether for actual justifiable reasons or because of plain overlooking. Markets can get busy and caught up with sectors that make the most noise, such as the U.S. technology sector, which has been taken to all-time highs by names like Nvidia Co. NASDAQ: NVDA.

Outside of this popularity contest, investors can find a few select stocks that have fallen behind the rest of the market and even their respective industries. From company-specific events to economic trends that are coming around the corner, stocks like Boeing Co. NYSE: BA, SoFi Technologies Inc. NASDAQ: SOFI, and even Daqo New Energy Corp. NYSE: DQ have some explaining to do. 

These stocks could become top picks for portfolios looking to beat the market in the coming cycle. However, they all depend on Interest rate cuts from the Federal Reserve (the Fed). 

Why the Odds Favor this Group

According to the CME’s FedWatch tool, stock market indexes have sold off recently because these potential rate cuts have been delayed until September 2024. As traders and investors had priced in these rate cuts today, delays caused the S&P 500 to retrace by as much as 5.5% in the past month. 

Despite this tantrum, some economic factors and developments suggest interest rate cuts may still be a reality. Analysts at The Goldman Sachs Group Inc. NYSE: GS predicted a manufacturing sector breakout this year, a thesis found in the bank’s 2024 macro outlook report


As the ISM manufacturing PMI index broke into its first expansionary reading in over a year, it seems Goldman is correct. February’s PMI shows a 6.4% jump in export orders, and foreign nations could only be interested in American exports if they expected the dollar to decline, making these future purchases cheaper. 

Because lower interest rates lower a currency's value, the manufacturing and exports trend suggests that even global traders expect cuts to come sooner rather than later. 

SoFi Stock: A Rate Cut Favorite

SoFi Technologies Today

SoFi Technologies, Inc. stock logo
SOFISOFI 90-day performance
SoFi Technologies
$7.21
-0.07 (-0.96%)
(As of 02:46 PM ET)
52-Week Range
$4.92
$11.70
Price Target
$9.08

The real estate market is at a standstill, with current homeowners refusing to relinquish their COVID-19 mortgages, which carry an average interest rate of 3.25%. Today’s mortgages are nearing 7.5%, making potential buyers wary of financing a home. 

More than that, the average home price rose by 31% from pre-pandemic levels, driving away potential buyers from another angle. Lower interest rates could kickstart the construction sector, a bet already taken by Warren Buffett in buying homebuilding stocks

What comes next after new homes are built, and new inventory helps to drive prices lower, is financing purchases. This is where SoFi stock comes into play, with analysts expecting to see earnings per share (EPS) growth of 225% in the next 12 months. 

Markets value these futures earnings at a forward P/E ratio of 28.3x today, which places SoFi stock at a 46% discount to other technology services stocks like Spotify Technology NYSE: SPOT and its 52.8x forward P/E. 

A price target of $9.1 a share calls for a net upside of 26.5% from today’s prices, reflecting the expectation of higher mortgage demand in the future and another piece of evidence helping the interest rate cut narrative. 

Rising Oil Prices? Better Call Daqo New Energy

Daqo New Energy Today

Daqo New Energy Corp. stock logo
DQDQ 90-day performance
Daqo New Energy
$18.83
+0.12 (+0.64%)
(As of 02:39 PM ET)
52-Week Range
$17.30
$43.66
P/E Ratio
8.84
Price Target
$27.63

That’s right, oil is breaking past its previous ceiling of $80, reaching a six-month high of $90 last week. As geopolitical conflicts in the Middle East keep escalating, oil prices could continue to increase. Goldman Sachs thinks it could reach $100 a barrel this year

More expensive oil makes alternative energy sources – like solar – more attractive propositions. This is where Daqo comes to help, as it is the world’s largest polysilicon manufacturer, a key material needed for solar panels to complete the photovoltaic process. 

Projecting 73% EPS growth this year should be enough to make a stock flirt with new highs; however, because Daqo is based in China, fears and uncertainty in the nation’s equity market caused this stock to trade down to a dismal 46% of its 52-week high.

A $36.2 price target represents a 61% upside in this stock. Lower interest rates could make solar panel financing easier for buyers and boost oil demand even further on the manufacturing breakouts mentioned.

Boeing’s Hiccup, Get Past It

Boeing Today

The Boeing Company stock logo
BABA 90-day performance
Boeing
$186.98
+2.03 (+1.10%)
(As of 02:46 PM ET)
52-Week Range
$159.70
$267.54
Price Target
$221.24

Boeing shares were scrutinized after a scandal involving a 737 MAX 9 jet. The stock trades at 63% of its 52-week high despite projecting industry-leading EPS growth of 1,548% this year. While boldly bullish, these projections could be a reality. 

As interest rates come down, traveling—business and pleasure—could take off. The ISM manufacturing PMI showed that the leisure and accommodation industry expanded for a third consecutive month. Because this involves travel, airline stocks may push their Boeing orders this quarter. 

Knowing this, analysts placed a $229.3 price target on the stock, calling for a 34% upside today. Boeing’s last quarterly financial report shows that 100% of its new orders came from models outside of the affected MAX 9 jet, meaning next quarter’s fulfilled orders – accounted as earnings – could likely beat expectations. 

Despite the scandal, short interest in Boeing stock declined by 14.1% in the past month, bringing the net percentage of shares shorted down to 1.5%. Bears aren’t even buying into the ‘doom’ story surrounding Boeing planes.  

Should you invest $1,000 in Spotify Technology right now?

Before you consider Spotify Technology, 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 Spotify Technology wasn't on the list.

While Spotify Technology currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

The Best High-Yield Dividend Stocks for 2024 Cover

Looking to generate income with your stock portfolio? Use these ten stocks to generate a safe and reliable source of investment income.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
NVIDIA (NVDA)
4.7189 of 5 stars
$951.25+2.9%0.02%79.67Moderate Buy$966.55
Boeing (BA)
2.8969 of 5 stars
$186.98+1.1%N/A-52.67Moderate Buy$221.24
SoFi Technologies (SOFI)
3.4227 of 5 stars
$7.21-1.0%N/A-23.26Hold$9.08
Daqo New Energy (DQ)
4.3267 of 5 stars
$18.83+0.6%N/A8.84Reduce$27.63
The Goldman Sachs Group (GS)
4.6794 of 5 stars
$465.48-0.5%2.36%18.18Moderate Buy$440.57
Spotify Technology (SPOT)
4.0252 of 5 stars
$307.50+1.5%N/A-458.95Moderate Buy$306.42
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


Featured Articles and Offers

Search Headlines: