The oldest advice in the markets is, buy low and sell high. The hardest trick in the markets is knowing how to recognize a low-cost stock that is poised to bring strong gains. It’s a trick because, in truth, low cost is a relative description. A stock can have a triple-digit price tag, and still be selling for a discount if it’s off a recent high point.
The upshot is, investors looking to buy low can use sharp declines in fundamentally sound stocks as a deciding factor. Wall Street’s analysts aren’t shy about pointing out deals in the market, and a review of their notes will point investors toward stocks that have hit a hurdle, lost share price, but retained the strengths that got them that peak in the first place.
We’ve used the TipRanks platform to pull up details on three stocks that meet this profile. These are an interesting lot, coming from several market niches, but all are Strong Buys with plenty of upside potential and they are all down at least 30% from peak values reached earlier this year. Let’s take a deeper dive in, and check them out.
Open Lending Corporation (LPRO)
First up is Open Lending, a loan financing company in the automotive sector. Financing has been the engine of car sales – for new and used – in recent years, and it will likely be more important going forward as inflation pushes up prices in the car markets. Open Lending, a Texas-based company, makes the decision process easy, with loan analytics, risk modeling and risk-based pricing, and automated decision making. The company went public last year through a SPAC transaction.
Open Lending works with automotive lending companies, offering a platform to streamline their lending process. The company’s services allow lenders to make the best use of their assets and to maximize the repayment rates. The result is lower risk and higher yields, a win for everyone, including the end customer who drives off in a newly purchased car.
Despite some volatility through 2021, the company’s stock generally stayed elevated – until September of this year, when it started falling form its peak. From that peak, the stock is down 43%.
Even though the stock is down, company management described the recent 3Q21 report as a ‘record.’ Revenue came in at $58.9 million, down slightly from the $61.1 million in 2Q21, but up an impressive 97% year-over-year. The company facilitated over 49,000 certified loans during the quarter, up 138% yoy. EPS was positive, at 23 cents per share, compared to the 62-cent EPS loss in the year-ago quarter.
Writing on this stock for Canaccord Genuity, 5-star analyst Joseph Vafi sees the company in a sound position despite inflationary headwinds.
“Another all-time record quarter, bucking Covid, global chip shortages and rising car prices and underscoring how resilient the Open Lending platform is against such macro headwinds…. the LPRO business model is still expanding, with solid execution in credit union refi, potentially launching new products in the short term, and importantly moving forward with auto OEM relationships in addition to the two already in hand. Even during a tough quarter in auto transactions, the company signed 16 new customers, four of which had assets of $1B or greater,” Vafi noted.
To this end, Vafi gives LPRO shares a Buy rating, with a $55 price target that implies a 12-month upside potential of a huge 130%. (To watch Vafi’s track record, click here)
Overall, it’s clear that Wall Street likes the prospects on this stock. Of the 8 recent reviews, 7 are to Buy against 1 Hold, for a Strong Buy consensus rating. The shares are priced at $23.90, and the average price target of $38.57 suggests a gain of 61% in the year ahead. (See LPRO stock analysis at TipRanks)
Next up is Five9, an AI cloud company offering a scalable contact center platform. Five9 has a smart product in a crowded industry, but online contact is a growth industry. The company’s software uses AI to allow faster data analysis with greater accuracy and efficiency. Contact center customers can use the AI to track and route calls, direct callers and service agents, and process information.
The big news recently on Five9 was the collapse of the company’s talks with Zoom. The two companies had been in negotiations over a Zoom offer to acquire Five9. The offer, for an all-stock deal, was worth $14.7 billion, but Five9’s shareholders rejected the deal on the last day of September. It is highly unusual for company shareholders to reject a merger deal in this fashion.
Five9’s stock, which had been volatile this year, had been slipping since its August peak. It fell further after the rejection of the Zoom offer; currently, FIVN shares are down 32% from that peak value.
Despite nixing Zoom’s offer in the third quarter, Five9 reported record revenue and beat the EPS estimates in the Q3 financial release. The company’s top line hit $154.3 million, up 38% yoy, and EPS, at 28 cents, was 12% better than the 25-cent forecast.
Terry Tillman, 5-star analyst with Truist, was impressed by Five9’s quarter – and by the company’s outlook going into next year. He writes, “FIVN returned to its regularly scheduled quarterly call without missing a beat. The company delivered record bookings in 3Q, and sounded confident about ongoing strong momentum in enterprise growth, while confirming 2026 revenue ($2.4 billion) and EBITDA margin (~23%) as potential targets laid out in recent SEC filings. Given the stock underperformance since the Zoom deal was terminated, we believe this is a good entry opportunity for investors as fundamental momentum remains strong.”
In line with his optimistic approach, Tillman gives LIFE shares a Buy rating and his $210 price target suggests a 48% potential upside for the coming year. (To watch Tillman’s track record, click here)
Like Tillman, Wall Street is confident on Five9’s prospects, and that can be seen in the 16 reviews on record. These break down to 14 Buys and just 2 Holds, to support the Strong Buy consensus. The average price target of $199.25 implies a one-year upside of 40% from the current trading price. (See FIVN stock analysis on TipRanks)
Annexon Biosciences (ANNX)
The last stock we'll look at, Annexon, is a clinical-stage researcher, focused on C1q, an initiating molecule of the classical complement pathway – and one that is implicated in a number of auto-immune and neurodegenerative diseases that affect the body, brain, and eye. The company’s development pipeline features drug candidates designed to act as potent, selective inhibitors of C1q, to prevent tissue damage and antibody-mediated autoimmune response, as well as to preserve function in synapses associated with cognitive decline complement-mediated degenerative disease. The company’s drug candidates have broad application to multiple complement-mediated conditions.
All of that’s a mouthful, but what it comes down to is, Annexon is developing drug candidates with multiple indications. The autoimmune program, for example, has 3 drug candidates under investigation for five different conditions. The most advanced of these tracks, featuring ANX005 as a treatment for Guillain-Barré syndrome, is enrolling patients in a Phase 2/3 clinical trial, with completion projected for 2023. Earlier data, from the drug-drug interaction study and the Phase 1b trial, was presented this year, and showed an acceptable tolerability profile along with positive therapeutic action.
The company recently completed a Phase 2 trial of ANX005 in the treatment of Huntington’s disease (HD), and initiated dosing in a Phase 2 trial of the drug against amyotrophic lateral sclerosis (ALS). Data releases on these trials are expected in 4Q21 and during 2022 respectively. Annexon recently expanded its development program with ANX009, a new drug candidate aimed at treating lupus.
Despite this active pipeline, the company has seen its stock fall 61% from its peak, reached this past March.
However, JPMorgan analyst Anupam Rama remains bullish on Annexon, taking particular note of the company’s multiple shots on goal.
“In a win scenario, we are looking for a clean safety profile for ANX005 and positive directional trends on key biomarkers (particularly on neurofilament light chain or NfL), with a homerun scenario showing initial / early trends of functional benefit... While we acknowledge that the HD data will be early stage, we note upside scenarios likely will have sentiment pull-through to the broader neurodegeneration efforts (i.e., platform value). Importantly, from current levels, we see upside in ANNX shares on Guillain-Barré Syndrome (GBS) alone (into the mid~$20s) and the broader pipeline, including the phase 2 HD readout, as providing pipeline optionality,” the analyst opined.
Rama rates ANNX shares as Overweight (i.e., a Buy), with a $37 price target to indicate room for 170% appreciation in the next 12 months. (To watch Rama’s track record, click here)
The JPM view is hardly an outlier here, as the stock’s Strong Buy consensus rating is unanimous, based on 4 positive reviews. Shares are priced at $13.7 and the $38 average price target suggests a one-year upside potential of a very strong 177% from current trading levels. (See ANNX stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.