One of the problems with U.S. stocks near all-time highs is finding stocks to buy. Big winners have momentum, but can look expensive. Stocks that have lagged the market are cheaper, but underperformed even in a bullish environment. Investors rightly can wonder what performance will be going forward, if a name can’t rally when stocks as a whole are moving steadily in the right direction.
Wednesday’s big stock charts focus on three stocks that could be buying opportunities at the moment. All three have lagged the market to some extent both in 2019 and going back further. Each has a case for upside ahead and a case for caution given a suddenly shaky market environment.
These three big stock charts don’t look the same; in fact, they potentially augur very different near-term outcomes. But for investors looking for value, they do provide possible opportunities, though market dynamics might well determine if and when those opportunities arise.
Groupon (NASDAQ:GRPN) stock seems to be at a decision point at the moment. The first of Wednesday’s big stock charts shows a stock ready to make a move:
- Clearly, resistance has held at $3 for roughly three months now. Each time GRPN stock has challenged that level, it has faded, and it might so do again. But an upward exit from a sideways triangle usually suggests a bullish outlook. Shares have cleared near-term moving averages as well. If Groupon stock can find a catalyst, it can break through resistance. From there, the 200DMA is the only thing standing between the stock and a return to July levels closer to $3.50.
From a broader perspective, however, it’s tough to find much optimism. As the monthly chart shows, GRPN has been dead money for years now. On an earnings basis, Groupon stock is reasonably cheap at 13x forward earnings. But margins are thin and revenue growth has been weak. I’ve long been a bear towards the stock, and I agree with Luke Lango’s take last month that the stock is cheap for good reason.
- Still, traders and those with a bit of a speculative bent might see an interesting potential play here. Rumors of a merger with Yelp (NYSE:YELP) made the rounds earlier this year, and talks could resume or progress. There’s still hope for a turnaround. And in a market with so few cheap stocks, GRPN may be attractive simply by default.
- That said, both the chart and the fundamentals seem to come to the same conclusion: Groupon just needs something more. At $3, it needs better sentiment to bust through resistance, and better performance to be a compelling value.
Monster Energy (MNST)
Shares of Monster Energy (NASDAQ:MNST) have faced stiff and repeated resistance. But the good news for MNST stock is that its resistance remains a decent ways off, suggesting that the recent breakout can continue:
- The rally since a solid earnings report last month seems like a textbook uptrend. The 20- and 200-day moving averages are providing support. Volume has been relatively strong, particularly in recent sessions. There’s no sign of real resistance on the chart until MNST stock touches $66, which suggests another 7%-plus upside.
The one concern is that resistance has been firm going back early this year. It might be too much to expect the rally to continue beyond $66. Taking the broader view, MNST stock has traded sideways going back to the beginning of last year. For a consumer name with a still-hefty 27x forward multiple, that lack of momentum over such a long stretch is worrisome.
- Still, as Bret Kenwell detailed last week, a solid fundamental case underpins the second of Wednesday’s big stock charts. Monster Energy still is growing earnings at a nice clip. The balance sheet is clean, with no debt and over $1 billion in cash. The competitive environment will get a bit tougher as Coca-Cola (NYSE:KO), which owns a large stake in Monster Energy, launches its own energy drink early next year. But if Monster Energy can navigate those challenges, MNST stock can get back to its old ways. This, after all, is the best-performing stock of the century so far.
F5 Networks (FFIV)
There are a number of stocks with intriguing bull cases in the cybersecurity sector at the moment. F5 Networks (NASDAQ:FFIV) is one of those stocks, but the last of our big stock charts suggests a rally may not be imminent:
- A gap down last week looks quite concerning. It signaled a bearish reversal out of a narrowing ascending wedge, and ended an uptrend that had held going back to August. FFIV stock has held up in recent sessions, and on decent volume, but there’s little but sentiment supporting the stock at the moment.
Zooming out to the weekly chart, the trend is more clear — and more bearish, with a steady pattern of lower highs and lower lows. FFIV stock has found its footing to some extent over the last six months, but shares still haven’t been able to rally. It’s worth noting that it was a two-notch downgrade from Bank of America Merrill Lynch that led to last week’s gap down, and quite clearly the market hasn’t signaled much disagreement with that analysis.
- From a fundamental perspective, FFIV does look more intriguing at less than 13x forward earnings and down over 30% from last year’s highs. Cybersecurity stocks on the whole surprisingly have struggled, with the ETFMG Prime Cyber Security ETF (NYSEARCA:HACK) barely above September 2018 levels. Palo Alto Networks (NYSE:PANW) sold off after earnings late last month. The good news for FFIV stock is that sector sentiment has room to reverse and potentially lift the stock higher. The bad news is that the last 15 months show that F5 Networks probably can’t improve that sentiment on its own.
As of this writing, Vince Martin has no positions in any securities mentioned.