A lot of once high-flying stocks have been beaten down over the past few months. Names that used to be expensive have become cheap stocks as investors have rotated out of technology and growth companies that benefitted during the pandemic.
Instead, they appear to have been gravitating toward cyclical stocks that should do well as the economy reopens and consumers emerge from Covid-19 hibernation.
For savvy investors, the current environment presents buying opportunities galore. Many of the hardest-hit stocks belong to companies that are market leaders and whose financial performance has been stellar.
There’s nothing wrong with many of the stocks that currently have depressed share prices and analysts continue to upgrade their ratings on them even as the price-per-share keeps falling.
In this article we look at four cheap stocks for investors to buy on sale.
Cheap Stocks to Buy on Sale: Zillow (ZG)
Zillow is the market leader when it comes to online real estate listings, and its business got a big push during the pandemic when people were prevented from touring houses in person.
The company reported earnings on May 4 that smashed estimates as it swung to profitability. Zillow reported first quarter earnings of 44 cents a share on revenue of $1.2 billion.
Analysts had forecast first-quarter earnings of 26 cents a share on $1.1 billion revenue.
Net income came in at $52 million (its first-ever profit) after reporting a loss of $163 million in the first quarter of 2020.
Zillow is also run by an exceptionally competent management team that is led by Rich Barton and Lloyd Frink, two former executives at Microsoft (NASDAQ:MSFT).
The company has just announced plans to hire more than 2,000 employees to fill roles in mortgage loans and software development.
Yet despite its success and pedigree, Zillow shares are currently trading at fire sale prices.
ZG stock has fallen since Feb. 16 and now trades at around $120 a share. The decline can be blamed on investors rotating out of technology stocks that thrived during the pandemic.
Smart investors will buy ZG stock on weakness. The median price target on the shares is $209, representing a serious gain from its current level. The high price target on the stock is $250.
President Biden has wasted no time making renewable energy one of the central focuses of his administration.
Lessening Americans’ reliance on fossil fuels and combating climate change is one of Biden’s top priorities. This is good news for Sunrun, a San Francisco, California-based company that manufactures solar panels and batteries for use in residential homes.
This is a market that is expected to boom in the coming years as an alternative to electricity and traditional power generation.
Wall Street feels strongly that Sunrun is the right company at the right time. Several analysts, including from Piper Sandler and RBC, have upgraded the stock with “outperform” ratings, stating that they expect RUN stock to climb 40% to 50% higher from its current level.
That’s got to be welcome news to Sunrun shareholders, who have watched with gritted teeth as the company’s stock has fallen more than 50% since January. Sunrun shares now trade at around $49.
At its current valuation putting RUN on this list of cheap stocks was a no-brainer. The median price target on the stock is $81 with a high estimate of $95.
The median price target suggests a tempting upside. It’s worth noting that the lowest price target on Sunrun’s stock is $55.
Cheap Stocks: Draftkings (DKNG)
Boston-based sports betting operator Draftkings has a lot going for it yet can’t seem to get any love from investors.
Sports are coming back in a big way.
More states are legalizing online gambling as a means of generating revenue to help cover budget shortfalls caused by the Covid-19 pandemic (New York recently became the 16th state in three years to allow online betting), and Draftkings is growing in popularity.
All of these tailwinds have led analysts to upgrade DKNG stock and urge investors to see the current share price as a buying opportunity.
It is certainly curious that DKNG stock has fallen 25% since mid-March. The company’s share price is struggling to stay above $55 a share right now.
Yet analysts are encouraging investors to buy and hold Draftkings stock, promising they will be rewarded in coming months as the share price turns around. Indeed, the median price target on Draftkings stock is $75, with a high estimate of $105.00.
The median price target represents an impressive gain. A turnaround in Draftkings fortunes should arrive with this year’s NFL football season, of not sooner.
Teledoc Health (TDOC)
Virtual consultations are a real and growing part of the healthcare industry, and Teledoc Health is the industry leader when it comes to telemedicine that features video conferences with doctors.
This business got a substantial boost during the pandemic and many analysts expect telemedicine to become an integral part of healthcare moving forward.
This outlook gave Purchase, New York-based Teledoc Health and its share price a sizable boost in 2020. At the start of this year, TDOC shares were trading as high as $308.
However, since early February, TDOC stock has been crushed like a tin can. The company’s share price has collapsed 49% to its current level of $156.
This despite the fact that Teledoc Health reported better than expected first-quarter earnings, with revenue of $453.7 million, a 151% year-over-year increase and better than analysts’ estimate of $451.9 million.
Net income came in at $56.6 million, up from $10.7 million in the first quarter of 2020.
Like other stocks on this list, TDOC has gotten hurt by the investor rotation out of technology companies that did well during pandemic lock down measures and into cyclical stocks.
There are concerns about Teledoc Health’s ability to sustain its current growth as the pandemic ends.
But most analysts remain bullish on the stock. The median price target on the shares is $235, with a high estimate of $300.
That suggests a potential gain of 50% if the median price target turns out to be correct. The low price on the stock is $170 a share, nearly 10% higher than its current level.
On the date of publication, Joel Baglole held long positions in ZG, MSFT and DKNG.