Broader indices have started 2022 on a down note. In the first half of January, the Dow Jones, the S&P 500 and the Nasdaq 100 were each down about 1%, 2% and 5%, respectively. However, seasoned investors will realize that these declines typically offer an opportunity to buy robust stocks at considerable discounts. As such, today’s article introduces seven potential comeback stocks that could see sunnier days in the months ahead.
Companies on this list have been under pressure for most of 2021 as well. Yet, I believe these names have the potential to turn the tide soon. They have established businesses, impressive cash flows and proactive management teams. Plus, most of them are trading below fundamental values of their respective sectors. Several of these comeback stocks also offer juicy dividends. Put another way, recent weakness in these picks means they need to be on your watchlist.
So, with that information said, here are seven comeback stocks to buy for 2022:
- AT&T (NYSE:T)
- CrowdStrike (NASDAQ:CRWD)
- Electronic Arts (NASDAQ:EA)
- Las Vegas Sands (NYSE:LVS)
- Medtronic (NYSE:MDT)
- NetEase (NASDAQ:NTES)
- Twitter (NYSE:TWTR)
Comeback Stocks to Buy: AT&T (T)
52-week range: $22.02 – $33.88
Dividend yield: 7.65%
One of the largest telecommunications groups stateside, AT&T has around 100 million customers who use its entertainment and communications products and services. This telecom giant is currently on track to spin off WarnerMedia in a $43 billion deal with Discovery (NASDAQ:DISCA). WarnerMedia and Discovery will merge to create a new media empire. Wall Street expects the spinoff to provide AT&T with capital to keep itself competitive in the 5G space.
AT&T announced third-quarter 2021 results in late October. For the period, consolidated revenue declined 5.7% year-over-year (YOY) to $39.9 billion. Net income was $5.9 billion, or 82 cents per diluted share, up from $2.8 billion or 39 cents per diluted share in the prior-year quarter. Finally free cash flow (FCF) stood at $5.2 billion. On the results, CEO John Stankey said the following:
“We had our best postpaid phone net add quarter in more than 10 years, our fiber broadband net adds increased sequentially, and HBO Max global subscribers neared 70 million.”
Currently, T stock offers a juicy dividend yield of over 7%. However, the company expects to decrease its payout to around 5% after the WarnerMedia divestiture. Therefore, income investors can no longer count on a streak of consecutive payout increases. The payout reduction aims to reduce debt and allow AT&T to invest in network improvements.
This pick of the comeback stocks is currently priced slightly above $27. Despite a 14% surge in the past one month, the stock price is down almost 7% over the past year. Shares look like a bargain at 8.11 times forward earnings and 1.12 times trailing sales. The 12-month median price forecast for T stock stands at $30.
CrowdStrike (CRWD)
52-week range: $168.67 – $298.48
Next up on this list of comeback stocks, cybersecurity name Crowdstrike provides a range of solutions, such as endpoint security services and proactive threat intelligence offerings. Many Fortune 500 companies are currently CrowdStrike customers. InvestorPlace readers may also be interested to know that the International Data Corporation (IDC) recently named CrowdStrike a “worldwide leader in endpoint security.”
Crowdstrike put out strong Q3 fiscal 2022 results in early December. For the period, revenue increased 63% YOY to $380 million. Non-GAAP net income stood at $41.1 million as well, or 17 cents per diluted share. That was up from $18.6 million a year ago. Finally, the company generated free cash flow of $123.5 million, while cash and equivalents ended the quarter at $1.91 billion. Overall, investors were delighted to see significant growth in annual recurring revenues (ARR). CEO George Kurtz cited the following:
“CrowdStrike delivered a robust third quarter with broad-based strength across multiple areas of the business leading to net new ARR growth accelerating and ending ARR growing 67% year-over-year to surpass the $1.5 billion milestone.”
CRWD stock has declined more than 35% over the past three months. Currently, it hovers around $175, down 19% over the past year. Of course, the stock still looks expensive at 303 times forward earnings and 31 times trailing sales. However, the 12-month median price forecast for the stock stands at $280, implying a 60% upside from current levels.
Comeback Stocks to Buy: Electronic Arts (EA)
52-week range: $120.08 – $150.30
Dividend yield: 0.52%
Electronic Arts is one of the world’s largest video game publishers on consoles, PCs and mobile. The company boasts around 500 million engaged users, thanks to numerous hit franchises like FIFA, Apex Legends, Battlefield, The Sims and Titanfall.
EA released strong Q2 fiscal 2022 results in early November, well above the market forecasts. Total revenue increased 59% YOY to $1.8 billion. Further, net income came in at $294 million, or $1.02 per diluted share. That was up from $185 million a year ago. Lastly, cash and equivalents ended the period at $1.63 billion. On these metrics, CEO Andrew Wilson cited the following:
“This was the strongest second quarter in the history of Electronic Arts, with more players around the world joining and engaging in our leading franchises, new launches and live services.”
While user engagement growth for gaming slightly slowed down in 2021, it still keeps on marching ahead. In 2021, EA acquired Codemasters for $1.2 billion as well, which includes the rights to the Formula One video game franchise. EA also acquired Glu Mobile for $2.1 billion, significantly enhancing its mobile game portfolio. These acquisitions should help Electronic Arts gain further market share in the booming mobile gaming industry.
EA stock hovers around $136 currently, down 2% over the past one year. Shares offer value at 18.7 times forward earnings and 5.9 times trailing sales. Therefore, long-term investors could use the current dip as a buying opportunity. The 12-month median price forecast for this one of the comeback stocks stands at $175, suggesting more than 28% upside.
Las Vegas Sands (LVS)
52-week range: $33.75 – $66.77
Leisure giant Las Vegas Sands is the next entry on this list of comeback stocks. This company operates resorts that include casinos, hotels and convention centers. Las Vegas Sands issued Q3 2021 results on Oct. 20.
For the period, revenue increased 92% YOY to $857 million. Yet, the net loss came in at $368 million, or 61 cents per diluted share, down from a net loss of 565 million or 65 cents per diluted share in the prior-year quarter. What’s more, unrestricted cash balances stood at $1.64 billion at the end of the quarter. After the announcement, CEO Robert Goldstein remarked:
“While heightened pandemic-related restrictions impacted our financial results this quarter, we were able to generate positive EBITDA in each of our markets.”
In recent quarters, LVS has been shifting its focus on high-growth Asian properties. For instance, back in March 2021, the company announced the sale of its Las Vegas properties and operations for roughly $6.25 billion. The deal is expected to finalize in the first half of 2022.
That said, with the omicron variant spreading at full speed worldwide, the company’s gambling revenue from both Macau and Singapore could remain at depressed levels in the first part of 2022. Moreover, increased regulatory oversight due to the proposed changes in Macau’s gaming law has also created investor pessimism in LVS stock.
At present, LVS stock sells for around $43, down 18% over the past year. Shares are trading at 47.2 times forward earnings and 6.7 times trailing sales. The 12-month median price forecast for Las Vegas Sands stock stands at $48.
Comeback Stocks to Buy: Medtronic (MDT)
52-week range: $98.38 – $135.89
Dividend yield: 2.32%
Next up on this list is MDT stock. Ireland-based medical technology name Medtronic has an impressive product portfolio that focuses on more than 70 health conditions such as diabetes, Parkinson’s and more.
Medtronic released Q2 fiscal 2022 results in late November. For the quarter, revenue increased 3% YOY to $7.8 billion. Non-GAAP net income increased 30% to $1.8 billion, or $1.32 per diluted share. Further, free cash flow stood at $2.4 billion. Cash and equivalents ended the period at $2.9 billion. After the announcement, CEO Geoff Martha noted the following:
“During the quarter, we continued to advance our pipeline, launched new products, and grew share in the majority of our businesses.”
Despite the pandemic, Medtronic has launched scores of medical devices worldwide over the past year. Therefore, the company could potentially generate double-digit annual earnings growth in the coming years. However, with the omicron variant rapidly spreading, hospitals might again have to delay elective procedures, which implies a potential threat to near-term earnings.
Medtronic is a Dividend Aristocrat that has raised its dividend for more than 40 consecutive years. Its share price currently supports a 2.32% dividend yield.
MDT stock hovers around $108, down 7% for the past 12 months but up more than 4% year-to-date (YTD). Shares are trading at 19 times forward earnings and 4.6 times trailing sales. The 12-month median price forecast for this one of the comeback stocks stands at $130.
NetEase (NTES)
52-week range: $77.97 – $134.33
Dividend yield: 0.80%
This next pick of the comeback stocks is NetEase, one of the oldest online service providers in China. This company’s operations extend to online and mobile games, music streaming, advertising, online education and e-commerce. Online, PC and mobile app gaming account for over 70% of its revenue.
NTES announced Q3 2021 results in mid-November. For the quarter, revenue was up nearly 19% YOY to $3.4 billion. Further, non-GAAP net income totaled $599 million, or 18 cents per share. That’s compared with $577 million in the prior-year quarter. Cash and equivalents ended the period at $3.5 billion.
Chinese gaming stocks felt the heavy hand of regulation in 2021; regulators have been restricting the number of hours children can spend playing online games. However, NetEase shareholders were recently delighted at the news that the crackdown would impact only 1% of its total business.
NTES stock has become a well-known growth play, seeing double-digit revenue growth for years. Moreover, the tech company is preparing its music streaming business for an initial public offering (IPO) at a potential valuation of between $5.4 billion and $6.2 billion.
Currently, NTES stock hovers around $100, down nearly 3% in the past 12 months. Shares are trading at 25 times forward earnings and 5.4 times trailing sales. The 12-month median price forecast for NetEase stands at nearly $136.
Comeback Stocks to Buy: Twitter (TWTR)
52-week range: $37.13 – $80.75
Last up on this list of comeback stocks is TWTR stock. Microblogging platform Twitter has well over 200 million monetizable daily users (mDAUs) worldwide. Over a third of them come from the United States, followed by Japan, India, Brazil and the United Kingdom, among other countries.
Twitter released Q3 2021 results in late October. For the period, total revenue increased 37% YOY to $1.28 billion. Further, net loss came in at $537 million, or 67 cents per diluted share. That’s compared to a net income of $29 million, or 4 cents per diluted share, in the prior-year quarter. Finally, cash and equivalents ended the period at $3.5 billion.
Wall Street noted that mDAU growth rates slowed in 2021, falling short of market estimates in the third quarter. Metrics suggest that the social media group may not be able to grow as fast as it once did. However, Twitter bulls trust management will take steps to draw more users to the site. Former CEO Jack Dorsey remarked the following:
“Average monetizable DAU (mDAU) reached 211 million, up 13% year over year in Q3, accelerating from 11% year over year growth in Q2, driven by ongoing product improvements and global conversation around current events.”
TWTR stock hovers slightly above its 52-week low at nearly $38. The stock is down 17% over the past 12 months and has already declined 13% YTD. Shares are trading at 35.6 times forward earnings and 7.6 times trailing sales. Currently, the 12-month median price forecast for Twitter stands at $63.
On the date of publication, Tezcan Gecgil did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
