January was a rough month for stocks, but the downturn won’t last forever. Now is the time to look for cheap stocks to buy before they take back off.
Many stocks that were flying high only a few months ago got taken down hard as the S&P 500 index fell 5.3% during the first month of the year. January was the index’s worst since the Covid-19 induced crash of March 2020. The technology heavy Nasdaq index had a worse go of it, falling 9% in January, also its worst month since the onset of the global pandemic.
However, many analysts on Wall Street see this year’s decline as a correction not a crash and are urging investors to buy stocks that have come down 20%, 50%, or more, in recent weeks. Ark Invest’s (NYSEARCA:ARKK) Cathie Wood said recently that “innovation is on sale” as she doubled down on many of the technology holdings in her actively managed exchange trade funds.
With so many stocks substantially off their 52-week highs, we thought we’d look at three cheap stocks to buy now before they take back off.
Cheap Stocks to Buy Now: Disney (DIS)
Entertainment giant Disney is usually a reliable bet. And DIS stock got a big boost during the pandemic as the Disney+ streaming service took off, adding nearly 120 million subscribers in the two years after it launched in autumn 2019.
From the onset of the pandemic in March 2020 through September 2021, DIS stock gained 114%. However, since the start of the fourth quarter last year, Disney’s share price has declined 20%. The slump came after Disney issued disappointing earnings in November, missing analyst expectations for both revenue and earnings per share.
While the overall earnings at Disney were disappointing, what really sent the stock lower was the company’s announcement that subscriber growth at Disney+ slowed. Wall Street expected Disney to add 9.4 million new subscribers in the company’s fiscal fourth quarter, but the company added only 2.1 million new Disney+ subscribers. Analysts and investors seemed less concerned that Disney’s theme parks and cruise lines are reopened and focused on the slowing subscriber numbers.
More recently, DIS stock fell nearly 7% after the most recent earnings from Netflix (NASDAQ:NFLX) showed that competition is eating into its subscriber growth. However, some market observers say Disney stock has now been punished enough and are encouraging investors to buy the dip.
Block (SQ)
Shares of digital payments company Block haven’t been the same since the San Francisco-based company announced a rebrand and name change last year.
In an effort to reflect its growing interest in cryptocurrencies and the underlying “blockchain” that underpins digital coins and tokens, the company previously known as Square announced it would now be known as Block. The switch has not been well-received by investors.
Today, SQ stock is down 60% from its 52-week high of $289.23. The rebrand has been so poorly received that accounting firm H&R Block (NYSE:HRB) is suing Block for “trademark infringement.”
Block founder and CEO Jack Dorsey, who stepped down from his dual role leading Twitter (NYSE:TWTR) last year so that he can concentrate exclusively on running Block, is a notorious crypto bull and is expected to pivot the financial technology company more towards digital coins.
The company recently announced plans to launch a Bitcoin (CCC:BTC-USD) mining system, and also holds a sizable amount of physical BTC, whose price has been extremely volatile this year. The increased focus on cryptocurrencies has unnerved some risk-averse investors.
However, at current levels, SQ stock is attractively priced. The median price target on the shares is currently $230, which is more than double its current level.
Cheap Stocks to Buy Now: Moderna (MRNA)
Boston-based pharmaceutical company Moderna is another once high-flying stock that has taken it on the chin in recent months. Currently changing hands at under $165 a share, MRNA stock today is more than 65% below its 52-week high.
For much of 2021, Moderna’s stock was one of the best-performing securities in the S&P 500 index. But this January, it was one of the worst performing. The stock has lost $130 billion in market capitalization, leaving shareholders reeling.
The about-face has been due to slowing global sales of Moderna’s Covid-19 vaccine, as well as a thin pipeline of new pharmaceutical products. While the company was viewed as a savior during the pandemic, many investors are unsure where it goes from here.
However, Moderna is far from destitute. The company has forecast that it will sell between $18.5 billion and $22 billion worth of Covid-19 vaccines this year, outpacing last year’s sales. And with mounting evidence pointing to the need for regular booster shots, Moderna’s cash cow shouldn’t dry up anytime soon.
Moderna also had $15 billion of cash on hand at the end of September, up from $5 billion at the end of 2020, and says that it has 40 pharmaceutical products in various stages of development – some in Phase 2 and Phase 3 clinical trials.
Given how severely MRNA stock has been taken down, many analysts now say it’s time to buy.
On the date of publication, Joel Baglole held long positions in DIS and SQ. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
