- Investing in high-quality, oversold growth stocks could help investors generate lucrative returns in the months ahead.
- ASML (ASML): Enjoys high demand for its extreme ultraviolet lithography systems.
- HP (HPQ): Warren Buffett has made a bit bet on this undervalued tech name.
- Nvidia (NVDA): Transitioning from a dominant hardware player to a computing platform company.
- PayPal (PYPL): Announced a shift in its focus from active user growth to more efficient capitalization of existing customer base.
- Upstart (UPST): Despite a potential decline in lending activity, management still has strong confidence in its AI-based loan underwriting models.
2022 has been a turbulent year for Wall Street. The Nasdaq 100 index has sold off over 11% last month and is currently down almost 24% year-to-date (YTD). Therefore, many tech stocks currently offer a discount shopping opportunity for long-term investors. But InvestorPlace.com readers still need to be selective on which oversold growth stocks to include in portfolios.
In mid-April, James Bullard, the president of the St. Louis branch of the Federal Reserve, announced it’s a “fantasy” to believe that small, modest increases in interest rates can tame the highest inflation the U.S. has seen in four decades. Therefore, we can expect volatility in the markets to continue in the second half of the year as well.
Nonetheless, investing in high-quality, oversold growth stocks with solid fundamentals now could help investors generate risk-adjusted returns well into the future. According to Morgan Stanley (NYSE:MS), among the trends that deserve investors’ attention in 2022 are “Innovation… Deglobalization…Decarbonization… Transformation of the U.S. labor market…”
Against this backdrop, here are five oversold growth stocks that could shield investor portfolios from further market crashes.
Our first oversold growth stock today is the Dutch company ASML (NASDAQ:ASML), the leading manufacturer of photolithography systems used by semiconductor foundries to produce chips.
ASML reported Q1 results on April 20. Revenue came in at 3.5 billion euros, down from almost 5 billion euros the previous quarter. Earnings per share (EPS) was 1.73 euros, down from $4.39 per share for the prior quarter. Cash and equivalents ended the period at $4.94 billion.
The chipmaker finished the quarter with net bookings of 7 billion euros, highlighting strong demand for its extreme ultraviolet lithography (EUV) machines. The growth in bookings has increased ASML’s backlog to a whopping 29 billion euros.
The company issued solid revenue guidance of 5.1 to 5.3 billion euros for the second quarter, up from 4 billion euros a year ago.
ASML stock has declined more than 29.5% YTD. Shares trade at 30.2 times forward earnings and 11.4 times sales. Meanwhile, the 12-month median price forecast for ASML stock stands at $774.50.
Our next oversold growth stock HP (NYSE:HPQ), one of the largest manufacturers of PCs, printers, and printer supplies worldwide.
HP released Q1 results on Feb. 28. Revenue increased 8.8% year-over-year (YOY) to $17.03 billion. Adjusted diluted earnings increased to $1.10 per share, compared to 92 cents a year ago. Free cash flow stood at $1.4 billion. Cash and equivalents ended the period at $3.39 billion.
HPQ stock is almost flat YTD but has risen more than 12.5% in the past year. Shares are trading at 8.4 times forward earnings and just 0.66 times trailing sales. The 12-month median price forecast for HP stock is $36.
The chipmaker announced Q4 FY22 results on Feb. 16. Revenue increased 53% YOY to $7.64 billion. Adjusted earnings per diluted share came in at $1.32, up 69% YOY. Cash and equivalents ended the period at $2 billion.
Management has recently launched Nvidia Omniverse, a platform for Web 3.0 developers to create their own metaverse products. Moreover, Nvidia’s autonomous driving technology is expected to hit the road in 2024 model Mercedes-Benz (OTCMKTS:DMLRY) vehicles.
However, the chipmaker faces short-term headwinds from bearish cryptocurrency trends due to its mining-related hardware. Furthermore, multiple analysts have also been forecasting a significant decline in Nvidia’s gaming chip business.
NVDA stock has dropped more than 40% YTD. Shares are trading at 30.1 times forward earnings and 15.9 times sales. The 12-month median price forecast for Nvidia stock stands at $332.
Financial technology (fintech) giant PayPal (NASDAQ:PYPL) facilitates online and mobile payments on behalf of consumers and merchants. Its portfolio of payment products includes PayPal, Venmo, BNPL, and Braintree.
Paypal reported Q1 2022 results on April 27. Revenue grew only 8% YOY to $6.5 billion. Adjusted earnings per share declined to 88 cents, down from $1.22 per share in the prior-year quarter. Cash and equivalents ended the quarter at $15.1 billion.
During the quarter, total payment volume increased 13% YOY to $323 billion. However, management anticipates adding only 15 to 20 million new active users in 2022, roughly a third of what it added in 2021. Wall Street noted the shift in its focus from active user growth to better monetization of the customer base.
PYPL stock has lost close to 57% YTD. Compared to last year, shares look significantly undervalued at just 19.8 times forward earnings and 3.53 times trailing sales. At present, the 12-month median price forecast for PayPal stock is at $116.50.
Our final growth stock is the lending platform Upstart (NASDAQ:UPST). It relies on artificial intelligence (AI) and machine learning technologies to evaluate loan applications. The platform collects consumer demand for loans and connects it to its network of bank partners, competing directly with the FICO score to make decisions.
The company released Q1 2022 results on May 9. Revenue increased 156% YOY to $310 million. Diluted adjusted earnings per share came in at 61 cents, compared to 21 cents a year ago. Cash and equivalents ended the period at $336 million.
Management lowered its full-year revenue forecast from $1.4 billion to roughly $1.25 billion. The AI lender originated 465,500 loans in the first quarter, compared to 495,000 in the prior quarter. In addition, the company has seen lower approval rates as loan approval gets more expensive.
UPST stock has tumbled nearly 67% YTD. Shares are trading at 25.84 times forward earnings and 4.47 times trailing sales. The 12-month median price forecast for Upstart stock stands at $45.
On the date of publication, Tezcan Gecgil did not have (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.