Last month, annualized inflation hit 8.6%, the highest in more than 40 years. In response, the Federal Reserve raised interest rates by 75 basis points last week, the largest such hike since 1994. The combination of high inflation and aggressive central bank tightening sent an already jittery stock market to its worst week since the COVID crisis began, and Economists speak grimly of a repeat of the late 1970s and early 1980s, when similar inflation and high interest rates led to market weakness and a deep recession.
For long-term investors, however, the picture may not be so bleak. The broad market downturn led to lower prices across the board – and that can present opportunities to buy quality names in struggling sectors. In fact, billionaire investment legend Ron Baron of Baron Capital sees today’s environment as a “huge once-in-a-generation buying opportunity.”
“Overall, we remain optimistic. We don’t usually think much about short-term macro issues like inflation, oil prices, interest rates and the Russia-Ukraine conflict. Inflation is always with us, but most people don’t talk about it. During my lifetime, inflation averaged about 4% to 5% per year. That means prices double about every 14 or 15 years. The stock market doubles about every 10 or 12 years, or about 7% to 8% a year,” Baron said.
So the key for investors is to find stocks that will go up in the future as the bear market runs its course, even if they’re down now. Using TipRanks’ database, we’ve identified three run-down stocks that have received a “Strong Buy” rating from the analyst community. Not to mention that each offers over 50% upside despite the challenging market environment. Let’s take a closer look.
wall box (WBX)
We start with Wallbox, a Spanish company in the electric vehicle (EV) charging market. Wallbox works on both the commercial and residential side of EV charging, offering a range of charging products for both personal and business use. Charger features include universal plug and touchscreen controls. Wallbox is particularly proud to offer the first bi-directional charging unit that allows a fully charged electric vehicle to send power to the user’s home or even to the grid – turning the electric vehicle into a storage battery when not in use as a car .
Wallbox has been in the public markets since last October when it completed a corporate merger with a SPAC company. Since debuting on Wall Street, WBX shares have peaked at $18.50 in November and were still trading near $17 at the start of 2022 — but are down 47% so far this year.
The sharp drop in share price has come despite Wallbox reporting strong financial results. The company’s 1Q22 report released last month showed $28.3 million at the top, up 192% from the same quarter last year. That was driven by a 180% year-over-year increase in charger sales — about 51,000 units sold in the quarter — and a gross margin that beat internal guidance at 41%. Wallbox forecasts full-year 2022 revenue in the range of €175 million to €205 million, which would represent annual growth of 145% to 190% year-on-year.
The company’s rapid growth has impressed Cowen analyst Gabriel Daoud, who writes, “With a diverse product portfolio to support US expansion and energy management transformation, Wallbox leverages the required $293 investment in hardware between 2022 and 2030 billion US dollars worldwide. Vertical integration within manufacturing enables the company to navigate a harsh supply chain environment and achieve best-in-class gross margins of ~40%. We see WBX becoming FCF positive in 2026, with additional upside potential from new software products like Sirius.”
Daoud quantifies his outlook on WBX shares with an Outperform rating (ie, Buy) and a price target of $14/share, implying upside potential of ~63% over the next 12 months. (To see Daoud’s track record, click here)
Wallbox didn’t just impress Daoud; The consensus rating of “Strong Buy” on the stock is supported by 5 recent analyst ratings, including 4 “buy” and 1 “hold” ratings. The shares trade at $8.58 and their average price target of $16.50 indicates a robust 92% upside potential this year. (See WBX Stock Prediction on TipRanks)
Generac Holdings (GNRC)
For the second stock, we look at Generac from Wisconsin, a manufacturer of power generators. The company’s generators are designed as backup units for use in residential, light commercial and industrial markets to provide power in the event of a grid failure. Generac offers a wide range of generator sets, from 15-kilowatt units for home use to multi-megawatt power systems for the industrial sector. Customer can even choose small portable generators for workshop or camping use.
Generac has always been expanding its product lines and looking for new niches that can take advantage of backup power generation. In recent weeks, the company has launched new products for the electric vehicle and portable generator markets. The first offers vehicle charging solutions, while the second brings dual-fuel capabilities to the portable generator market with models that can run on both LPG and regular gasoline.
New products in a high quality range have been the backbone of Generac’s strong sales position. The company has experienced consistent revenue growth for the past several years, with 8 consecutive quarterly revenue increases. For the most recent Q1’22, Generac reported revenue of $1.14 billion, up 41% year-on-year. The gain was driven by a 43% increase in sales of household products and included a 38% increase in commercial and industrial sales.
At the same time as sales increased, earnings fell. The company reported adjusted net income of $135 million for the first quarter, compared to $153 million in the same quarter last year. On a per share basis, this represented a year-over-year decrease from $2.38 to $2.09.
Generac’s shares have seen volatile trading this year, with sharp swings up and down. Year-to-date, the stock is down 33%.
The drop in the stock price hasn’t stopped Northland analyst Donovan Schafer from getting firmly on the bullish side for this stock. He sees Generac well positioned to move forward, citing three reasons: “(1) GNRC dominates the growing US Home Standby (HSB) market with enduring competitive advantages and ~75% market share; (2) is ideally placed to understand and navigate the energy transition terrain and therefore make the most of its burgeoning clean energy business; and (3) has a large global footprint acquired from 2010 to 2018 that flies under the radar and could serve as a latent force multiplier.”
Schafer uses these comments to bolster his Outperform (ie, Buy) rating for GNRC stocks with a price target of $370, which implies a 57% 12-month upside potential. (To see Schafer’s track record, click here)
If we step back and look at the bigger picture, we see that Generac has picked up 16 recent analyst ratings — and their 15-to-1 buy versus hold split gives the stock a strong buy consensus view. The stock’s average price target is $399.33 and the trading price is $233.50, suggesting that it has room for robust 70% upside potential in the coming year. (See GNRC Stock Prediction on TipRanks)
Silvergate Capital (SI)
Last but not least is Silvergate, a commercial bank from California that focuses on investing in digital currencies. Founded in 1988, Silvergate has been at the forefront of digital currency investing for nearly a decade. The company has been profitable for 24 consecutive years and offers services to a wide range of institutional investors and digital currency exchanges.
So far this year, Silvergate’s shares are down 58%, a steep decline that coincides with the sharp falls we’ve also seen in crypto markets.
Despite the difficulties the crypto market has been experiencing lately, Silvergate’s digital currency business has expanded. The company’s 1Q22 report showed 1,503 digital currency customers at the end of the quarter, compared to 1,381 at the end of the fourth quarter and 1,104 in the year-ago quarter. At the same time, the bank’s Silvergate Exchange Network, its digital currency exchange, saw remittances fall to $142.3 billion in Q1’22 from $219.2 billion in Q4’21.
While currency exchange transactions were down, Silvergate was still posting earnings gains. The bank reported Q1 net income of $27.4 million, an increase of 28% over Q4 21 and an even more impressive 115% gain over Q1 21. Bank revenue was 79% cents per diluted share.
Analyst Jared Shaw, covering Silvergate for Wells Fargo, believes now is the time for investors to consider SI stocks. He writes: “SI has created a powerful network effect through its Silvergate Exchange Network (SEN), used by some of the largest exchanges and institutional clients in the crypto space. As interest rates rise, higher spread earnings will come from a zero-cost deposit base, and further growth in SEN leverage and the launch of an SI-issued stablecoin payment network represent future opportunities. Continued institutional adoption of crypto and product innovation at SI should contribute to maintaining the Bank’s growth profile. We believe much of the bear case is priced in at current levels, which represents an attractive entry point…”
With this stance, it’s not surprising that Shaw rates the stock as Overweight (ie, Buy). He gives shares a price target of $120, showing his confidence in a 93% one-year up move. (To see Shaw’s track record, click here)
Overall, out of the 9 Wall Street analysts who have recently reviewed this stock, 8 gave it a buy versus only a hold (ie, neutral) rating, consistent with a Strong Buy consensus rating. The shares are selling for $62.32 and have an average target of $175.89, indicating ~182% upside potential in the coming months. (See SI Stock Prediction on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.