Time to bottom fish?  2 Strong Buy stocks that are down 70% this year

After finishing higher on Friday, markets started the week with further gains — although the S&P 500 has moved back into bearish territory since the start of the year. The recent high volatility comes after the Fed raised interest rates last week and intends to keep rates high as it struggles to contain inflation.

It’s hard to say where the markets are headed right now, but at least according to market expert Ed Yardeni, we’re already near the bottom of the bear market. Yardeni thinks the Federal Reserve is unlikely to raise interest rates much more and that the bad news on interest rates has already been factored in.

“It looks like we’re in the process of bottoming out. “I think the market has certainly rejected a lot of what the Fed is going to do,” Yardeni noted.

If Yardeni is right, then investors have an opportunity now to adhere to the oldest of all investment tips: buy low, sell high. Many stocks fit the profile of a “bottom fish”; we downloaded two of the TipRanks database, a stock with consensus Strong Buy ratings and about a 70% decline in share price this year. In fact, analysts see both rising more than 90% over the next year. Let’s take a closer look.

Thoughtworks Holdings (TWKS)

We’ll start in technology, where digital consultancy Thoughtworks offers a customizable experience to its clients. The firm’s services include digital strategy, design and software engineering, which combine to make Thoughtworks a valued partner for enterprise clients and technology disruptors. The company has a presence in 17 countries, and its clients include big names such as Paypal, Daimler and Bayer.

For bottom fishing investors, the first thing to know about Thoughtworks is that the stock is down 70% so far this year. The second thing to know is that even though the stock price is down, the company has reported a modest, consistent increase in revenue in every quarter of this year so far.

In its latest quarterly report of 2Q22, the company posted a top line of $332.1 million, for a 3.8% sequential gain and a stronger 27.5% year-over-year gain. The company’s adjusted diluted EPS rose 10% year over year, from 10 cents in 2Q21 to 11 cents in 2Q22. On balance, Thoughtworks in the second quarter was able to pay down $100 million of its permanent debt, bringing the total down to $406.1 million, and boasted cash and liquid assets of $274.5 million. The Company also has access to $165 million in borrowing capacity under a revolving credit facility. Thoughtworks has scheduled its 3Q22 report for this coming November 14.

analyst Daniel Perlinhedged by RBC Capital, described TWKS shares as “constructively positioned” heading into the third-quarter earnings release, with currency exchange issues from a rising dollar the biggest headwind.

“Despite potential challenges related to exchange rate volatility and a tight labor market, we believe current valuations offer an attractive entry point given TWKS’s unique position to capture a share of a large and growing total addressable market with an attractive core business a model with strong growth projections,” says Perlin.

All of the above makes it clear why Perlin now stands with the bulls. The 5-star analyst rates TWKS as Outperform (i.e. Buy), while his $16 price target suggests an upside of ~98% over the next year. (To watch Purlin’s record, Press here)

In total, 8 Wall Street analysts have weighed in on Thoughtworks shares, and their views include 6 buys and 2 holds – for a strong consensus rating of buy. The stock is currently trading at $8.09, and the average target price of $17.13 suggests a ~112% gain in the coming months. (Check out the TWKS stock forecast at TipRanks)

Cryoport, Inc. (CYRX)

Now we’re going to move into the world of healthcare and take a look at Cryoport, a company that has built a solid niche in the field of cold. That is, in refrigerated storage and transport of biological tests and samples. These are highly perishable, time-sensitive items, and reliable cold storage and courier services are essential for laboratories, medical offices and research facilities using Cryoport capabilities. These capabilities include liquid nitrogen dry product shippers and refrigerated transport solutions for a variety of materials in the 2 degree to 8 degree Celsius range. Cryoport’s transportation services are end-to-end and the company backs it up with extensive cold chain expertise and 24/7 customer support.

Cryoport occupies a substantial niche in the healthcare industry, but that does not insulate the company from economic and situational headwinds. The lockdown in China is putting pressure on the company’s product supply and manufacturing chains; the strong dollar and resulting negative foreign exchange impact cost the company $2.6 million in Q3; and the effects of inflation and tighter money are visible in reduced customer orders for freezers and refrigerators despite high demand for cryogenic bottles (Dewars).

Those headwinds were partially offset by the reopening in March of the company’s Prague, Minnesota plant (part of its 2020 MVE acquisition), which was severely damaged by a fire early last year.

Overall, the pressure has pushed CYRX shares down 70% this year — and the recent 3Q22 report showed misses on both revenue and earnings and a cut in full-year guidance, further exacerbating the stock’s slide.

On the company’s top line, revenue of $60.5 million was up ~7% from the year-ago quarter, but nearly $9 million below the consensus estimate. On the earnings side, GAAP EPS came in at a loss of 15 cents, 7% worse than expected. While those metrics were poor, the company’s future guidance appears to be what spooked investors; Cryoport cut its full-year revenue guidance by 10% in the middle, to a range of $232 million to $238 million. That guidance was also well below the $251.7 million forecast.

Through it all, the BTIG analyst David Larsen remains bullish on Cryoport’s outlook, noting, “Although the quarter was disappointing, we would encourage investors to buy on weakness as we believe management has good control over the business and view the quarter’s headwinds as temporary.”

“Since the MVE plant in China that was shut down has reopened and since demand for Dewars is high, we would expect some relief with the MVE build. We also like how there is no slack in Dewars supply and believe it’s only a matter of time before demand for large fridges picks up. Management has a plan to transfer CRYOPDP services to countries other than Eastern Europe. We like the actions the management is taking,” the analyst added.

Looking ahead from here, Larsen rates CYRX stock a Buy, and his $40 price target suggests an impressive one-year upside potential of 130%. (To watch Larsen’s record, Press here)

Clearly, the headwinds here haven’t deterred Street analysts, as all 6 of CYRX’s recent analyst reviews are positive, for a consensus Strong Buy rating. The stock has a trade price of $17.38 and an average price target of $34.67 suggests a 99% gain over the next 12 months. (Check out the CYRX stock forecast at TipRanks)

Would you like to identify stocks that have received the highest recent Street ratings? Check out TipRanks’ Analyst’s Top Stocks Tool. The tool also reveals which stocks have declined over the past three months – allowing you to identify the best stocks trading at compelling levels.

Rebuttal: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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