While any market advisor will tell you never to try to “time” the market, timing is still important to success. Investors need to buy at low prices and for that they need to know when prices are low. This doesn’t necessarily mean low in absolute dollar terms, but low relative to a stock’s recent past performance.
Recognizing that lower price range, investors can turn to the professionals at Wall Street for help. Analysts have been busy lately picking stocks that are in their lower price range and poised for strong gains.
We used the TipRanks database to look up two such stocks; each is down more than 50% in the past year, but each also has a Buy rating and solid upside potential, according to Wall Street analysts. Here are the details.
CS Disco Inc. (LAW)
We start with CS Disco, a software company that has AI, cloud computing and data analysis made for the legal profession. CS Disco’s offerings include solutions for managing legal requests, strengthening the discovery process, reviewing documents and drafting cases – and that’s just the beginning. The company serves law firms, businesses and educational institutions with a scalable system focused on legal matters.
While there is never a shortage of legal services in our highly litigious society, LAW stocks have struggled over the past 12 months, with a low of ~76%. The stock’s drop comes as the company has seen increasingly strong quarterly losses and management cut its full-year 2022 revenue guidance by 11% midway through last summer and forecast a larger-than-expected annual net loss for ’22.
Acknowledging the company’s headwinds, David Hynes, Canaccord’s five-star analyst, writes, “We’ve reached the point with Disco where the stock is simply too cheap for the company’s potential…From giant to problem child in the space of 18 months . Some of this is self-inflicted, namely that the model and team don’t provide enough forward-looking metrics to keep your cap on, but a lot of it feels like growing pains to us from a still-subscale company.
“Whatever the culprit, with LAW stock now trading at around 1.0x EV/R at C2023E, we feel it’s time to get more constructive on the stock… With improving growth, confidence should be recovered, and if that’s true, there’s nothing to say that shouldn’t be at least a 3-4x EV/R share, which current estimates for 2023 would cost LAW at $11-13,” added Hynes.
It should come as no surprise, then, that Hynes rates LAW a buy. Not to mention his $12 price target, which puts upside potential at ~55%. (Click here to view Hynes’ track record)
A total of 9 recent analyst ratings have been recorded for LAW, including 5 Buys, 3 Holds, and 1 Sell – giving the stock a Moderate Buy consensus rating. The stock is selling for $7.75 and their average price target of $11.56 indicates a potential for a ~49% increase in value over the next 12 months. (See LAW stock forecast)
Turtle Beach Corporation (TO BELONG)
Next up is Turtle Beach, a San Diego-based gaming accessories company. While computer gaming software companies often make headlines, the games won’t go anywhere without the hardware that companies like Turtle Beach design and manufacture: headsets, controller units, simulation systems, microphones, and other audio equipment. Turtle Beach started in the 1970s and today is mostly known for its headsets and console gaming audio.
Shares in Turtle Beach, however, are down 53% over the past year. In late 2021, and continuing into 2022, the company experienced a sharp drop in profits and profitability, with quarterly net gains shifting to losses, and the stock price began to decline in response. By mid-summer, it was clear that demand – which had peaked during the pandemic period, when people were kept at home by lockdowns and home entertainment options such as computer gaming became more expensive – had fallen and was not recovering – or at least, not anytime soon to recover.
In addition to the headwinds in the gaming sector, Turtle Beach explored the possibility of a buyout in 2022, but by the end of the summer those moves had fallen through. In August, the board officially decided not to sell, at least for now, and shares fell ~30% when that message broke. At the same time.
Analyst Sean McGowan, writing on Turtle Beach for Roth Capital, says the ‘headwinds are likely to dissipate’ going forward, providing some details to support his position: “In addition to the broader market sell-off, we believe the decline of HEAR has two main causes: 1) Surprising weakness in the video game industry, leading to disappointing sales and an industry-wide compression of stock prices; and, 2) A costly proxy fight and failed sales effort forced by an activist investor. We believe both factors will play out in the coming 12-18 months will decrease, driving HEAR to at least $18.
McGowan’s comments support his buy rating for the stock, and his $18 price target implies ~97% gains on the one-year time frame. (To view McGowan’s track record, click here)
In general, The Street analysts seem to have a more optimistic view of HEAR stock than investors; the stock has 5 recent analyst ratings, with a 4-to-1 split favoring Buys over Holds for a Strong Buy consensus rating. Shares are trading at $9.14 and the $11.70 average price target suggests a 28% upside from that level. (See HEAR stock forecast)
To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that brings together all of TipRanks’ stock insights.
disclaimer: The opinions expressed in this article are solely those of the named analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.