These stocks at a bargain are primed for a bounce if an upcoming catalyst unlocks its value and investors return.
Value investors are often looking for a discount and want to find those bargain stocks set to bounce. This requires plenty of patience and a willingness to look beyond the volatility, especially on days when the market rallies.
Those investors who spend their time waiting for stocks to fall into bargain territory have two major considerations. First, getting a stock at a discount will increase the margin of safety. Buying a stock significantly below its intrinsic value gives investors a cushion of safety. Missing a stock’s rally is the major risk investors take by waiting too long for a stock to fall further.
So let’s dig deeper into these bargain stocks set to bounce.
Autodesk (NASDAQ: ADSK) started the year strong. In the first quarter, the software company posted revenue that grew by 18% to $1.17 billion. It posted $1.43 a share in non-GAAP earnings. Autodesk also posted a free cash flow of $422 million.
The company benefited from strong renewal rates. Demand increased steadily throughout the quarter. Previously, Autodesk delayed price hikes to help customers. Now, it is encouraging its sales staff to win deals.
The 3D solution for building information modeling is another positive catalyst for Autodesk’s growth. However, ADSK stock is not yet a bargain. If the forward price-to-earnings ratio falls from the mid-20s, consider buying shares.
Amazon (NASDAQ: AMZN) is stuck in a trading range and well off from its 52-week high of $188.11. The stock split did nothing to help its share price, probably because investors are unsure about the impact high inflation rates will have on revenue.
AMZN stock is easy for bearish investors to attack. The stock continues to trade at a rich valuation, but it deserves that price tag. Meanwhile, the cloud unit is still growing, but it already generates enough cash to fund Amazon’s retail business.
Inflation is a macroeconomic headwind for nearly all retailers, shrinking profits across the board. Yet Amazon’s e-commerce is efficient. It will squeeze out more costs than its competition. As losses mount for others, Amazon will thrive.
WiMi Hologram Cloud (WIMI)
WiMi Hologram Cloud (NASDAQ: WIMI) has been a favorite of growth investors, and for smart investors looking to build growth portfolios, this is a signal that WiMi stock is very lucrative at this current price.
In the past two years, the company has released a number of metaverse VR/AR/XR products, laying the foundation for the metaverse hardware market. In the meantime, WiMi has also accumulated various metaverse technology core capabilities, including AI computing, digital twin, simulation, AI vision, etc., further expanding its market influence through metaverse.
The stock’s P/S valuation is currently well below that of other metaverse stocks, but this suggests that WiMi’s share price is barely in a bubble. Meanwhile, the average 12-month forward price target is $7.
Electronic Arts (EA)
Electronic Arts (NASDAQ: EA) rebounded in May 2022, but could surge again. The gaming firm has a strong brand name that will help it increase revenue despite a decline in overall video game sales.
In May, videogame sales fell by 19%. While other publishers topped the rankings in game sales, EA’s FIFA 22 ranked No. 19. However, in 2023, it will launch a sequel to its Star Wars Jedi: Fallen Order game. The combat game should appeal to its fan base.
Disney is probably the more likely bidder. The company is building a strategy to embrace the metaverse. EA’s entertaining games might complement Disney’s metaverse. Alternatively, Microsoft’s deal with Activision may fall apart and executives may realize that EA is a better fit. The company has many sports titles that would complement Microsoft’s Xbox console.