Experienced investors can win on their trades whether the market is rising or falling, and nobody knows that better than Michael Berry. Burry, whose achievements in profiting from the 2008 financial crisis have been featured in both book and film The great short filmhas turned his gaze to historical analogies and hints at reasons for optimism in today’s environment after last week’s collapse of the Silicon Valley bank.
Referring to the banking panic of October 1907, Burry notes certain similarities with the crisis of today. The panic of 1907 was triggered by the collapse of a large regional bank, Knickerbocker, in New York, which expanded, hitting two other regional institutions and then threatening to spread to the big banks. But Burry points out that the panic of 1907 quickly burned out. The market hit its bottom in just three weeks.
Burry described the incident as follows: “In October 1907, the Knickerbocker Trust failed on risky bets, causing a panic. Two more soon failed, and it spread. As a run towards a healthy trust began, JPMorgan took a stand. 3 weeks later the panic dissipated and the markets bottomed out. A position was taken last weekend.”
Whether history repeats itself remains to be seen. Meanwhile, Wall Street analysts have pointed out two stocks that are already in the “buy” zone. These are stocks that have been flirting with their own lows of late but offer solid upside potential going forward. We ran them through the TipRanks database to see what currently makes them attractive investment choices.
playgroup (MTCH)
We’ll start with Match Group, a holding company in the online world known as the parent company for some of the most popular dating sites on the web. Match’s subsidiaries include the eponymous match.com, as well as names like Tinder and OKCupid. Match is known in the industry for introducing the now ubiquitous “swipe” feature to mobile dating apps, and the company now boasts that its brands are recognized worldwide, are available in 40 languages, and cater to all dating demographics -Groups are available.
While Match can claim that Tinder, its biggest brand, was the top-grossing lifestyle and dating app in the world in 2022, the company’s stock has still fallen over the past year. Over the past 12 months, shares of MTCH are down 60%.
The drop in share price occurred at the same time that Match was recording revenue and merits lack of expectations. In the most recent reported quarter, 4Q22, the company had revenue of $786.15 million, down $1.2 million from guidance. Bottom line, the company’s earnings per share came in 35% below analysts’ forecasts at 30 cents, though that was a sharp reversal from the 60 cents per share loss reported a year earlier.
While sales and earnings missed expectations, Barclays analyst Mario Lu remains optimistic about Match’s prospects going forward, noting that the company is good at generating cash and has several positive fundamentals in a troubled environment.
“We believe MTCH has effectively transitioned from an internet growth stock to a value stock over the past several years due to its high-margin profile and strong cash flow generation. While there remains a risk that Tinder’s payer growth will not recover by 2H23 if the macro weakens further, we believe the company’s strategy to focus on optimizations in FY23 to support payer growth promote is a prudent strategy that has been very effective in the past,” said Lu.
“We see limited relative downside for MTCH stock compared to the rest of our coverage due to 1) its profitable business model in a tightening credit environment, 2) our view that concerns about Tinder payer growth are overdone, and 3 ) Upside at higher priced subscription tiers/ad revenue and gross margin benefit from potentially reduced/bypassed App Store fees,” added the analyst.
Consistent with this bullish stance, Lu rates MTCH stocks as Overweight (i.e. Buy) and sets the price target at $52 to imply ~42% 1-year upside potential. (To see Lu’s track record, Click here)
Overall, the 15 most recent Wall Street analyst ratings on this stock are 9 Buy and 6 Hold, for a moderate Buy consensus rating. The price targets are more bullish, with the $60.25 moving average suggesting a robust 63% upside potential from the current trading price of $36.66. (See MTCH Stock Forecast)
Trustworthy finances (TFC)
The second run-down stock we look at is Truist Financial, a “top 10” commercial bank in the US market with a $43 billion market cap and over $555 billion in total assets. The company is based in Charlotte, North Carolina and offers a full range of banking products and services to both individual and small business customers. Truist’s services include wealth management, specialty lending, corporate and investment banking, and commercial banking.
The bank’s shares are down 44% over the past 12 months – but by far the lion’s share of this share price decline has come since the SVB collapse on March 8.
This stock price decline shows how “black swan” events can overshadow solid financial performance. Truist reported 22 positive results in both revenue and earnings in the fourth quarter. Revenue of $6.3 billion marked a 12% year-over-year increase, while non-GAAP EPS of $1.20 in the bottom line was up 5.3% year over year. Even better, both results came in ahead of analysts’ forecasts; Revenue increased $50 million while earnings per share increased 2 cents on the bottom line.
In February, Truist announced its regular quarterly dividend. The payout was set at 52 cents per common share, the third consecutive this level; Truist has increased the dividend twice in the last 3 years. Payment was made on March 1, and the annual rate of $2.08 translates into a solid yield of 6.3%, about three times the average for S&P-listed companies and a third of a percentage point above the current rate of inflation.
In his coverage of Truist, Baird analyst David George explains why he believes this bank will avoid the bullet that hit SVB.
“We believe the deposit problems at SIVB will not resonate in the banking sector and were a function of the bank’s niche deposit base rather than a systemic issue. In contrast, TFC’s Southeast footprint offers one of the most attractive core customer bases in the US… While other banks may struggle to deliver PPNR growth in H2 2023 and FY2024, we believe TFC’s strong fee business units (namely insurance and investment banking) should drive growth and normalization of activity in mortgage and capital markets could provide a significant tailwind,” George said.
With that in mind, it’s no wonder George rates TFC as Outperform (ie, Buy) and its $53 price target implies it has ~67% 1-year upside potential. (To see George’s track record, Click here)
Overall, this stock receives a consensus rating of Moderate Buy based on 14 recent analyst reviews, which break down 5 buys and 9 holds. The stock currently trades at $31.73 and its average price target of $52.38 implies a 65% gain from that level on a one-year time horizon. (See TFC Stock Forecast)
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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.
Source : finance.yahoo.com