A strong bearish trend defined the markets in the first half of the year; since then, the key point has been volatility. Stocks hit a bottom back in June, when the S&P 500 dropped into the 3,600s. That has proven to be a support level in the last two months, and at least one strategist believes that the market won’t be testing those lows again this year.
JPMorgan’s Jason Hunter believes that inflation may have peaked, and that the upcoming CPI report will provide additional evidence of that.
“We still see the prospect that continued evidence of peaking inflation data in the August CPI report can feed into improving sentiment for risky markets, which in turn can keep the market from fully retesting the 3,636 June low,” Hunter wrote.
With this in mind, we’ve used the TipRanks database to pinpoint two stocks that have shown hefty losses this year, on the order of 40%, or more, but each also features a Strong Buy analyst consensus rating and a powerful upside potential. Let’s take a deeper dive in.
XPeng, Inc. (XPEV)
We’ll start with a close look at XPeng, a Chinese automotive manufacturer focusing on the electric vehicle (EV) market. XPeng has several models in production, and has been making deliveries of the P7 and P5 sedans since last year. In recent months, the company’s delivery numbers have soared, reaching a total of 90,085 for the first eight months of this year, with 9,578 deliveries in August alone. The August number represents a 33% year-over-year increase; the 8-month number is up 96% from the same period in 2021.
XPeng’s strong delivery numbers have fed into strong revenues. The company reported $1.11 billion at the top line in 2Q22; while this was down from the $1.34 billion peak in 4Q21, it was still up 90% year-over-year. The company’s quarterly loss came to $403 million, an unfavorable comparison to the $184 million net loss in the year-ago quarter.
Even though earnings are down, XPeng has had success at expanding its sales and support network. The company reported a total of 388 stores in 142 cities as of the end of Q2, and its charging station network was up to 977 stations. That number includes 793 self-operated supercharging stations, and 184 destination charging stations.
This makes the background to XPeng’s stock performance – which has badly underperformed this year, losing 69% year-to-date.
Covering this stock for Deutsche Bank, analyst Edison Yu notes that XPEV shares are down as the company has faced headwinds in the form of increasing competition in the Chinese EV market and the fickle tastes of customers. Even so, Yu believes that XPeng has the capability to meet these challenges.
“Demand concerns can potentially be alleviated closer to year-end with deliveries of G9 SUV starting in Oct but investor focus likely shifts to next year… We see underappreciated value longer term in XPeng’s ADAS/AD technology and don’t think demand trends can get worse from here on out as 4Q seasonality should provide at least some small tailwind for older models,” Yu opined.
In Yu’s view, this backs up a Buy rating on XPEV, while his $33 price target implies a 111% upside for the coming year. (To watch Yu’s track record, click here)
Wall Street’s analysts are in broad agreement with Yu’s bullish view, as 9 of the 12 recent analyst reviews recommend a Buy on XPEV – and give the stock its Strong Buy consensus rating. The shares are priced at $15.60 and their $44.02 average price target suggests the stock has a robust 182% upside ahead of it. (See XPeng stock forecast on TipRanks)
Daseke, Inc. (DSKE)
The second stock we’ll look at is North America’s largest operator of specialized transportation and flatbed trucking. Daseke works as a holding company, and its subsidiaries own and control over 4,500 tractors, 11,000 flatbeds and specialized trailers, and well over a million square feet of industrial warehouse space. Daseke’s operations are mainly in the industrial trucking sector.
The recent 2Q22 financial results showed a top line of $481.3 million, up ~19% year-over-year. The company generated $22.7 million in cash from operations, including $15.2 million in free cash flow. Earnings, however, while up from both 1Q22 and 4Q21, are down y/y. The company’s net income came in at $17.7 million, 24 cents per diluted share, or about half the 2Q21 results.
The earnings report, and especially management’s comments, highlighted Daseke’s exposure to industry-specific headwinds. The company’s CEO brought attention to “disruptions in the global supply chain, slowing [the company’s] ability to access new equipment, and giving rise to inflationary pressures.” These headwinds brought delays in new equipment acquisition, which in turn led to y/y declines in total miles driven.
The disappointing earnings put investors on edge, with shares slipping 43% year-to-date. What this means, in the eyes of Stifel analyst Bert Subin, is an opportunity for investors seeking a ground-floor entrance.
“We continue to like the company’s prospects as the flatbed/specialized market will likely be strong enough for Daseke to pass through at least a portion of its inflationary headwinds. Commentary from management helped dispel our concern that this would be a negative indication for FY23, noting an expectation for next year’s EBITDA to rise as inflationary headwinds should ultimately be (mostly) covered by higher rates. Management will likely need to prove that out, but it’s a step in the right direction. We see upside [on current low prices].”
To this end, Subin sets a Buy rating on DSKE shares, and quantifies his upbeat view with a $10 price target that suggests a 73% one-year upside. (To watch Subin’s track record, click here)
Overall, there are 4 recent analyst reviews on record for Daseke, and they are unanimous that this is a stock to buy – giving DSKE shares a Strong Buy consensus rating. The stock is priced at $5.77 per share and has an average price target of $11.88, implying a 106% upside over the next 12 months. (See Daseke stock forecast on TipRanks)
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Disclaimer: 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.