As we near the end of the second quarter, it’s time to start thinking about earnings. Looking back on the quarter, analysts are forecasting earnings growth of 8%, which could climb to 11% by next year. It’s a rosy picture, but it’s also not a sure thing. GDP contracted nearly 1.5% in the first quarter and some estimates are for 0% growth in the second quarter. Such results would fit the technical definition of a recession – and a recession is hardly the usual setting for robust earnings growth.
Given the current conditions, Jim Cramer, the well-known host of CNBC’s Mad Money, believes investors should wait for the post-earnings market to bottom, writing: “In the next few weeks before earnings season begins, I expect analysts to hit us with some preemptive cuts in estimates while more companies hit us with negative forecasts. Then we don’t have a tradable floor like this, but an investable floor.”
Meanwhile, there are stocks that have already been severely dragged down by today’s bear market. Using TipRanks’ database, we’ve identified three stocks that are down at least 50% this year — but analysts at The Street still rate them as strong buys. Not to mention that each offers triple-digit upside despite the challenging market environment. Let’s take a closer look.
Remitly Global (TRUST)
We start with Remitly Global, a financial services company with an interesting niche. Remitly focuses on facilitating international wire transfer payments, keeping senders and recipients safe, and ensuring transactions are safe and accurate. The service is heavily used around the world by immigrant communities who have historically used wire transfer payments to send money “home”. Remitly operates in 160 countries and bases its services on a mobile app with lower fees than traditional banks.
Remitly has been on the public markets for less than a year since its IPO in September 2021. Since then, the stock has been falling. RELY shares are down 56% year-to-date.
Even though the stock has fallen, Remitly’s business remains strong. Revenue hit $22,136 million in the first quarter, up 49% year over year. The strong revenue gains were driven by a 42% year-over-year increase in active subscribers from 2.1 million to 3 million and a 43% year-over-year increase in send volume from $4.3 billion to $6.1 billion . The company made a slight positive adjustment to its full-year 2022 revenue guidance from $610 million to $615 million to the midline, representing ~34% year-over-year growth. On the negative side, the company’s earnings declined as its net loss deepened to $23.3 million year-over-year from $7.8 million.
JMP analyst David Scharf took an overall positive view of the company’s recent results, writing, “The strong momentum that ended 2021 continued in the first quarter of 2022 and accelerated throughout the first quarter. First quarter financial results were almost in line with our guidance, while key operating metrics (active customers, send volume and volume per user) exceeded our expectations and were the driving force behind the modest increase in full-year revenue guidance.”
“Despite the sharp decline in valuations attributed to technology and paymentech stocks, and heightened macroeconomic uncertainties fueling global recession fears, RELY’s revenue growth prospect of over 30% reflects the secular digital tailwind it enjoys and its lengthy pedigree of corridor expansion,” the analyst added.
Overall, Scharf thinks this stock is worth holding on to. The analyst rates RELY stock as Outperform (i.e., Buy) and its $22 price target suggests solid upside potential of ~140%. (To see Scharf’s track record, click here)
Remitly has also managed to earn a unanimous Strong Buy consensus rating from Wall Street based on 4 recent positive reviews. The stock is trading at $9.15 and the average price target of $18.75 implies ~105% upside from that level. (See RELY Stock Prediction on TipRanks)
LendingTree, Inc. (TREE)
The next run-down stock we’ll look at is Lending Tree, an online loan broker that connects lenders and borrowers through an Internet platform. Borrowers can track multiple lending options at once, giving additional flexibility in finding terms on everything from credit cards to insurance to loans to deposit accounts. Charlotte-based Lending Tree had total sales of just over $1.09 billion last year, up from $910 million a year earlier.
For Q1 22, Lending Tree reported $283.18 million in revenue, a modest 4% increase over the same quarter last year. Earnings were negative for the quarter, with a GAAP loss of 84 cents per share. This was a trend reversal from the net gains reported in 4Q21 and 1Q21 and the largest net loss since 3Q20.
Looking into the details of Lending Tree’s earnings release reveals an interesting pattern. The company’s Home segment was down 20% year over year, with revenue from mortgage products falling 33%. Insurance segment revenue also fell 8% from 1Q21. At the same time, the consumer credit business increased; Credit card revenue is up 69% and personal loans are up an impressive 137% year over year. It’s worth noting that TREE shares are down 55% so far this year.
This pattern caught the attention of Youssef Squali, Truist’s 5-star analyst. Describing the situation, Squali said: “While mortgage and refi products remain under pressure in an environment of rising interest rates and inflation is driving up insurance premiums, TREE did not see the same negative impact on its consumer business in the second quarter. The company expects Q2 revenue growth of ‘approximately 40%’ year-on-year, in line with our earlier expectations following Q1 earnings. We believe this underscores the continued strength TREE is seeing in sectors such as SMEs and personal loans (the highest-margin business) and credit cards, given the lack of stimulus checks and higher consumer spending this year.”
“These trends are likely to continue for a few more quarters as rates continue to rise, but lighter comps from 4Q22 should see headline growth pick up again in 2023 with inventory in check,” Squali concludes.
This reinforces the analyst’s view that TREE is a “buy” stock, worthy of a $130 price target. At current levels, this target suggests ~137% upside potential for the coming year. (To see Squali’s track record, click here)
All in all, TREE has received 7 recent analyst ratings over the past few weeks, with 6 buy and 1 hold making for a strong buy consensus rating. The stock’s average price target of $137.50 suggests that it has a robust 150% upside potential from the current trading price of $54.87. (See TREE Stock Prediction on TipRanks)
Portun Financial Corporation (OPRT)
We are graduating with another online financial company. Oportun uses AI to power its digital banking platform and offers affordable financial services to around 1.7 million members. Oportun’s customers use the platform to access a full range of banking services, including savings accounts and investment services – but particularly short-term personal loans and credit. Subprime borrowers often have to resort to high-risk services like payday loans, but Oportun offers a number of alternatives. These include personal loans between $300 and $10,000 with terms of 1 to 4 years and credit cards with limits between $300 and $1,000.
Late last year, Oportun expanded its footprint and customer base by acquiring Digit, an online neobanking platform. The acquisition was a cash and stock deal valued at approximately $112.6 million.
Last year saw a generally bullish consumer environment, and Oportun benefited from four consecutive quarters of sequential revenue growth. The most recent quarterly report, 1Q22, showed $214.72 million at the top, the best in more than two years and up 59% year over year. The total number of active members of 1.7 million represents a year-over-year growth of 48%. Earnings also rose to $1.58 per share on a GAAP-adjusted basis, up from 41 cents in the year-ago quarter, for a strong 285% year-over-year gain.
Despite those solid results — and record EPS — Oportun’s stock is down 58% so far this year. The stock’s decline hasn’t worried BTIG analyst Mark Palmer, who writes, “We believe the company’s long-term growth and profitability prospects have been bolstered by its acquisition of Digit, its partnership with MetaBank and the benefits to its cost structure from its emphasis on its.” digital strategy and that the decline in the company’s share price has created a compelling buying opportunity.”
To that end, Palmer gives OPRT a Buy rating, with a price target of $27, showing its confidence in a strong 218% upside potential over the coming months. (To see Palmer’s track record, click here)
Wall Street likes Oportun judging by the unanimous 5 upbeat analyst ratings that support the stock’s “Strong Buy” consensus rating. The shares are priced at $8.49 and their average price target of $25.50 suggests ~197% 1-year upside potential. (See ORPT 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 for informational purposes only. It is very important that you do your own analysis before making any investment.