The market has been tough lately. the Nasdaq Compound (NASDAQ INDEX: ^IXIC) is currently more than 20% below its late March peak and down almost 30% from the November peak. And of course, for some Nasdaq-listed stocks, the past few weeks have been much worse.
If you think many of these top-selling names are now priced too low to pass up, you’re right. Here’s a closer look at three of the Nasdaq’s most downbeat stocks that may be nearing a bottom and are ready to rebound.
Okta (NASDAQ:OKTA) is a cybersecurity team. The company provides a way to ensure that only authorized users connect to a network, whether they are employees or customers of a company.
Such services were needed before COVID-19 took hold, but when millions of people started working from home during the pandemic, the need for such safety measures grew. And it still swells. Okta’s revenue is expected to grow 37% this fiscal year and nearly 34% next year. Although still not profitable, next year’s growth should significantly reduce this loss, putting profits in sight for the foreseeable future.
This pace of growth hasn’t impressed investors lately. The stock has fallen 66% since November, hitting new 52-week lows just at the start of the month.
Okta’s leadership in a broad sellout of the tech sector, however, appears to be rooted in a bad idea. It is the assumption that as the coronavirus pandemic subsides, the demand for secure connections will also increase. This will not be the case. If anything, it continues to grow. In Arkose laboratories Fraud status 2021 report, the digital fraud prevention team noted a 70% increase in false new account registrations early last year, adding that so-called “credential stuffing” accounted for 29% of all cyberattacks that he was watching.
To this end, Mordor Intelligence estimates that the digital authentication management market will grow at an CAGR of 22% from 2018 to 2026. Okta has already proven that it is more than capable of earning more than its fair share. the growth of this market.
If you want proof that even the most popular stocks in the market are sometimes capable of falling out of favor, chew on this: Amazon (NASDAQ: AMZN) the stock price is now 35% below the March peak and down more than 40% from the November peak.
Surprised? Do not be. The higher prices seen since the middle of last year aren’t just annoying. Higher fuel, material, and labor costs can be downright problematic for a company like Amazon, which, despite its size, operates on wafer-thin profit margins. And, as CFO Brian Olsavsky made a point of explaining during the company’s disappointing first-quarter earnings conference call, “[T]he cost of fuel is about one and a half times higher than a year ago. Combined with year-over-year increases in wage inflation, these inflationary pressures added about $2 billion in additional costs compared to last year. »
For perspective, the company generated $3.7 billion in operating profit for the quarter in question, down more than half from a year earlier despite higher revenue. Additionally, the only profitable business run by Amazon last quarter was its cloud computing business, Amazon Web Services. Its consumer-facing online retail operation actually lost money in the three months to March.
So why enter the stock now? Because it’s Amazon. It’s been here before, and adjusted as needed. He will do it again. As CEO Andy Jassey noted in the Q1 report: “Today, when we are no longer chasing physical capacity or staffing, our teams are resolutely focused on improving productivity and profitability across our fulfillment network.”
Finally, add Adobe (NASDAQ: ADBE) to your list of humble Nasdaq stocks ready to bounce.
Most computer users will recognize Adobe as the name of the pdf (portable document file) file type that helps deliver easy-to-print documents via the web. Seasoned investors may recall that Adobe also largely pioneered the software market for creating, managing and enhancing digital images with a program called Photoshop. While many alternatives exist today, Photoshop is still around too, and so is the pdf file.
What most investors might not realize, however, is that Adobe is so much more than Photoshop and PDF files these days. It offers comprehensive platforms that help enterprise-level clients create and optimize websites and online advertising campaigns, and yes, create digital photos and images. The one called Experience Cloud allows its customers not only to manage and promote an e-commerce site, but also to collect and analyze data about its users and traffic. It can even help its corporate users change the look of a website to suit different visitors.
The other, Creative Cloud, is a digital image creation and enhancement tool that can do more with a photo than most people ever thought possible. There’s nothing else out there quite like either offering. Even in a tough economy, customers cannot simply give up access to these tools.
These platforms are largely rented rather than sold outright, made available as a cloud-based application rather than downloaded software. The end result is an increasing degree of recurring revenue. However, the change in the company’s business model does not slow down growth. Analysts expect sales growth of 13% this year to accelerate to nearly 15% next year, with similar earnings growth in cards.
Given this kind of steady progression, the stock’s 44% drop since November is a chance to plug in at a bargain price.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. James Brumley has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Adobe Inc., Amazon, and Okta. The Motley Fool recommends the following options: $420 long calls in January 2024 on Adobe Inc. and $430 short calls in January 2024 on Adobe Inc. The Motley Fool has a disclosure policy.