Jim Cramer Says Earnings Estimate Cuts Will Form Investable Fund; Here are 3 ‘Strong Buy’ stocks that are already down 50%
As we approach the end of the second quarter, it’s time to start thinking about earnings. As for the quarter, analysts expect earnings growth of 8%, which could reach 11% heading into next year. It’s a rosy picture, but it’s not a sure thing either. GDP contracted in the first quarter, by nearly 1.5%, and some estimates point to 0% growth in the second quarter. Such results would meet the technical definition of a recession – and recession is hardly the usual environment for finding robust earnings growth.
Regarding current conditions, Jim Cramer, the well-known host of CNBC’s “Mad Money” program, believes that investors should wait for the post-earnings market to bottom out, writing, “Over the next weeks before earnings season begins, I expect analysts to hit us with preemptive estimate cuts while more companies hit us with negative advance announcements. We won’t have a tradable fund like this, but an investable fund.
In the meantime, there are stocks that have already been pushed hard by today’s bear market. Using the TipRanks database, we’ve identified three stocks that have fallen at least 50% this year – but analysts on the high street still consider them strong buys. Not to mention that each offers triple-digit upside potential, despite the challenging market environment. Let’s take a closer look.
Global Remittance (COUNT)
We’ll start with Remitly Global, a financial services company with an interesting niche. Remitly is focused on facilitating international transfer payments, ensuring the security of senders and recipients and making transactions both safe and accurate. The service is widely used by immigrant communities around the world, who have historically used remittance payments to send money “home”. Remitly operates in 160 countries, basing its services on a mobile app with lower fees than traditional banks.
Remitly has been in the public markets for less than a year, having held its IPO in September 2021. The company’s public debut has gone well, with shares opening above initial expectations and selling generating some $520 million in gross capital, but the stock has been falling ever since. RELY shares are down 56% year-to-date.
Even though the stock is down, Remitly’s business remains solid. Revenue reached $136 million in 1Q22, a 49% year-over-year gain. Strong revenue gains were driven by a 42% year-over-year increase in the number of active customers, from 2.1 million to 3 million, and a 43% year-over-year increase in sending volume, which increased from $4.3 billion to $6.1 billion. The company made a small positive adjustment to its full-year 2022 revenue guidance of $610 million to $615 million at the midpoint, representing about 34% year-on-year growth annual. On a negative note, the company’s profits fell as the net loss worsened from $7.8 million to $23.3 million year-on-year.
JMP analyst David Scharf saw the company’s recent results as a net positive, writing, “The strong momentum that closed 2021 continued and accelerated through the first quarter of 2022. Financial results of the first quarter were almost exactly in line with our forecasts. , while key operating metrics (active customers, volume sent and volume per customer) exceeded our expectations and drove the modest increase in full-year revenue guidance.
“Despite the sharp contraction in valuations attributed to technology and payments stocks, and heightened macroeconomic uncertainties that are fueling global recession fears, RELY’s 30%+ revenue growth outlook reflects the secular digital tailwinds it enjoys and its long track expansion corridor,” the analyst added.
Overall, Scharf thinks this is a title worth keeping. The analyst notes that RELY shares an outperformance (i.e. buy), and his price target of $22 suggests solid upside potential of around 140%. (To see Scharf’s track record, Click here)
Remitly also managed to earn a unanimous Strong Buy consensus rating from Wall Street, based on 4 recent positive reviews. The stock is selling for $9.15 and the mid price target of $18.75 implies an upside of around 105% from that level. (See RELY stock forecast on TipRanks)
LendingTree, Inc. (TREE)
The next beat title we will look at is Lending Tree, an online loan broker, connecting lenders and borrowers through an internet-based platform. Borrowers can track multiple loan options simultaneously, giving them increased flexibility when researching terms on everything from credit cards and insurance to loans and deposit accounts. Charlotte-based Lending Tree generated just over $1.09 billion in total revenue last year, up from $910 million the previous year.
For 1Q22, Lending Tree reported $283.18 million in revenue, a modest gain of 4% from the prior year quarter. Earnings were negative for the quarter, with a GAAP loss of 84 cents per share. This is a reversal from reported net profits in 4Q21 and 1Q21, and the largest net loss since 3Q20.
A review of the details of the Lending Tree earnings release shows an interesting pattern. The company’s Home segment was down 20% year over year as mortgage product revenue fell 33%. Revenue from the Insurance segment also decreased by 8% compared to 1Q21. At the same time, consumer credit activity is on the rise; credit card revenue grew 69% and personal loans grew 137% year-on-year. It should be noted that TREE shares are down 55% so far this year.
This model caught the eye of 5-star Truist analyst Youssef Squali. Describing the situation, Squali wrote: “As mortgage and refi products remain under pressure in a rising rate environment and inflation is pushing insurance premiums higher, TREE has not seen the same. negative impact on its Consumer business for 2T. The company expects revenue growth of “about 40%” year-on-year in 2Q, which is in line with our prior expectations after the 1Q results. We believe this highlights the continued strength TREE is seeing in verticals, such as SME and retail lending (TREE’s highest-margin business), as well as credit cards, given the lack of stimulus checks and higher levels of consumer spending this year.
“These trends are likely to last for a few more quarters as rates continue to climb, but easier comparisons from 4Q22 should lead to a further acceleration in overall growth in 2023. In the meantime, a reset in expectations, subdued valuation and an active buyback should stock under control,” Squali summarized.
This reinforces the analyst’s view that TREE is a “buy” stock and is worth a target price of $130. At current levels, this target suggests an increase of about 137% for the coming year. (To see Squali’s track record, Click here)
In total, TREE has garnered 7 recent analyst analysis over the past few weeks, with 6 buys and 1 hold, making it a strong buy consensus rating. The stock’s $137.50 mid-price target suggests it has a solid 150% upside from the current trading price of $54.87. (See TREE stock forecast on TipRanks)
Financial company of Oportun (OPRT)
We will conclude with another online financial company. Oportun uses AI to power its digital banking platform, providing affordable financial services to some 1.7 million members. Oportun customers use the platform to access a full range of banking services, including savings accounts and investment services, but especially short-term personal loans and credits. Subprime borrowers often resort to high-risk services such as payday loans, but Oportun offers a range of alternatives. These include personal loans between $300 and $10,000, with payment between 1 and 4 years, and credit cards with limits between $300 and $1,000.
Late last year, Oportun decided to expand its footprint and customer base through the acquisition of Digit, an online neo-banking platform. The acquisition was a cash and stock transaction worth approximately $112.6 million.
Last year saw a generally bullish consumer environment, and Oportun benefited from four consecutive quarters of sequentially increasing revenues. The most recent quarterly report, 1Q22, showed $214.72 million in revenue, the best in more than two years and a 59% year-over-year increase. The total number of active members of 1.7 million represented a year-on-year growth of 48%. Earnings also rose, to $1.58 per share on a GAAP-adjusted basis, from 41 cents in the year-ago quarter for a hefty 285% year-over-year gain.
Despite those strong results — and record EPS — shares of Oportun are down 58% year-to-date. The stock losses didn’t worry BTIG analyst Mark Palmer, who wrote: “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 focus on its digital strategy and the decline in the company’s share price has created an attractive buying opportunity. »
To that end, Palmer is pricing OPRT shares long, with a price target of $27, showing confidence in a strong 218% upside for the months ahead. (To see Palmer’s track record, Click here)
Wall Street likes Oportun, as evidenced by the 5 unanimous positive opinions of analysts, confirming the consensual rating of strong buy on the action. The shares are priced at $8.49 and their average price target of $25.50 suggests an upside of around 197% year over year. (See ORPT stock forecast on TipRanks)
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Disclaimer: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.