Last month, the annual rate of inflation stood at 8.6%, the highest in more than 40 years. Last week, in response, the Federal Reserve raised its benchmark interest rate by 75 basis points, the biggest increase since 1994. The combination of high inflation and aggressive toughening action by the central bank sent an already panicked stock market into its worst single. Weeks since the start of the COVID crisis, and economists have spoken gloomily about the late 1970s and early 1980s, when similar inflation and high interest caused market weakness and a deep recession.
For long-term investors, however, the picture may not be so dire. The broader market downturn drove prices down across the board — and that could provide opportunities to buy higher-quality names in beaten-down areas. In fact, investment billionaire veteran Ron Barron of Baron Capital sees today’s environment as a ‘big once in a generation buying opportunity’.
“Overall, we remain optimistic. We generally do not give much thought to short-term macro issues such as inflation, oil prices, interest rates and the Russia/Ukraine conflict. Inflation is always with us, yet most people do not speak up. That’s it. Over my lifetime, inflation has averaged around 4% to 5% per year. That means prices almost double every 14 or 15 years. The stock market doubles roughly every 10 or 12 years, or Goes to about 7% to 8% per year,” Barron said.
For investors, the key is to find stocks that are ready to move when the bears run their course, even if they are down now. Using TipRanks’ database, we identified three beaten-down stocks that have earned “strong buy” ratings from the analyst community. Not to mention more than 50% growth potential in each offer, despite the challenging market environment. let’s take a closer look.
We’ll start with Wallbox, a Spanish firm in the electric vehicle (EV) charging market. Wallbox serves both the commercial and residential side of EV charging, offering a range of charging products for home and commercial use. Charger features include universal plug and touchscreen controls. Wallbox takes particular pride in offering the first bidirectional charger unit, allowing a fully charged EV to send power to a user’s home, or even to the electrical grid – in effect, an EV Convert it to a storage battery when it is not in use as a car.
Wallbox has been in the public markets since last October, when it completed a business merger with a SPAC firm. Since its Wall Street debut, WBX shares peaked at $18.50 in November and were still trading close to $17 since its 2022 opening — but are down 47% so far this year.
The sharp drop in the share price comes even as Wallbox reported strong financial results. The company’s 1Q22 report released last month showed 28.3 million euros in the top line, for a 192% increase from the year-ago quarter. This was driven by an 180% year-over-year increase in Charger sales — some 51,000 units sold in the quarter — and a gross margin that, at 41%, beat internal forecasts. Wallbox is directing 2022 full-year revenue in the range of €175 million to €205 million, which would translate to y/y annual growth of 145% to 190%.
The company’s rapid growth has impressed Cowen analyst Gabriel Daoud, who writes: “With a diversified portfolio of products supporting US expansion and energy management transformation, Wallbox is expected to provide the necessary investments in hardware globally between 2022 and 2030.” Leverages $293 billion. Vertical integration within manufacturing allows the company to navigate a harsh supply chain environment and achieve best-in-class gross margins of ~40%. We see WBX new software products in 2026 As with additional gains from Sirius, the FCF has turned positive.”
Daoud quantifies its outlook on WBX stocks with an outperform (ie buy) rating, and a $14/share price target meaning ~63% upside over the next 12 months. (To see Dawood’s track record, click here,
Wallbox hasn’t affected Dawood; The Strong Buy consensus rating on the stock is supported by 5 recent analyst reviews, including 4 buys and 1 hold. The shares are priced at $8.58 and have an average price target of $16.50 indicating strong growth of 92% this year. (Check out WBX Stock Forecast at TipRank)
Generic Holdings (GNRC)
For the second stock, we’ll look at Wisconsin-based Genrac, a manufacturer of electric power generators. To provide electricity in the event of a grid failure, the company’s generators are designed as backup units for use in the residential, light commercial and industrial markets. Generac offers a wide range of generator units from 15 kW appliances suitable for home use to multi-MW power systems for the industrial sector. Customers can also choose from small portable generators for workshop or camping use.
Genrac has always been expanding its product lines, looking for new niches that can use backup power generation. In recent weeks, the company released new products for the EV and portable generator markets. The first provides solutions for vehicle charging issues, while the second brings dual fueling capabilities to the portable generator market with models capable of operating on both LP gas and regular gasoline.
New products in the quality lineup have been the backbone of Genrac’s strong sales position. The company has seen growth in its top line over the past several years with 8 consecutive quarterly revenue gains. As recently as 1Q22, Generac reported $1.14 billion in top line, up 41% year-over-year. The profit was driven by a 43% increase in residential product sales and included a 38% increase in commercial and industrial sales.
At the same time that revenue was rising, earnings slipped. The company reported Q1 adjusted net income of $135 million, down from $153 million in the year-ago quarter. On a per-share basis, this translated into a year-over-year decrease of $2.38 to $2.09.
Shares of Genrac have had a volatile trade this year, with sharp ups and downs on both sides. Year-to-date, the stock is down 33%.
The decline in the stock’s price hasn’t stopped Northland analyst Donovan Schaefer from firmly turning down the bullish side for the stock. He sees Genec in a good position to move forward, and cites three reasons: “(1) GNRC dominates the growing US domestic standby (HSB) market, with a sustainable competitive advantage and ~75% market share; (2) a) is ideally positioned to understand and navigate the field of energy transition and therefore make the most of its growing clean energy business; and (3) have a large global footprint achieved from 2010-2018 that flies under the radar And can serve as a latent force multiplier.”
Schaefer uses these comments to support his outperform (i.e. buy) rating on GNRC shares, and sets a price target of $370, meaning a 12-month growth potential of 57%. (To see Schaefer’s track record, click here,
Stepping back and looking at the bigger picture, we see that Genrac recently garnered 16 analyst reviews — and their 15 to 1 breakdown in buy versus hold gives the shares a strong buy consensus view. The stock has an average price target of $399.33 and a trading price of $233.50, which suggests that it has a 70% chance of strength in the coming year. (Check GNRC Stock Forecast on TipRank)
Silvergate Capital (SI)
Last but not least is Silvergate, a California-based commercial bank with a focus on digital currency investments. Silvergate was started in 1988, and has been a leader in digital currency investing for almost a decade. The company has seen 24 consecutive years of profitability, and serves a wide range of institutional investors and digital currency exchanges.
So far this year, Silvergate shares are down 58%, a sharp drop that coincides with the sharp declines we’ve seen in crypto markets as well.
Despite the difficulties the crypto market has seen recently, Silvergate’s business in digital currencies is expanding. The company’s 1Q22 report showed 1,503 digital currency customers at the end of the quarter, compared to 1,381 at the end of Q4 and 1,104 in the year-ago quarter. At the same time, the bank’s Silvergate exchange network, its digital currency exchange, saw a drop in transfers in 1Q22, falling from $219.2 billion in 4Q21 to $142.3 billion.
While currency exchange transactions were down, Silvergate still saw earnings gains. The bank reported net income of $27.4 million for Q1, an increase of 28% over 4Q21 and an even more impressive profit of 115% from 1Q21. The bank’s earnings came in at 79 cents per diluted share.
Analyst Jared Shaw, in his coverage of Silvergate for Wells Fargo, believes now is the time for investors to consider SI stocks. He writes: “SI has built a strong network influence through its Silvergate Exchange Network (SEN), which is used by some of the largest exchanges and institutional clients in the crypto space. As rates rise, higher spreads Proceeds will come from a zero-cost deposit base, and further growth in SI leverage and the rollout of the SI-issued stablecoin payments network represent future opportunities. Continued institutional adoption of crypto and product innovation in SI will drive the bank’s growth profile. We believe most bear-case price at current levels, which creates an attractive entry point…”
With that stance, it’s no surprise that Shaw overvalues (i.e. buys) the stock. He gives the stock a target of $120, which shows his confidence above 93% a year. (To see Shaw’s track record, see click here,
Overall, 8 out of 9 Wall Street analysts who have reviewed this stock recently rated it as buy versus just one hold (ie neutral), a strong buy consensus rating. Shares are selling for $62.32 and have an average target of $175.89, indicating an increase of ~182% in the coming months. (See SI Stock Forecast on TipRank)
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Disclaimer: The opinions expressed in this article are those of featured analysts only. The content is to be used for informational purposes only. It is very important to analyze yourself before making any investment.