Smart stock investing shouldn’t be emotional, but investors are only human, after all, making it difficult to follow a rational trading strategy.
Investors should remember the advice of Warren Buffett: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” What Buffett is advocating is the oldest of market advice: buy low and sell high.
Taking this into consideration, we set out on our own search for compelling investment opportunities trading at a discount. Using TipRanks database, we were able to find 3 stocks that are down from their recent peaks, while some Wall Street analysts are recommending to ‘buy the dip.’ Let's take a closer look.
We'll start with Teladoc, a remote medical care service, which makes use of online networking to connect patients with doctors for non-emergency matters, including ear-nose-throat issues, lab referrals, basic medical advice and diagnoses, and prescription refills for non-addictive medications. In the company’s words, it’s “remote house calls by primary care doctors,” using digital technology to offer an old-fashioned service.
Teladoc’s service is in high demand, and the corona year saw the company thrive – its business model was a perfect fit for COVID-19 pandemic conditions. Full-year revenues in 2020 grew 98% year-over-year, to 1.09 billion, and total patient visits increased by 156%, to 10.6 million. In addition, the company in October completed its merger with competitor Livongo, in a deal worth $18.5 billion. Teladoc shareholders now control 58% of the combined company.
While the move adds to Teladoc’s capabilities and potential patient base, it also meant the company incurred large costs during Q4. Teladoc had to pay up in cash for the merger, and as a result, the Q4 earnings results showed a heavy EPS loss of $3.07 per share.
In addition to the Q4 net loss, investors are also worried by the 2021 membership guidance. Specifically, the figure is likely to be between 52 million and 54 million, which implies growth of +3.4-7.4% year-over-year. This is way down from +40% in 2020 and +61% in 2019.
The stock has slipped 37% since its recent peak in mid-February, but Canaccord's 5-star analyst Richard Close says to 'buy this dip.'
“Bright spots such as multi-product sales, increasing utilization, new registration strength, and visit growth in noninfectious areas trump the membership metric when all is said and done. Opportunities have presented themselves in the past to jump into (or accumulate shares of) Teladoc -- we believe this is one of the opportunities,” Close confidently noted.
Close backs these comments with a Buy rating and $330 price target that implies an upside of 78% in the coming 12 months. (To watch Close’s track record, click here)
Overall, Teladoc has engendered plenty of Wall Street interest. There are 21 reviews on the stock, of which 13 are to Buy and 8 are to Hold, giving TDOC a Moderate Buy consensus rating. The stock is selling for $185.43, while its $255.05 average price target suggests a one-year upside of ~38%. (See TDOC stock analysis on TipRanks)
From medical care we'll move on to the mining industry, because sometimes owning a gold mine is the next best thing to owning the gold. Agnico Eagle is a Canadian gold miner in the business for over 60 years. The company has active mining operations in Canada, Mexico, and Finland, and showed strong production in 2020. The company’s Q4 report detailed over 501,000 ounces of gold produced, at a production cost of $771 per ounce – against an ‘all-in sustaining cost’ of $985 per ounce.
That quarterly performance was duplicated for the full year 2020. Total gold production came in at more than 1.73 million ounces, the top end of the previously published yearly guidance, and the production cost per ounce, $838, was well below the year’s all-in sustaining cost of $1,051 per ounce.
High production – the fourth quarter number was a company record – led to high income. Agnico reported Q4 net income of $205.2 million, which came out to 85 cents per share. For the full year, income came in at $511.6 million, or $2.12 per share. This figure included the 9-cent per share loss in Q1, and was still 6% higher than the 2019 figure.
Despite the strong 2020 full-year figures, AEM shares have slipped since the earnings release, falling some 21% of their value. While the company is profitable, and production is meeting expectations, earnings in Q4 were down 7.6% sequentially and 38% year-over-year.
Covering this stock for CIBC, analyst Anita Soni writes, “In our view, the market reaction on the back of quarterly earnings was overdone and we would recommend investors add to positions on the dip… We continue to favor Agnico for its track record of prudent capital allocation, largely organic growth strategy, exploration expertise (evident in the strong reserve replenishment and resource additions in a COVID impacted year), project pipeline, and strong management.”
In light of these comments, Soni set a price target of $104 to go along with an Outperform (i.e. Buy) rating. Her target implies a one-year upside potential of 73% from current levels. (To watch Soni’s track record, click here)
Overall, Agnico Eagle gets a Strong Buy analyst consensus rating, based on 12 recent reviews that include 9 Buys against 3 Holds. The shares are priced at $60.12 and their $85.62 average price target implies a 42% upside potential for the coming year. (See AEM stock analysis on TipRanks)
Last but not least is Redfin, a Seattle-based, online real estate broker, with a business model based on modest fees (in the 1% to 3%) for sellers to list their homes and for closing the sale. The company aims to make the home tour, listing debut and escrow processes faster and easier.
Redfin reported a 4.7% year-over-year revenue gain in Q4, with the top line reaching $244 million. EPS, at 11 cents, was far above the 8-cent net loss recorded in the year-ago quarter. Both numbers beat the Wall Street estimates by substantial margins. For the full year 2020, the net loss came in at $18.5 million, or less than one-fourth of the 2019 figure.
Since the earnings were released, RDFN shares are down 25%. Investors are somewhat spooked by the company’s Q1 guidance, for a quarterly loss in the $36 million to $39 million range. This is higher than 2020’s total loss, and there is some worry that Redfin is slipping away from profitability. The company is facing growth headwinds from two factors, a lack of agents and a lack of properties to list. The first factor can be met by a hiring drive, but the second is out of the company’s control – and only partly compensated for by higher property values.
Ygal Arounian, 5-star analyst with Wedbush, wrote a note on Redfin titled, ‘Buy the Dip, There’s a Lot to Like Here.’
“The strength in the housing market is continuing to drive material benefits to Redfin, where it is having trouble keeping up with demand. Customers seeking service from agents was +54 y/y, even after Redfin made changes to its site that discouraged customers from requesting tours when an agent was unlikely to be available," Arounian wrote.
The analyst added, "Redfin still doesn't have nearly the amount of agents it needs for the level of demand it is seeing and is hiring aggressively to get there. Agent recruiting increased by ~80% for lead agents in Dec/ Jan vs. Sep/Oct. Redfin is also seeing increasing repeat rates and referrals, which can support growth for longer.”
To this end, Arounian put a $109 price target on the stock, indicating his confidence in a 57% one-year upside, and backing his Outperform (i.e. Buy) rating. (To watch Arounian’s track record, click here)
Redfin’s shares have 10 recent reviews on file, with a break down of 4 Buys and 6 Holds, for an analyst consensus rating of Moderate Buy. The average price target is $87.71, implying a 27% upside from the $69.22 trading price. (See RDFN stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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.
