The stock market can be a fickle beast, driven by emotion and prone to overreactions. While some companies are riding high on waves of hype and speculation, others are left behind, unfairly punished by short-sighted analysts and panicked investors. However, for those with a keen eye and a contrarian spirit, these moments of market turmoil can present golden opportunities. This week, our network of gurus has identified three companies that have been oversold and are poised for a powerful comeback. Let's dive in.
CELH: A Refreshing Opportunity in a Booming Market
Celsius Holdings (CELH), a health-focused energy drink maker, has experienced a dramatic 66% drop from its peak in May. This plunge was sparked by news that orders from a major distributor saw a year-over-year decline. However, a deeper look at the company's performance and the energy drink sector as a whole suggests that Wall Street's reaction was a classic overreaction.
Bryan Bottarelli, an expert technical trader, believes CELH represents a “textbook Wall Street overreaction.” In his October 11 article, he highlights the company’s impressive growth, with sales surging from $130 million in 2020 to $1.3 billion last year. CELH has captured roughly 10% of the US energy drink market and secured a distribution deal with PepsiCo, giving them access to a vast network of retailers and restaurants.
What’s more, CELH is tapping into a growing niche within the energy drink sector: health-conscious consumers. Its products, made with natural ingredients like green tea extract and ginger root, promote metabolism and fat burning, appealing to consumers seeking healthier lifestyles. A recent Piper Sandler teen survey, mentioned in Bryan’s article, reinforces this idea, showing that Celsius is winning over consumers, with its “share of mentions as a favorite [being] about 35% more than its overall market share.” It seems Wall Street is overlooking the fact that CELH is not only capitalizing on the booming energy drink market, but also carving out a dominant space within a growing niche.
ASML: Don't Fear the Dip, AI Chip Demand Is Still Strong
ASML Holding (ASML), a Dutch semiconductor equipment maker, sent shockwaves through the tech sector this week when its latest forecast fell short of expectations. This news, released prematurely in an earnings report leak, sparked a sell-off, leaving the stock down nearly 16% for the day. But this knee-jerk reaction may have created an excellent buying opportunity, especially for those with a long-term perspective on the AI revolution.
While ASML’s CEO acknowledged that some segments are experiencing a “more gradual” recovery, he emphasized the continued strength in AI. Davis Wilson, a trader who follows the ins and outs of the AI sector closely, picked up on this critical nuance. In his October 15 article, he points out that the ASML press release specifically states that “while there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover,” including Logic and Memory.
He argues that this sell-off is largely driven by misleading headlines and a misunderstanding of the nuances in ASML’s various markets. This is a “classic ‘throwing the baby out with the bathwater' scenario” where a stock is punished for news that’s irrelevant to its core strengths. He views this as an opportunity to jump into ASML, particularly ahead of the company's upcoming earnings report.
CVNA: A Contrarian Bet on a Turnaround Story
Carvana (CVNA), the online used car retailer, has experienced a tumultuous year, with its stock price down nearly 60% from its peak in March. The company has faced headwinds, battling higher interest rates and used car prices. But if you lean towards contrarian investing, this dramatic downturn presents an intriguing buying opportunity, particularly for those with an appetite for volatility.
Nathan Bear, a technical trader who focuses on strong chart setups, believes CVNA is poised for a comeback. In his October 17 article, he highlights the stock's appealing technical setup, pointing to its “impressive FOUR A+ squeezes across different timeframes,” a “beautiful consolidation pattern underneath the $200 price point,” and a “high short float, adding potential for a squeeze.” He argues that these technical signals, combined with the stock’s relatively low valuation at 10.8x earnings, suggests a buying opportunity, even in this uncertain market.
It’s Your Move
When it comes to navigating the stock market, it pays to be alert. And while Wall Street is prone to getting it wrong, especially in moments of fear and uncertainty, for savvy investors, those overreactions can create lucrative opportunities. These three stocks are just a starting point. The key is to look beyond the headlines, and dig deeper.
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