The stock market has produced a very mixed bag of earnings results for the first reporting season of 2015, and investors have been whipsawed on some top companies. While most of the companies in the S&P 500 have reported earnings in line with estimates, some very high-profile members have missed, causing the market to bounce wildly all through January.
A new research report from the Information Technology and Hardware analysts at UBS tracks the stocks that are the most overbought and oversold on a relative strength basis. Needless to say, this week’s volatility has skewed numbers for the stocks that were oversold even more. One caveat that was in the report, and one for investors to be mindful of: as the UBS team has said on occasion, many of the stocks in their coverage universe are fairly valued at this time.
The oversold stocks of note are Best Buy Co. Inc. (NYSE: BBY), Electronics for Imaging, Inc. (NASDAQ: EFII), NetApp Inc. (NASDAQ: NTAP), Nuance Communications Inc. (NASDAQ: NUAN) and SanDisk Corp. (NASDAQ: SNDK).
Despite the fact Best Buy overdelivering with 2014 holiday sales, shares got hit hard in the middle of January. Expectations for sales momentum and margin performance where better than management’s guidance suggested. Although conditions improved for Best Buy in the third quarter of fiscal 2015, the road ahead still seems difficult.
Best Buy reported same-store-sales growth of 2.2% in the third quarter of fiscal 2015, in contrast to the first two quarters in which same-store sales were in the red. The company is trying to combat difficult conditions by reducing costs, pricing competitively, optimizing stores and enhancing distribution. The store-within-store partnerships it has with suppliers like Samsung are expected to drive more store traffic. Best Buy’s online channel growth also looks promising, as it continues to battle Amazon.
We spotlighted the retail giant’s efforts to spur traffic with a no-money down iPhone offer.
Best Buy investors are paid a 2.1% dividend. The Thomson/First Call price target for the stock is posted at $41.14. Shares closed Thursday at $36.09.
Electronics for Imaging
This was a very hot tech stock at the end of the 1990s and into the early 2000s. The company is a worldwide provider of products, technology and services leading the transformation of analog to digital imaging. Its product portfolio includes digital front-end servers; superwide, wide-format, label and ceramic inkjet presses and inks; production workflow, Web-to-print and business automation software; and office, enterprise and mobile cloud solutions.
The consensus price target for this once high-flyer is a whopping $51. Shares closed trading on Thursday at $35.64. Trading up to that target would be a large 43% gain.
This top tech storage stock was blistered during the recent stock sell-off, and at one point in the past 52 weeks was down 30% from January 2014 highs. The company is a provider of storage systems and data management solutions that form the foundation for efficient and flexible IT infrastructures. The company is one of the smaller players in the electronic storage industry, which could hurt it in competition with industry giants like EMC.
NetApp investors are paid a 1.73% dividend. The consensus price objective is $43.30. Shares closed Thursday at $38.06.
This has been one of the targets of activist investor Carl Icahn over the past year. Icahn has two members of his team on Nuance’s board and he owns almost 19% of Nuance stock, as of the last reporting data available. While the company is perhaps the most advanced speech recognition company, investors may want to watch this pullback for a good spot to buy stock.
The consensus price target for the stock is posted at $18. Nuance shares closed Thursday at $13.85.
When the company reported tepid fourth-quarter 2014 results and provided weak first-quarter and fiscal 2015 revenue guidance, the stock was absolutely blasted. Lower operating profit and higher expenses also had an impact on the share price. Following the announcement, the company’s shares plunged almost 7%.
SanDisk’s quality, state-of-the-art solutions are at the heart of many of the world’s largest data centers and embedded in advanced smart phones, tablets and PCs. While some have speculated the slowing sales at Samsung are the reason for the revenue revisions, others on Wall Street think that the soft fourth quarter could be a one-off correction, and this gives investors an excellent entry point for the top stock.
SanDisk investors are paid a 1.55% dividend. The consensus price objective is $92.54. Shares closed trading on Thursday at $77.47.
Obviously the overall market has been in a topsy-turvy mode for most of the January trading days, and earnings for the most part have been good, but very mixed. While these stocks are very oversold, careful buying may be the best plan for aggressive investors looking to add new stocks to their portfolios.