The current rally in technology stocks is not carrying all companies along. Artificial intelligence (AI) stocks are racing ahead while many other tech companies are seeing their share prices languish. This presents an opportunity for investors looking to buy beaten-down stocks currently trading at cheap valuations and distressed prices. Many of the most hard-hit tech stocks over the past 18 months have bright futures and great long-term outlooks. Investors who plan to hold stocks for five years or longer could be richly rewarded by picking up some of these battered technology names now while they are on sale. While the Nasdaq index is up 25% year to date, it remains well below its November 2021 peak above 1,600. And the current rally in tech stocks has not been broad-based, presenting true buying opportunities. Here are three tattered tech stocks to buy and hold.
Block (SQ)
Two issues have conspired to lower the share price of financial technology (fintech) company Block (NYSE:SQ). The first was the meltdown last year in cryptocurrency prices. The second has been a damaging report from short-seller Hindenburg Research that accused the company of overstating its key metrics, including the number of people and organizations that use its popular payment app. The good news is that crypto prices have rebounded, and the damage caused by the Hindenburg report is priced into the share price.
At its current price, SQ stock is trading 30% lower than where it was a year ago and is nearly 80% below an all-time high reached in August 2021. The time to buy the stock might be now, as it looks to have bottomed in mid-May and is trending higher. The company could catch tailwinds if crypto prices continue to rise. Block owns more than 8,000 Bitcoin (BTC-USD). The company’s Cash App also remains popular, noting that it has 44 million verified monthly users.
Long-term, SQ stock should rise from its current doldrums.
Chewy (CHWY)
Online pet retailer Chewy (NYSE:CHWY) continues to struggle after the pandemic. CHWY stock went gangbusters during Covid-19 as pet adoptions skyrocketed and people were forced to purchase food, toys, and other pet supplies online. But after cresting at $118 a share in February 2021, the company’s stock has plummeted 75%, including a 17% decline this year. Waning consumer demand and a glut of inventory has weighed on the stock.
There is reason for hope with CHWY stock. Americans continue to love their four-legged friends, and that love is driving positive results at Chewy. The company recently turned a profit for the first time, and it has grown its annual revenue over the last four years by 185% to $10 billion. It’s also managed to increase its gross margins to 28% from 20%. These financial results are extremely positive and show that Chewy is moving in the right direction. In time, the share price should climb higher.
Teladoc Health (TDOC)
Another casualty of the pandemic has been the telemedicine company Teladoc Health (NYSE:TDOC). As with Chewy, TDOC stock scaled great heights during the Covid-19 crisis, peaking at nearly $300 a share in February 2021. Since then, it has been all downhill for the company’s share price, having fallen 93% in the last two years. The stock has pulled back 20% over the past six months alone. A lack of profits and concerns about stalled growth as people emerge from pandemic hibernation seem to be the culprits here.
However, like Chewy, the demand for the virtual medical appointments provided by Teladoc Health is not disappearing. In some areas, demand is growing, particularly regarding patients consulting with medical specialists. This demand has led Teladoc Health to report successive quarters of double-digit revenue growth. The company now says it is focusing on achieving profitability. To that end, Teladoc has announced job cuts and office closures as it works to improve efficiencies. In time, TDOC stock should rise.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
