Given that this may be the year of artificial intelligence, it’s no surprise that while certain enterprises have hogged the spotlight, astute investors also enjoy compelling opportunities regarding stocks on sale. To be sure, this approach requires going off the beaten path. If you’re willing to do so, the potential rewards could be enticing.
Fundamentally, chasing after heavily hyped securities carry risks. Yes, rumblings in the AI sector have continued to bolster the usual suspects in the technology ecosystem. However, discounted stocks may offer the sounder strategy. Put simply, what goes up must come down. Since under-the-radar entities are by nature overlooked, they may yield greater upside.
As well, investors need to consider other ideas besides digital intelligence. Yes, advanced tech will always be relevant. However, economic conditions may benefit a specific set of stocks to buy on sale. With thousands of publicly traded enterprises available, some ideas will invariably fall through the cracks.
If you’re willing to handle the heat in the kitchen, these stocks on sale could be right for you.
MercadoLibre (MELI)
At first glance, MercadoLibre (NASDAQ:MELI) might seem an odd idea for stocks on sale. Since the beginning of the year, MELI gained over 66% of equity value. As an operator of online marketplaces, MercadoLibre commands a significant presence in Latin American countries. Given that a mix of economic and geopolitical realities may push global business into the region, MELI seems a solid long-term idea.
But is it one of the discounted stocks? Believe it or not, from a financial perspective, it is. Per investment data aggregator Gurufocus, MELI trades at a price/earnings-to-growth (PEG) ratio of 0.57x. In contrast, the PEG ratio of the underlying industry stands at 1.21x. Investors appreciate the PEG ratio because it may indicate a security’s true value. And ratios under 1 may indicate an undervalued status.
What I also appreciate is that it’s not a powder puff PEG. Currently, the company sports a trailing-12-month (TTM) revenue of $13.2 billion. That’s a sizable lift from the $10.54 billion posted in 2022. Analysts rate MELI a strong buy with a $1,476.58 average price target.
Fortinet (FTNT)
A risky idea among stocks on sale, Fortinet (NASDAQ:FTNT) will require belief in the narrative versus the immediate print. Since the January opener, FTNT gained less than 5%. However, that’s due to a severe negative acceleration rate. In the trailing month, shares lost almost 14% of equity value. Unfortunately, the cybersecurity specialist fell victim to a weak fourth-quarter forecast.
In addition, according to a Reuters report, Fortinet faces intense competition from its direct peers. So, while the cybermarket ecosystem offers a large total addressable market, others want a piece of the pie. Still, it’s one of the top performers. Including the Q3 data, Fortinet runs a TTM revenue of $5.17 billion. That’s noticeably greater than 2022’s sales haul of $4.42 billion.
Additionally, FTNT features a PEG ratio of 0.73x. Compared to the broader software field, the PEG ratio stands at 1.53x. Combined with consistent profitability, it’s one of the more exciting stocks on sale. Analysts agree, pegging FTNT a moderate buy with a $56.91 price target.
VICI Properties (VICI)
Another risky but also tempting idea for stocks on sale, VICI Properties (NYSE:VICI) is a real estate investment trust (REIT). Specifically, it specializes in casino properties. Per its public profile, Vici owns 53 casinos, hotels and racetracks, along with four golf courses. These properties are located in the U.S. and Canada. Despite the entertainment portfolio, VICI suffered a loss of more than 10% year-to-date.
To be sure, that’s not surprising given the waning of the revenge travel sentiment. Further, with the Formula One racing circus coming to Las Vegas later this week – but with major problems anticipated – circumstances could get tricky for VICI. On the other hand, it’s difficult to ignore that shares trade for 10.42x forward earnings. In contrast, the sector median stands at 14.51x.
Also, the PEG ratio sits at only 0.38x. Yet it’s a strong performer in the top line, with a three-year revenue growth rate of 13.2%. As one of the compelling discounted stocks, analysts rate it a strong buy with a $34.60 price target.
Discover Financial Services (DFS)
One of the trickiest ideas for stocks on sale, Discover Financial Services (NYSE:DFS) owns and operates Discover Bank. This is an online bank that offers checking and savings accounts, personal, home equity and student loans. In addition, it’s probably best known for its issuance of credit cards. To be sure, plastic use is popular now, given the $1.08 trillion of credit card debt.
However, that’s also the problem. Yes, rampant plastic use indicates in one sense confidence in the financial system. But with factors such as mass layoffs to consider, record consumer debt isn’t exactly helpful. Nevertheless, as long as the system continues to march somewhat forward, I suppose Discover could benefit. Do note, though, that DFS lost 14% YTD.
On the positive side, DFS trades at a trailing-year earnings multiple of only 6.2x. In contrast, the sector median comes in at 12.45x. Also, the PEG ratio sits at only 0.58X despite its strong operations. For example, Discover’s three-year revenue growth rate lands at 10.2%, above nearly 64% of its peers.
Analysts peg DFS a moderate buy with a $102.24 price target, projecting over 22% growth.
AutoNation (AN)
A tough idea for stocks on sale, AutoNation (NYSE:AN) almost seems irresponsible to discuss as a long-side opportunity. It’s not just about inflation that hurts the automotive retailer brand. Rather, the soaring finance rate for auto loans has crimped sentiment. In addition, more than enough evidence exists that people are holding onto their current rides, not replacing them.
Obviously, that’s not a great backdrop for AutoNation. However, it’s also fair to point out that AN stock hasn’t suffered a catastrophic loss in the market. Quite the opposite, shares gained nearly 24% of equity value. No matter what, people need personal transportation solutions in many regions of the U.S. Further, car prices have declined compared to last year’s highs.
It’s also one of the discounted stocks. Presently, AN trades at only 6.3x forward earnings, below the sector median value of 9.52x. Also, the PEG ratio sits at 0.17x while the three-year revenue growth rate clocks in at an impressive 26.4%.
Analysts rate AN a moderate buy with a $165 target, implying over 24% upside.
Jack in the Box (JACK)
Possibly a sensible source of speculation among stocks on sale, Jack in the Box (NASDAQ:JACK) is a popular fast-food joint. Fundamentally, the company could benefit from the trade-down effect. With inflation and high borrowing costs hurting consumer sentiment, people will look to save money. One of the easiest ways of doing so would be to trade down from expensive restaurant fare to something like Jack in the Box.
For full disclosure, JACK is down around 4% since the January opener. Also, in the trailing six months, it lost an alarming 31% of equity value. However, in the past 30 days or so, the security appears to have stabilized. It’s possible it could be one of the stocks to buy on sale due to the derisking factor.
It’s also a bargain in terms of financial metrics. Currently, the market prices JACK at a forward multiple of 9.63X, lower than the sector median 17.39X. Now, JACK’s PEG ratio is 1.13X but the sector PEG stands at 2.04X. And it features a robust three-year revenue growth rate of 23.8%.
Lastly, analysts peg JACK a moderate buy with an $84 price target, implying 29% growth.
Genmab (GMAB)
Another risky idea, Genmab (NASDAQ:GMAB) might still entice speculators seeking stocks on sale. A Danish biotechnology firm, Genmab features eight approved antibodies used in eight marketed products covering cancer indicates and autoimmune diseases. While the company offers incredible scientific relevance, it also lost 27% of equity value since the start of the year.
Naturally, concerns exist that may fall further into the abyss. However, over the trailing five years, GMAB gained nearly 124%. Also, where it sits right now, GMAB is trending alongside a multi-year horizontal support line. It’s possible Genmab may hold this line because of options sentiment. Based on implied volatility (IV) trends, options traders are collectively betting on an upside move more so than hedging for tail risk.
Against traditional financial metrics, GMAB trades at a PEG ratio of 0.67x. In addition, the company’s three-year revenue growth rate clocks in at 37.9%. Also, its EBITDA growth rate during the same period impresses at 33.5%.
Finally, analysts rate GMAB as a moderate buy with a $43.17 price target, implying over 37% upside.
On the date of publication, Josh Enomoto 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.
