While crowd wisdom has its place, when it comes to contrarian stocks, going against the grain could be profitable. One example just materialized recently.
Over the last several days, investors have been following lunar services provider Intuitive Machines (NASDAQ:LUNR) with interest. Poised to make history with its Nova-C lander touching down on the surface of the moon, LUNR stock was skyrocketing as it approached the fateful target date of Feb. 22.
Sure enough, the lander did make it to the moon. The only problem — It tipped over. Thus, the Friday close of nearly 16% up translated to a loss of almost 32% in the after-hours session as the devastating news broke.
In other words, the crowd can get ahead of itself and that goes in the negative direction as well. However, astute investors may want to tune into the discount possibly inherent in these contrarian stocks.
Himax Technologies (HIMX)
Whether you look at the market performance of Himax Technologies (NASDAQ:HIMX) on a year-to-date or trailing-year basis, HIMX stock simply stinks. Fundamentally, analysts don’t believe that the fabless semiconductor firm – which specializes in display imaging processing technologies – can expand at a satisfactory rate.
Per data compiled by Yahoo Finance, Wall Street’s experts believe that by the end of 2024, Himax will only print revenue of $901.25 million. That’s well off the $945.4 million the semiconductor specialist rang up in 2023. It’s only until 2025 – when projected sales hit $982.05 million – that HIMX stock might appear compelling to contrarian investors.
In my opinion, these average projections seem ungenerous. In particular, Himax’s WiseEye1 AI Processor may help improve the utility of artificial intelligence. Specifically, the WiseEye processor efficiently wields the power of Internet-of-Things (IoT)-enabled AI protocols by minimizing their intense energy consumption.
Further, the downbeat revenue projections for Himax clash with Robert W. Baird’s “buy” view of HIMX. As well, its experts believe that shares can reach $7, a significant lift from the current price. Therefore, HIMX ranks among the contrarian stocks to consider.
Agco (AGCO)
Despite its broad relevancies, Agco (NYSE:AGCO) – which manufactures agricultural machinery – finds itself on the backfoot. Earlier this month, Agco released its fourth-quarter earnings report, which subsequently disappointed investors. For adjusted earnings per share, the company only managed to deliver $3.78, slipping below the consensus target of $4.03. Also, the prior-year quarter’s result landed at $4.47, presenting an ugly picture of contrasts.
If that wasn’t bad enough, Agco’s revenue sat at $3.8 billion. Unfortunately, this figure also missed the consensus target, which stood at $4.06 billion. Nevertheless, some positives did materialize. For example, cost of sales decreased 4.7% on a year-over-year basis. In turn, gross profit increased 4.5% YOY.
In 2023, the company posted revenue of $14.41 billion. Looking ahead, analysts see 2024 revenue landing at $13.53 billion. By next year, they anticipate sales to slip again to $13.36 billion. However, this pessimism seems a bit over the top.
Notably, enhancements across various agricultural solutions should see increased farmer yields and profitability this year. If so, you’d imagine that demand for agricultural machinery should pick up. Therefore, I find AGCO’s moderate buy consensus view and $143.70 average price target as more realistic. Stated differently, it’s one of the contrarian stocks to buy.
Chewy (CHWY)
As much as Americans love their four-legged friends, Wall Street hates pet-related securities. Just look at Chewy (NYSE:CHWY). You’d think that an online retailer of pet food and other pet-related products should perform well. However, CHWY stock is off to a very inauspicious start to the new year. What’s worse, its 52-week performance is downright frightening.
Nevertheless, the red ink could present a huge opportunity regarding contrarian stocks to buy. Basically, CHWY might benefit from an odd setup. You see, in the fiscal year ended January 2023, Chewy posted revenue of $10.1 billion. However, analysts believe that in 2024, the company should deliver sales of $11.12 billion, up 10.1%. In 2025, revenue could increase again to $11.68 billion.
However, CHWY stock is dropping like a bad habit, almost as if it’s destined to implode. That’s just not the case, especially with the broader fundamentals. In fact, the American Pet Products Association believes that last year, total pet expenditures clocked in at $143.6 billion. That’s noticeably above the $136.8 billion posted in 2022.
And that’s with all the terrible inflation that has disproportionately impacted the U.S. pet economy. As other analysts say, CHWY is a buy.
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.
