What to make of the markets today? The CPI numbers came in on Tuesday, and were better than expected; that is, inflation remains high, but the rate of increase appears to be cooling off. The annualized CPI rate for November registered 7.1%, compared to the 7.3% forecast, and markets spiked on the news.
And then they slipped back today, after the Federal Reserve raised interest rates by half a percentage point, as expected, but also signaled it would have to take rates higher through next year. Fed chair Jerome Powell has indicated that rates may peak at 5.1% from the current range of 4.25%-4.5%.
Overall, the S&P is down 16% year-to-date, and the NASDAQ is down 29%; with overall declines like that, plenty of stocks are facing low share prices — and that could spell opportunity.
With this in mind, we used TipRanks database to pinpoint two stocks that are too cheap to ignore. Essentially, we looked for 1) stocks with a ‘Strong Buy’ analyst consensus; 2) solid upside potential. And on top of this, each one of these stocks is trading at low valuations. Let’s take a closer look.
Matterport, Inc. (MTTR)
The first beaten-down stock we’ll look at is Matterport, a spatial data company that allows customers and users to create digital models of 3D spaces. These immersive, interactive virtual models make possible spatial data insights with applications in architectural design, building and construction, and real estate sales. The company can boast of 8.7 million spaces under management in some 177 countries, generating $152 million in annualized run-rate revenue.
On a quarterly basis, Matterport reported $38 million in 3Q22, beating its own previous guidance. This included records in subscription revenue, of $19 million, and in services revenue, of $10 million. The latter, services revenue, was up 204% year-over-year. Along with solid revenues, Matterport reported $495 million in cash and liquid assets on the balance sheet.
While the top line and cash reserves were strong, the company also saw a Q3 non-GAAP EPS loss of 9 cents. This was deeper than the 6-cent loss in the year-ago quarter – but it beat the 13-cent loss forecast, and represented a 25% quarter-over-quarter improvement.
In the end, the positives outweighed the negatives, as far as investors were concerned, and MTTR shares jumped 24% after the earnings release. The gains held for a time, before the overall bearish trend of the past year took hold again, and the stock now shows a year-to-date decline of 86%.
The current low share price makes this stock too cheap for investors to ignore – and too cheap for the analysts to ignore as well. Covering the stock for Berenberg, Justin Ages writes: “We believe shares are attractively priced at current levels given MTTR’s opportunity to take share over the long term and improve profitability.” Supporting this view, the analyst adds, “Matterport’s end-markets are underpenetrated. We remain positive on Matterport’s ability to expand use cases in real estate, AEC, and adjacent verticals… The company has an ecosystem around its products and services that we believe makes it sustainable in the long term.”
Considering the disconnect between the company’s share performance and its long-term potential, Ages rates MTTR as a Buy, and sets an $8 price target that implies a one-year upside potential of ~189%. (To watch Ages’ track record, click here)
Overall, Matterport has picked up 5 analyst reviews recently, with a 4 to 1 breakdown favoring Buys over Holds, for a Strong Buy consensus rating. The shares are priced at $2.83 and the average price target of $6.30 suggests a gain of 123% in the next 12 months. (See MTTR stock forecast on TipRanks)
WalkMe, Ltd. (WKME)
Next up is WalkMe, a Software-as-a-Service (SaaS) company offering a digital adoption platform (DAP) to more than 2,000 enterprise customers, including names such as Walgreens, Twilio, and Adobe. The company’s software boasts over 35 million users in more than 42 countries. WalkMe’s cloud-based platform lets organizations accelerate digital transformations through more accurate data measurements supporting more effective actions.
WalkMe’s product is popular, as shown by two key metrics in the last earnings report, for 3Q22: The company saw 13 new DAP customers in the quarter for a total of 155, and a 63% growth in annual recurring revenue (ARR) from DAP customers; and, high-end ARR, from enterprise customers with more than 500 employees, was up 31% year-over-year.
At the top line, the company’s total revenue of $63.4 million was up 25% from the year-ago period. This included a 23% y/y gain in subscription revenue, which made up $56.7 million of the total. Looking ahead, the total ARR was up 26% from 3Q21, to $254 million.
At the bottom line, WalkMe’s non-GAAP diluted EPS loss deepened from 13 cents in 3Q21 to 14 cents in the latest report. The strong revenue readings impressed investors more, and WalkMe’s shares saw a 17% gain in the immediate aftermath of the financial release. Yet, WKME is still down 51% on a year-to-date basis.
What this comes down to, is a stock that investors need to pay more attention to – in the view of JMP analyst Patrick Walravens.
Walravens sees WalkMe as a ‘buying opportunity’ for several reasons, including: 1) the company’s enterprise business, which accounts for 94% of the business, remains robust…; 2) WalkMe is seeing increasing traction with systems integrators and partners…; 3) the company is tightening up spending and driving the company to expect positive free cash flow within 2023…; 4) the company should be FedRAMP Ready in 4Q and FedRAMP Moderate in 1H23…; 5) we continue to think WalkMe would make an attractive acquisition candidate for a workflow-related business like ServiceNow…; and 6) the valuation remains quite reasonable…”
With these bullish factors in mind, Walravens rates WKME an Outperform (i.e. Buy), with a $19 price target to indicate potential for 82% share appreciation over the coming year. (To watch Walravens’ track record, click here)
The Street agrees with the bullish take here, and the 8 recent analyst reviews include 6 Buys and 2 Holds for a Strong Buy consensus. The shares have an average price target of $13.31, implying ~28% one-year gain from the current trading price of $10.43. (See WKME stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
