Savvy investors can win on their trades whether the market goes up or down, and no one knows this better than Michael Burry. Burry, whose successes in profiting from the financial crisis of 2008 were featured in the book and film The Big Short, has turned his eye to historical analogies, and is hinting at reasons for optimism in today’s environment following last week’s collapse of Silicon Valley Bank.
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Referring back to the October bank panic of 1907, Burry notes certain similarities with today’s crisis. The 1907 panic was triggered by the collapse of a major regional bank, Knickerbocker, in New York, which expanded to hit two other regional institutions and then threatened to spread to the banking majors. But, Burry points out, the 1907 panic burned itself out quickly. The market hit bottom in just three weeks.
Describing the incident, Burry wrote, “In October 1907, Knickerbocker Trust failed due to risky bets, sparking a panic. Two others soon failed, and it spread. When a run began on a healthy Trust, JPMorgan made a stand. 3 weeks later the Panic resolved & markets bottomed. A stand was made this past weekend.”
It remains to be seen whether history will repeat itself. Meanwhile, the Wall Street analysts have pointed out two stocks that are already in the ‘buy’ zone. These are equities that have been flirting with their own bottom levels lately, but offer solid upside potential going forward. We ran them through the TipRanks database to see what makes them appealing investment choices right now.
Match Group (MTCH)
We’ll start with Match Group, a holding company in the online world, known as the parent firm for some of the internet’s most popular dating sites. Match’s subsidiaries include the eponymous match.com, as well as names like Tinder and OKCupid. In the industry, Match is known for having introduced the now-ubiquitous ‘swipe’ feature to mobile dating apps, and the company now boasts that its brands are known world-wide, offered in 40 languages, and available for all dating demographic groups.
While Match can claim that Tinder, its largest brand, was the world’s top-grossing lifestyle and dating app in 2022, the company’s stock has still fallen in the past year. Over the last 12 months, shares in MTCH are down by 60%.
The share price decline has come at the same time that Match has seen revenues and earnings missing expectations. In the last reported quarter, 4Q22, the company had a top line of $786.15 million, coming in $1.2 million below the forecast. At the bottom line, the company’s EPS of 30 cents was 35% below the analyst predictions, although it was a strong turnaround from the 60-cent per share loss reported one year earlier.
Even though revenue and earnings missed expectations, Barclays analyst Mario Lu remains sanguine about Match’s prospects going forward, noting that the company is good at generating cash, and has several positive fundamentals in a difficult environment.
“We believe MTCH has effectively transitioned from an Internet growth stock over the past few years to now a value stock due to its high-margin profile and strong cash flow generation. While there is continued risk that Tinder payer growth does not recover by 2H23 if macro continues to weaken, we believe the company’s strategy in FY23 to focus on optimizations to drive payer growth is a prudent one that was highly effective in the past,” Lu opined.
“We view limited relative downside for MTCH stock to the rest of our coverage due to 1) its profitable business model in a tightening credit environment, 2) our view of Tinder payer growth concerns as overblown, and 3) upside on higher priced subscription tiers /advertising revenue opportunity and gross margin benefits from potential lowered/bypassing App Store fees,” the analyst added.
In-line with this bullish stance, Lu rates MTCH shares an Overweight (i.e. Buy), and sets the price target at $52 to imply a one-year upside potential of ~42%. (To watch Lu’s track record, click here)
Overall, the 15 recent Wall Street analyst reviews on this stock include 9 to Buy and 6 to Hold, for a Moderate Buy consensus rating. The price targets are more bullish, with the average of $60.25 suggesting a robust 63% upside from the current trading price of $36.66. (See MTCH stock forecast)
Truist Financial (TFC)
The second beaten-down stock we’re looking at is Truist Financial, a ‘top 10’ commercial bank in the US market, with a market cap of $43 billion and total assets exceeding $555 billion. The firm is based in Charlotte, North Carolina, and offers a full range of banking products and services to both retail and small business clients. Truist’s services include wealth management, specialized lending, corporate and investment banking, and commercial banking.
This bank’s shares are down 44% for the past 12 months – but by far the lion’s share of that stock price decline has come since the March 8 collapse of SVB.
That share price drop shows how ‘black swan’ events can overshadow sound financial performance. Truist saw positive results in both revenues and earnings in 4Q22. The top line of $6.3 billion marked a 12% y/y gain, while the bottom line non-GAAP EPS of $1.20 was up 5.3% from the prior year. Even better, both results were above the analyst forecasts; the top line beat by $50 million, while the bottom line EPS beat by 2 cents.
In February, Truist declared its regular quarterly dividend. The payment was set at 52 cents per common share, the third in a row at this level; Truist has raised the dividend twice in the last 3 years. The payment went out on March 1, and the annualized rate of $2.08 gives a solid yield of 6.3%, about triple the average found among S&P-listed firms, and a third of a percentage point above the current rate of inflation.
Baird analyst David George, in his coverage of Truist, explains why he believes this bank will avoid the bullet that hit SVB.
“We believe the depository issues at SIVB won’t reverberate through the banking sector and were a function of the bank’s niche deposit base rather than a systemic issue. In contrast, TFC’s Southeastern footprint offers one of the most attractive core customer bases in the US… While other banks may struggle to generate PPNR growth in 2H23 and FY2024, we believe TFC’s strong fee business units (namely insurance and investment banking) should drive growth and normalizing activity in mortgage and capital markets activity could represent a significant tailwind,” George opined.
Against this backdrop, it’s no wonder that George rates TFC as an Outperform (i.e. Buy), and his price target of $53 implies it has a one-year upside potential of ~67%. (To watch George’s track record, click here)
Overall, this stock gets a Moderate Buy consensus rating, based on 14 recent analyst reviews that break down to 5 Buys and 9 Holds. The stock is currently trading at $31.73 and its average price target of $52.38 implies a 65% gain from that level on the one-year time horizon. (See TFC stock forecast)
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.
