As the first quarter unfolded, the semiconductor sector's resounding success has dominated the stock market narrative, propelling the broader market nearly 10% higher. However, a notable shift occurred as the quarter drew to a close. Defensive sectors like utilities and consumer staples began to gain traction and break out, hinting at a potential redirection of focus towards oversold large-cap stocks positioned favorably for a rebound.
Amidst this shifting landscape, an exciting proposition is identifying extremely oversold stocks with favorable analyst ratings and predicted upside. Nike, Lululemon, Snowflake, and Adobe have all found themselves in the spotlight, not for their recent highs, but for their significant pullbacks. While the market has been fixated on the surge of the semiconductor sector and high-flying tech names, these companies have quietly slipped into highly oversold territory, potentially catching the attention of investors seeking value amidst volatility.
So, let's look closer at these stocks to assess whether they present compelling buying opportunities despite their current oversold conditions or whether further downward pressure looms.
Nike, a powerhouse in athletic apparel, has endured a challenging year, with shares down nearly 14% year-to-date. However, its latest earnings report on March 21st, 2024, offered a ray of hope. Nike beat expectations with earnings per share of $0.98, surpassing estimates by $0.29, and recorded revenue of $12.43 billion, exceeding forecasts.
Despite this year's weakness, analysts remain bullish on Nike, projecting nearly 25% upside potential. This indicates confidence in its resilience and growth prospects. The stock's RSI of 34.79 indicates it might be highly oversold and entering a skewed risk: reward scenario to the long side.
After its latest earnings announcement, the stock experienced a downward gap and continued to trade lower, resulting in year-to-date losses nearing 20%. Despite this, the cloud-based data storage, computer, and analytics company exceeded analysts' expectations by reporting an EPS of ($0.44), $0.05 higher than the consensus estimate of ($0.49). Additionally, the firm generated $774.70 million in revenue for the quarter, surpassing analysts' projections of $759.86 million.
Following weeks of substantial selling pressure, the RSI currently stands at 35, indicating significantly oversold conditions in the short term. Analysts anticipate a considerable upside for the stock, issuing a moderate buy rating and setting a price target suggesting a nearly 25% potential increase.
Lululemon, a leader in athletic apparel, has had a rough start to the year. Its stock is down over 23% year-to-date, pushing it into bear market territory. Following its latest earnings report on March 21st, 2024, the stock experienced a significant downward gap, returning to its 2023 trading range.
Lululemon reported earnings per share of $5.29 for the quarter, beating estimates by $0.29. Revenue was $3.21 billion, surpassing expectations and marking a 15.6% year-over-year increase. However, the earnings selloff has left the stock in highly oversold territory, with an RSI of 28.
Analysts remain bullish on Lululemon, with a moderate buy rating based on twenty-nine analyst ratings and a consensus price target indicating almost 27% potential upside.
Following its recent earnings report, Adobe experienced a notable decline, with the stock gapping lower to a significant level of previous support at $500, a level last seen in 2023. On March 14th, 2024, Adobe released its quarterly earnings results, reporting earnings per share (EPS) of $4.48 for the quarter. This surpassed analysts' consensus estimates by $0.10. Additionally, the company generated $5.18 billion in revenue during the quarter, slightly exceeding analyst estimates of $5.14 billion, reflecting an 11.3% year-over-year increase in quarterly revenue.
Despite the decline prompted by the earnings report, Adobe retains a moderate buy rating. Based on the consensus price target, analysts forecast a 23% potential upside. Furthermore, the company projects earnings growth of close to 13% for the entire year ahead, indicating confidence in its ability to capitalize on market opportunities and drive continued growth.
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