3 Beaten-Down Tech Stocks That Could Be Set For a 2022 Comeback
Dec 27, 2021
Market volatility has escalated in the final weeks of 2021. Along with Omicron worries, market volatility has coincided with Wall Street's acceptance of a new Fed strategy in the New Year, which includes monetary tightening and at least one, if not more, interest rate rises. The Fed's easy money has supported the market for the greater part of a decade or more, and investors are understandably concerned about how the market will adjust.
Daniel Ives of Wedbush is upbeat about the future. According to the 5-star expert, the IT sector will propel the NASDAQ to a year-end objective of 19k in 2022. If he is correct, the index will rise by nearly 21%.
With such a large potential gain, where should one invest? Several IT industries, like cloud computing and cybersecurity, are expected to be winners next year, according to Ives. "With currently 43 percent of workloads on the cloud based on our projections," Ives adds of the cloud, "we expect this figure [$1 trillion TAM] will exceed the 50 percent threshold by the end of 2022 as more enterprises/governments go to the cloud." Sharp-eyed investors will have lots of possibilities as a result.
According to Ives, network security is another huge winner. "Based on our current reviews, we anticipate cyber security budgets will climb by 21% in 2022, which is nearly a 100 basis points YoY increase from a strong 2021." This is a significant growth in a market that is currently worth almost $180 billion globally. In today's environment, you can't do digital without security.
To get investors started, we've utilized the TipRanks platform to pull up information on three tech stocks that fit the bill: a beaten-down share price, more than 50% upside potential in the future, and a recent Buy recommendation from a prominent analyst. Not to add that the analyst consensus rates all three as Strong Buys. The following are the specifics.
Allot Ltd. (ALLT)
Let's start with Allot, a software firm that works in both cybersecurity and cloud computing. Through a cloud-based SECaaS (security as a service) approach, Allot provides solutions for network intelligence, DOS prevention, traffic management, and more. Allot has over a billion users and is available on networks in over 100 countries.
Recently, the firm has had some noteworthy accomplishments to share in the news. Allot announced at the end of November that Play, Poland's largest mobile operator, has signed a deal with Allot to provide cyber threat protection to its clients - a significant milestone given Play's 15 million members. In Europe, Allot's Network Secure software reportedly stopped 1.7 million phishing assaults targeting Amazon.com Black Friday consumers. It was a significant victory for Allot's army.
Despite these good developments, the company's stock is still down 41% from its peak in June of this year. Despite the fact that Allot's quarterly sales and profitability have been consistent throughout the year, the firm has dropped its SECaaS revenue prediction for CY21 from $8 million to $4.3 million, and its overall company revenue projections from $150 million to $146 million.
According to Nehal Chokshi, a 5-star analyst at Northland Capital Markets, the low share price creates a buy-in opportunity for investors. "Based on our interactions with ALLT SECaaS customers in Europe and APAC, we feel that CSPs are finding value in ALLT's SECaaS technology, and that CSP end-customers are actually embracing ALLT enabled SECaaS technology," he adds. Based on our interviews, we calculate a $3 billion SECaaS revenue opportunity for ALLT.
Chokshi rates the company as Outperform (Buy) and sets a $23 price objective, representing an 89 percent one-year gain.
In terms of the rest of the Street, Allot's Strong Buy consensus rating is based on 4 reviews, with the Buys and Holds divided 3 to 1. The stock is now trading at $12.14, with a $18.75 average price objective implying a year-over-year increase of 54 percent.
Airgain, Inc. (AIRG)
Next up is Airgain, who works in the field of cellular networking. The firm specializes in wireless technology and connectivity, especially antenna systems for connecting wireless and mobile devices to cellular networks. The company's product portfolio also comprises wireless modules and integrated wireless systems in addition to antenna modules.
Airgain's product lines offer a wide range of applications, even in disciplines that aren't strictly data networking-related. The company's gadgets are popular among first responders, public safety departments, and vehicle fleet operators, as well as in IoT and fixed wireless applications. This is a varied and broad client base, which is generally a buffer against sales downturns, but Airgain has been hit hard by the well-publicized supply chain problems, particularly in semiconductor chips.
The impact of these difficulties may be seen in recent sales declines in the second and third quarters. The top line for the third quarter was $15.4 million, down about 11% from the second quarter. Earnings, which had previously been positive, fell to a loss of 11 cents per share in the third quarter. AIRG stock has dropped 62 percent from its top of $28 per share in February.
Anthony Stoss, a 5-star analyst at Craig-Hallum, sees an opportunity to get in on the ground floor with Airgain. "We feel now is the time to acquire AIRG since the firm is primed to benefit from various tailwinds that will help growth in existing and future products," he adds. While component shortages impacted legacy consumer business revenues in the second half of fiscal year 21, shortages are projected to improve in the first quarter of fiscal year 22. We believe the market has overlooked AIRG's transformation from a component provider to an integrated IoT wireless systems provider as a result of these supply repercussions on the company's heritage business.... This move will not only speed up growth in areas with significantly bigger TAMs, but we believe it will also result in a rerate as AIRG's revenue mix shifts over time."
In keeping with these remarks, Stoss grades the company as a Buy, with a price objective of $16 implying a 50% gain in 2022.
We're looking at a firm that has a consensus rating of Strong Buy once again. For AIRG, there are 5 reviews on file, with a 4 to 1 ratio favoring Buy over Hold. The average price objective is $17.60, implying a 65 percent increase from the current trading price of $10.64.
Markforged Holding (MKFG)
Today's last company on our list is a tech firm with a potentially revolutionary business plan. Markforged uses a mix of software platforms and powerful, industrial-grade 3D printers to enable on-site fabrication of machine tools. On the manufacturing floor, the company's goods may go from component design to part in hand, offering manufacturers a significant edge.
This business took advantage of this year's stock market rally to go public via a SPAC merger. In July, the company merged with venture entrepreneur Kevin Hartz' blank check startup, one, and the MKFG stock began trading on July 15. Markforged received a total of $361 million in gross profits from the acquisition.
Markforged reported $24 million in revenue in the third quarter of 2021, its second such report as a public company, increasing 53 percent year over year. This was complemented by a 47% rise in gross profit year over year, reaching $13.7 million. The stock price has been sliding, down 60% from the SPAC's peak in February – but this isn't unusual; the majority of SPAC deals see stock prices decline in the first year before stabilizing and discovering genuine value.
Troy Jensen, writing for Lake Street Capital on Markforged, sees a huge opportunity for this firm, particularly in light of supply chain issues. "After posting strong earnings, the price has been disappointingly weak, and Markforged was the only additive business to improve sales expectations for 2021," he says. We believe the current price is an ideal investment position since supply chain interruptions have benefited additive manufacturing in the short run. Markforged stands to benefit greatly from this, since their engineering-grade printers, industrial-grade materials, and cutting-edge software produce the greatest composite components in the business."
These remarks support a Buy rating, and a $14 price target predicts a 157 percent gain in the following year.
Wall Street appears to agree with Jensen on this one, based on the aggregated reviews: Markforged has a unanimous Strong Buy recommendation, based on four analyst opinions. The stock is now trading at $5.45, with a one-year price objective of $10.17, implying a potential upside of 87 percent.