Barring select periods of relief, the inherent trend in the stock market has been decidedly negative in 2022. For investors looking for ways to boost portfolio performance, there have generally been few pickups.
But if you look on the bright side of a market situation in which stocks are continually moving lower, what you get are some attractive low entry points.
Roth Capital technology and communications expert Scott Searle certainly thinks that with a little digging, investors can find some ‘oversold gems.’ “We believe there are multiple investment opportunities within our IoT and broadband universe,” the 5-star analyst said recently.
So let’s take a look at some of these “oversold gems” that Searle believes are ripe for the picking right now. In fact, the analyst estimates that a couple of stocks will double in the next year. With the help of the TipRanks platform, we can see how Searle’s recommendations fare among his colleagues in the analyst community.
Lantronix, Inc. (LTX)
We’ll start with Lantronix, a leader in the world of networking and connectivity hardware. The company provides turnkey secure solutions for global customers in the worlds of Internet of Things (IoT) and Remote Environment Management (REM). The company’s offerings include smart hardware to power connectivity services, engineering support and cloud-based software-as-a-service. The company’s products have found application in the fields of automotive, data centers, industry, logistics, medicine, wearables, video conferencing, retail and smart city technology.
Lantronix’s product lines are heavily weighted toward wireless connectivity, including network device servers, network switches, IoT gateways, and media converters. The company also offers a full range of support services, for software, installation and design.
Last month, Lantronix reported its fourth and final quarterly results for its 2022 fiscal year. The headline number was a quarterly top line of $35.9 million, a 74% year-over-year gain. That led to non-GAAP EPS of 8 cents. While this EPS was just short of the forecast of 9 cents, it was up 33% from the 6 cents result reported in the year-ago quarter.
For the full fiscal year 2022, Lantronix reported total revenue of $129.5 million, up 81% from the $71.3 million reported in fiscal 2021. Looking ahead, the company is targeting to revenue of $149 million to $162 million for fiscal year 2023; at the midpoint, this would represent a 20% increase over the 22 total.
However, shares took a beating in the subsequent session as the company’s earnings outlook for fiscal 2023 fell short of expectations; Lantronix expects non-GAAP EPS to be between $0.39 and $0.44, but the consensus was looking for $0.50. Since then, the stock has continued its downward trend, and is now down 41% today.
However, Searle points to upside potential for the stock, saying: “Given the expanding product breadth from internal development and M&A, increased scale and management with a defined track record of success, we believe that LTRX stock is too discounted. With positive EBITDA, EPS and cash flow, which we expect to drive further acquisitions, we believe it is only a matter of time before investors recognize the transformation underway.”
To that end, Searle rates LTRX a Buy, while its 12-month price target of $12 suggests a ~161% upside from current levels. (For Searle’s history, click here)
Wall Street is generally optimistic about Lantronix’s path forward. With 5 buys and no hold or sell, the word on the street is that LTRX is a strong buy. The stock is trading at $4.74 and its average target of $12.20 suggests ~163% upside over the next 12 months (see Lantronix stock forecast at TipRanks)
Universal Display Corporation (OLED)
The second stock we’ll look at is Universal Display, a market leader in organic light-emitting diodes, or OLEDs. This is the technology behind the next generation of electronic displays, for devices of all kinds, from smartphones and mobile tablets to laptops, desktop monitors and smart flat-screen TVs mounted on the wall OLEDs are at the top of the high-end display market and are clearly where LED systems are headed. They can also be found in lighting systems, and give Universal Display a good stock image at a bargain.
After seeing an overall increase in revenue from late 2020 to 2021, this company has faced a tougher market environment in 2022. Business has slowed globally, suppressing demand for Universal Display’s OLED products and has put short-term weakness on the company’s outlook. . While the company posted a 5.4% year-over-year revenue gain from $129.7 million in the year-ago quarter to $136.6 million in 2Q22, the figure missed expectations at $14.61 million.
Universal Display’s second-quarter earnings, while profitable at 87 cents per diluted share, based on net income of $41.5 million, were another disappointing result. EPS missed the forecast of $1.01 by nearly 14%.
Shares could be below the cosh in 2022, showing year-to-date losses of 41%, but the Roth Capital analyst is facing demand headwinds and sees a long-term hit for Universal Display.
“Overall, we view the near-term weakness as not a surprise and a limited blip on the road to OLED adoption. With smartphones at ~45% penetration (640 million ‘units), TVs with < 2% penetration (laptops, tablets, monitors, etc.), it is still the early days of the OLED adoption cycle. We estimate that the OLED square meters needed to support the growth of smartphones, TVs and IT still translate into a 75% plus increase by 2025, or a CAGR of 15% plus,” Searle wrote.
In line with this bullish outlook, Searle gives OLED stock a buy rating and a $208 price target for the year ahead, implying a 114% upside for the year ahead. (For Searle’s history, click here)
Most of Searle’s colleagues agree. Based on 8 buys and 1 hold and sell each, OLED has a moderate buy consensus rating. All in all, analysts expect the stock to appreciate 59%, as indicated by the average price target of $154.50. (See OLED Stock Forecast at TipRanks)
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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.
