We are on the verge of completing a highly disappointing April with just a day of trading left. Historically, April is considered a strong month on Wall Street. However, this year, market participants failed to find any direction owing to extreme volatility. Despite several come back attempts, major stock indexes are in red this month.
Interestingly, April’s meltdown, has made several stocks highly attractive at their current valuation. Many of these stocks have a strong upside left for the rest of 2022. We have selected five from this space with a favorable Zacks Rank. These are —
Tesla Inc. ( TSLA Quick Quote TSLA - Free Report) , Pool Corp. ( POOL Quick Quote POOL - Free Report) , Alcoa Corp. ( AA Quick Quote AA - Free Report) , Zebra Technologies Corp. ( ZBRA Quick Quote ZBRA - Free Report) and SVB Financial Group ( SIVB Quick Quote SIVB - Free Report) . Markets Suffer a Blow in April
U.S. stock markets have been reeling under severe volatility since the beginning of 2022. However, major stock indexes rebounded in March although the Fed hiked the benchmark interest rate by 25 basis points, which was in line with investors’ expectations.
Despite raising interest rate for the first time in three years, several measures of inflation have shown no signs of a downtrend and remained elevated at a 40-year high. Soaring inflation has compelled Fed Chairman Jerome Powell to say that the central bank will not hesitate to take harsher measurers in 2022. Fed’s March FOMC minutes also indicated the same.
Market participants are overwhelmingly expecting the Fed to hike interest rate by 50 basis points in both May and June FOMC and will start shrinking the size of its $9 trillion balance sheet starting from May.
A more than hawkish Fed, the continuation of high inflationary pressure due to lingering global supply-chain disruptions, the prolonged war between Russia and Ukraine and the resurgence of COVID-19 infections in China and lockdown in several parts of that country have significantly shaken investors’ confidence.
Month to date, the three major indexes — the Dow, the S&P 500 and the Nasdaq Composite — have tumbled 2.2%, 5.4% and 9.5%, respectively. The Nasdaq Composite is currently in bear territory declining 20.6% from its recent high. The S&P 500 is in correction zone after falling 11% from its recent peak. The Dow is down 8.2% from its recent high.
5 Top Stocks at Attractive Valuation
Wall Street’s turmoil in April has made several large-cap (market capital > $10 billion) highly attractive at their current valuation. Buying these stocks on the dip should give good benefit going forward. We narrowed down our search to five such stocks that have strong upside left for the rest of 2022.
These stocks have seen positive earnings estimate revisions in the last 30 days indicating that market is expecting these companies to do solid business in 2022. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see
. the complete list of today’s Zacks #1 Rank stocks here
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research Tesla has acquired a substantial market share within the electric car segment. Increasing Model 3 delivery, which forms a significant chunk of TSLA’s overall deliveries, is aiding its top line. Along with Model 3, Model Y is contributing to its revenues. The global auto industry is gradually moving toward electric vehicles. Tesla is expected to be the largest beneficiary of this trend.
Despite the chip crisis, Tesla reported record deliveries of 310,048 units in first-quarter 2022. Additionally, TSLA’s energy generation and storage revenues are growing, thanks to the positive reception of Megapack and Powerwall products.
Zacks Rank #2 TSLA has an expected earnings growth rate of 66.1% for the current year. The Zacks Consensus Estimate for current-year earnings improved 13.6% over the last 7 days. Tesla is currently trading at a 29.4% discount to its 52-week high.
Pool is the world's largest wholesale distributor of swimming pool supplies, equipment and related products. POOL is benefitting from the solid performance of base business, large market presence and strategic expansions through acquisitions.
Solid demand across heaters, pumps, filters, lighting, automation and pool remodeling also benefitted it. POOL remains optimistic on the back of products (such as automation and the connected pool), the continuation of the de-urbanization trends and the strengthening of the southern migration.
Zacks Rank #2 POOL has an expected earnings growth rate of 20.8% for the current year. The Zacks Consensus Estimate for current-year earnings improved 4.4% over the last 7 days. POOL is currently trading at a 28.2% discount to its 52-week high.
Alcoa produces and sells bauxite, alumina, and aluminum products in the United States, Spain, Australia, Brazil, Canada, and internationally. AA operates through three segments: Bauxite, Alumina, and Aluminum.
Alcoa is engaged in bauxite mining operations and processes bauxite into alumina and sells it to customers who process it into industrial chemical products. AA offers primary aluminum in the form of alloy ingot or value-add ingot to customers that produce products for the transportation, building and construction, packaging, wire, and other industrial markets and flat-rolled aluminum sheets to customers that produce beverage and food cans.
Zacks Rank #1 AA has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 8.8% over the last 30 days. Alcoa is currently trading at a 28.1% discount to its 52-week high.
Zebra Technologies stands to benefit from a solid demand environment, coupled with investments in growth initiatives, in the quarters ahead. The growing popularity of ZBRA’s Enterprise Asset Intelligence solutions is likely to be beneficial. Strong cash flow allows it to invest in organic growth, execute acquisitions and repurchase shares. For 2022, Zebra Technologies expects net sales to grow 3-7% year over year.
Zacks Rank #2 ZBRA has an expected earnings growth rate of 7.2% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 30 days. Zebra Technologies is currently trading at a 37.7% discount to its 52-week high.
SVB Financial is a diversified financial services company. Growth in loans and deposit balances, efforts to improve non-interest income (acquisition of MoffettNathanson) and global expansion strategy will likely keep supporting SIVB’s financials.
The acquisitions of Boston Private and the debt investment business of WestRiver Group are expected to be earnings accretive and will likely help SVB Financial further cement its foothold in the innovation economy.
Zacks Rank #2 SIVB has an expected earnings growth rate of 6% for the current year. The Zacks Consensus Estimate for current-year earnings improved 14% over the last 7 days. SVB Financial is currently trading at a 32.5% discount to its 52-week high.