It's been a rough few weeks for stocks. The Nasdaq Composite (^IXIC +1.71%) now sits more than 30% below its November high after dropping to a new multi-month low this week. And the composite is a weighted average of every Nasdaq-listed ticker. For some stocks, the declines have been much, much worse.
As tough as it may be to believe right now, however, there are long-term opportunities among the most beaten-down names. You just have to find the guts to step in even knowing that this bear market may not be at its cyclical bottom just yet. Here's a closer look at three of your best bets right now from this humbled group of stocks.
Lyft
Say what you want about the fallout from the budget-slashing initiative Lyft (LYFT +1.38%) announced last month -- just don't say the ride-hailing business model is fatally flawed. There are enough consumers out there who don't own cars (or don't want to drive one to a particular destination), and the market is slowly but surely figuring out how many rideshare drivers it needs, as well as the right price for their service. Lyft made huge bottom-line progress last quarter, and on an adjusted basis actually produced a net operating profit.
It still needs more scale to convincingly get over the profit hump once and for all, mind you. But that looks like it's coming. Analysts' expectations for top-line growth of 31% this year followed by 25% next year should be enough to lift the company to non-GAAP earnings of $0.32 per share in 2022, and then further upward to $1.10 per share in 2023.
Investors haven't been pricing this prospective upside into the stock of late. Lyft shares have slid more than 70% in the course of the past 12 months, and set a new 52-week low earlier this week. It's possible the market could be concerned about the prospect of a recession as well as the unknowns of sky-high oil prices. As contractors, Lyft drivers pay for their own gasoline, making driving in this environment an expensive endeavor. The sheer severity of the sell-off, however, arguably overstates the depth of the challenges Lyft actually faces.
NASDAQ: LYFT
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Tandem Diabetes Care
Tandem Diabetes Care (TNDM 16.19%) offers solutions that help diabetics control and combat their condition. While it competes with much bigger companies such as DexCom and moderately bigger ones like Insulet, Tandem's customers still appreciate the power of its t:slim X2 insulin pump and its accompanying software. It can be used by itself or along with a continuous glucose monitoring system, but more than that, the X2 works with mobile devices and can connect to the web to make it even more functional. This year's projected revenue growth of 22% and next year's expectation for sales growth of 20% speak volumes about the demand for the t:slim X2 insulin pump.
The thing is, the opportunity at hand is so much bigger than just the next couple of years' worth of above-average growth. The International Diabetes Federation says 9.3% of the world suffered from diabetes as recently as 2019, but fears that figure could swell to 10.2% of the worldwide population by 2030, and to 10.9% by 2045.
NASDAQ: TNDM
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Beyond that expanding prevalence, bear in mind that the global population itself is on pace to grow from just a little less than 8 billion now to more than 8.5 billion in 2030 en route to 9.5 billion by 2044, according to forecasts from Worldometer.
Yet the market hasn't been impressed by Tandem Diabetes' long-term growth prospects recently. The stock's down more than 60% year to date, and like Lyft, touched a new 52-week low this week. This weakness, however, looks more driven by the lousy market environment than Tandem's solid past and projected results.
DraftKings
Finally, add DraftKings (DKNG +1.41%) to your list of humbled Nasdaq stocks ready to bounce back. Its shares are down by more than 80% just since September, with each rebound effort since then quickly being followed by a drop to an even lower low. Sooner than later though, one of these recovery moves is going to get traction.
NASDAQ: DKNG
Key Data Points
If you're not familiar, DraftKings' roots are in the fantasy sports arena, although it has evolved into a full-blown sports-betting platform. Professional baseball, basketball, football, and hockey are all in its app-based wagering wheelhouse, but it can offer betting on more obscure events such as darts, tennis, and cycling, just to name a few. It also offers a lot of different kinds of betting options beyond simply picking a team or athlete to win or cover the spread.
There has arguably never been a better time to be in the business. Although the U.S. Supreme Court lifted the long-standing ban on sports betting back in 2018, most of the industry's growth still lies ahead of it. Market research outfit Technavio estimates the worldwide sports betting business will grow by 10% per year between 2020 and 2025, ending that stretch more than $100 billion bigger than where it began it. One of the key drivers of this growth -- again according to Technavio -- will be the digitalization of the highly fragmented business.
This plays right into DraftKings' hands, as evidenced by the numbers. The company's top line more than doubled to $1.3 billion last year, and the analyst community is calling for revenue growth of 62% this year.
While it's still in the red, this sales growth is chipping away at its losses, and the company won't necessarily even need to turn a net profit before the stock starts to climb again. It just needs to convince the majority of investors that it's moving in that direction ... which it is.
