Even after climbing roughly 4% across 2023's trading, the S&P 500 index still trades down approximately 16.5% from its high, and many companies in that index have seen valuation pullbacks far exceeding that level. While trading could remain volatile in the near term, history suggests the market will eventually bounce back and go on to set new highs -- and building positions in strong companies before that recovery takes place could help investors score big wins.
If you're on the hunt for worthwhile investment opportunities, read on to see why two Motley Fool contributors think buying these particular beaten-down stocks would be a smart move right now.
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Disney is selling at half-price
Parkev Tatevosian: Now that it's down 51% off its 2021 all-time highs, this might be an excellent time to consider buying Walt Disney (DIS 1.54%) stock. This century-old business was hurt by the COVID-19 pandemic, but it's recovering quickly.
Notably, Disney's theme parks segment is now more profitable than ever. The company tweaked its operations during the time it was forced to shut its doors, and those changes have had a positive effect on the top-line growth of the company. A digital reservation system helps Disney manage attendance and pricing to optimize park efficiency. And the Genie pass, which lets visitors skip lines for a fee, is attracting users. In its most recent quarter, the segment that includes theme parks saw revenue jump by 21% year over year to $8.7 billion, while operating income increased by 25% to $3.1 billion.
One challenge Disney does face is navigating the consumer migration to streaming over cable or satellite TV. That transition has been somewhat bumpy. Disney still owns several popular broadcast and cable networks that are gradually losing viewers to streaming. While Disney's various streaming services (the Disney+, Hulu, Star+, and ESPN+ platforms) have accumulated more than 200 million subscribers globally, the segment is not yet profitable. The big takeaway is that people want to watch Disney content, but perhaps they just prefer to stream it. The company was already doing an excellent job profiting from previous preferred formats, and it would be reasonable to expect Disney to monetize its content effectively once the transition is further along.
DIS PE Ratio (Forward) data by YCharts
Meanwhile, the 50% drop in Disney's stock price has it selling at a favorable forward price-to-earnings ratio of 24.
Don't underestimate Fiverr's long-term opportunity
Keith Noonan: While it was once a high-flying pandemic-stock darling, Fiverr International's (FVRR 4.07%) valuation has plummeted in conjunction with the pullback for the broader market and slowing sales growth for its business. This gig-economy-based marketplace platform's share price is trading down 88% from its high.
Fiverr's most recent guidance calls for sales between $350 million and $365 million this year, representing growth of roughly 6% annually at the midpoint of the target. That's down from growth of 77%, 57%, and 13% in 2020, 2021, and 2022, respectively. In response to the more challenging macroeconomic backdrop, the company is cutting back on spending to drive growth and focusing on improving profitability.
While revenue growth seems to be on track to dip into the single digits in 2023, there are opportunities for its platform services to continue scaling even as the company shifts spending away from sales and marketing and focuses more on the bottom line in the near term. And Fiverr's focus on becoming a more efficient business could put it in a better position to capitalize when macroeconomic conditions become more favorable.
The gig economy is still on track for huge growth over the long term, and Fiverr will have opportunities to facilitate and benefit from the trend. Analysis from Industry Research suggests that the annual size of the global gig economy will grow from $355 billion in 2021 to $873 billion in 2027.
With gig labor offering companies the chance to save on payroll taxes, office costs, and employee benefits, there are strong catalysts and incentives to power the long-term growth of the gig economy. Fiverr also has a huge opportunity to expand the base of freelance workers on its platform in international markets. Consider that $100 can go a lot farther if you're hiring a freelancer from Eastern Europe or Southeast Asia than hiring an employee or contract worker living in the heart of San Francisco or New York City.
2023 isn't going to be a flashy year for Fiverr, but the company maintains a leading position in the gig-labor marketplace niche, and its growth potential is being underestimated. With the stock down precipitously from its high, Fiverr presents an attractive risk-reward profile for long-term investors.
Disney and Fiverr look like smart buys after big sell-offs
For investors seeking beaten-down stocks with the potential to deliver market-crushing returns, there's a lot to like about Disney and Fiverr. While both companies face some headwinds right now, each operates a category-leading business and has strengths and market opportunities that open the door to valuation recovery and long-term growth.
