It might seem like a risky time to buy stocks as inflation, rising rates, and bank failures continue to rattle the markets. It might also seem safer to simply park your cash in a high-yield savings account, CD, or T-bill until the market stabilizes.
That might be the prudent move, but investors should still actively seek out undervalued stocks which could rally as the macro environment improves. Let's review a trio of stocks which fit that description -- UiPath (PATH 3.49%), Uber (UBER 2.64%), and Oracle (ORCL 0.49%) -- and why they're no-brainer buys for long-term investors.
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1. UiPath
UiPath's robotic process automation (RPA) tools can be integrated into an organization's existing infrastructure to automate repetitive tasks like entering data, processing invoices, sending out mass emails, and onboarding customers. Those tools can help companies streamline their businesses and cut costs, but UiPath's growth still decelerated significantly over the past year as it grappled with macroeconomic headwinds, unfavorable currency rates, and the suspension of its business in Russia.
UiPath's revenue rose 19% to $1.06 billion in fiscal 2023 (which ended on Jan. 31), which decelerated from its 47% growth in fiscal 2022, and it expects only 18%-19% growth in fiscal 2024. But as its top line growth cools off, its profits are rising. In fiscal 2023, its adjusted net income grew 78% to $80 million as it narrowed its net loss from $526 million to $328 million on a generally accepted accounting principles (GAAP) basis.
Those improvements, which can be attributed to two rounds of layoffs and other cost-cutting measures, counter the notion that UiPath's business is unsustainable. It also plans to rein in its stock-based compensation to further narrow its GAAP losses.
UiPath still trades about 70% below its IPO price and six times this year's sales. It might not initially seem like a screaming bargain, but UiPath's growth could accelerate again once the macro environment improves. When that happens, this fallen hypergrowth stock could bounce back quickly as companies start to expand and automate their businesses again.
2. Uber
Uber is a ride-hailing and food-delivery leader in many countries, but it's struggled to generate stable profits ever since its IPO in 2019. Over the past two years, Uber divested its unprofitable advanced technologies group (ATG), which had been developing autonomous vehicles, as well as its weaker overseas divisions to significantly reduce its operating expenses.
Uber's gross bookings rose 28% in 2022, cooling from its 56% post-pandemic growth in 2021, and it expects only 17%-21% year-over-year bookings growth in the first quarter of 2023. However, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved from a loss of $774 million in 2021 to a profit of $1.7 billion in 2022. It also expects to post a positive adjusted EBITDA of $660 million to $700 million in the first quarter. That impressive profit growth can be attributed to its divestments, cost-cutting measures, and rising take rates across its mobility and delivery businesses.
For the full year, analysts expect Uber's revenue to rise 16% to $36.9 billion as its adjusted EBITDA increases 86% to $3.2 billion. Based on those estimates, its stock trades at just two times this year's sales and 21 times its adjusted EBITDA. It's also still trading nearly 30% below its IPO price. Therefore, Uber's stock could attract a lot more attention once the bulls realize how undervalued it is relative to its long-term growth potential.
3. Oracle
Oracle, the world's largest provider of database software, was once considered a dusty old tech stock that was owned for stability and income instead of growth. But over the past several years, Oracle reinvented itself by transforming its on-site software into cloud-based services, expanding its own cloud infrastructure platform, and adding more enterprise resource planning (ERP) services to that growing ecosystem with big acquisitions.
That costly transformation enabled Oracle to grow again as other old tech companies withered. In fiscal 2022, which ended last May, its revenue and adjusted EPS both rose 5%. Analysts expect its revenue and adjusted EPS to grow 17% and 3%, respectively, in fiscal 2023 -- but most of that growth was driven by its takeover of Cerner last June. But after it laps that acquisition, analysts expect 8% revenue growth and 11% adjusted EPS growth in fiscal 2024.
Oracle's cloud business, which drives most of its growth, is still expanding as it locks more customers into its cloud-based database services, ERP services, and cloud infrastructure platform. Its cloud revenues rose 22% in organic constant currency terms in fiscal 2022, and it expects an acceleration to more than 30% growth on that same basis in fiscal 2023.
Oracle trades at just 17 times its adjusted EPS forecast for fiscal 2023, and it pays a decent forward dividend yield of 1.9%. That stable growth and low valuation should make Oracle a safe tech stock to buy and hold as the bear market drags on.
