Concerns over a fragile financial system after the recent bank collapses and uncertainty regarding the Fed’s next move have dampened investor sentiment lately, leading to a broad market sell-off. However, this provides a golden opportunity to invest in low-priced, fundamentally sound stocks ADT Inc. (ADT), Viatris Inc. (VTRS), and trivago N.V. (TRVG), which could generate significant returns in the long run.
Major market indexes posted 2022 as their worst year since 2008, with the S&P 500 and the tech-heavy Nasdaq plunging more than 19% and 33%, respectively. Persistently high inflation, the Fed’s aggressive rate hikes, geopolitical concerns, and a potential economic slowdown weighed on investor sentiment throughout the year, causing a widespread market sell-off.
Although stocks recovered slightly earlier this year, the market has turned extremely volatile lately. Exactly a year ago, the Fed enacted its first interest rate hike to tame multi-decade-high inflation. Over time, the Consumer Price Index (CPI), the most cited measure of inflation, came down from a peak of 9.1% in June 2022 to a 6% annual rate in February and is trending lower.
While significant progress is made, inflation still remains well above the Fed’s 2% target. Recent economic data indicating jobs growth, strong retail sales, and high inflation levels will likely keep the Fed on track for another rate increase this week. However, the recent high-profile bank failures complicated the central bank’s fight against stubborn inflation.
Despite the turmoil in the banking industry and uncertainty ahead, the Fed is expected to raise interest rates by 25 basis points on March 22, according to a strong majority of economists polled by Reuters.
On the contrary, Goldman Sachs Group Inc. (GS) expects the Fed to pass up the chance to hike rates at its meeting this week. “We think Fed officials are likely to prioritize financial stability for now, viewing it as the immediate problem and high inflation as a medium-term problem,” Goldman economists told clients in a note.
Furthermore, according to a CME Group estimate, traders assigned more than a 55% probability of no rate increase, keeping the fed funds rate in a 4.50%-4.75% range.
A volatile market environment will likely persist in 2023 amid high inflation and rising interest rates. However, growing worries over the recent banking crisis might influence the Fed’s decision. Therefore, this could be the right time to invest in fundamentally sound stocks ADT, VTRS, and TRVG, trading below $10.
Let’s have a detailed look at the featured stocks:
ADT Inc. (ADT)
ADT offers security, automation, and smart home solutions to consumer and business customers in the United States. The company provides a range of fire detection, fire suppression, video surveillance, and access control systems. It operates through Consumer and Small Business; Commercial; and Solar segments.
On Match 17, 2023, ADT announced a $200 million debt paydown using cash on hand. $150 million of the total will be achieved through a partial redemption of the $750 million ADT First-Priority Senior Secured Notes due 2024, and $50 million will be achieved upon the maturity of its ADT Notes due 2023.
Ken Porpora, ADT’s Executive Vice President and Chief Financial Officer, said, “This substantial paydown accelerates ADT toward our goal of using our strong cash generation to reduce net debt by $1 billion by year-end 2025, versus year-end 2021.”
In January, ADT introduced the new ADT+ app and ADT Self Setup line of DIY smart home security products, which seamlessly integrate the security and protection of ADT with the convenience of Google Nest. With this, ADT customers can easily access and control their ADT devices virtually anywhere they go.
ADT’s total revenue increased 19.1% year-over-year to $1.65 billion for the fourth quarter that ended December 31, 2022. Its operating income was $206 million, up 1,960% year-over-year. The company’s adjusted EBITDA grew 9.6% from the year-ago value to $629 million. Its adjusted net income came in at $92 million, compared to an adjusted net loss of $25 million in the prior-year period.
Furthermore, the company’s adjusted net income per share was $0.10, compared to an adjusted net loss per share of $0.03 in the previous year’s quarter. Also, adjusted free cash flow came in at $269 million, up 52.8% year-over-year.
Analysts expect ADT’s revenue and EPS for fiscal 2023 to increase 5.7% and 97.6% year-over-year to $6.76 billion and $0.47, respectively. In addition, the company’s revenue and EPS for fiscal 2024 are expected to grow 6.9% and 16.9% year-over-year to $7.23 billion and $0.55, respectively. Moreover, ADT has surpassed the consensus revenue estimates in three of the trailing four quarters.
Over the past year, the stock has declined 11.3% to close the last trading session at $6.94.
ADT’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Momentum, Quality, and Stability. Within the Home Improvement & Goods industry, it is ranked #5 out of 56 stocks.
Click here to see the additional POWR Ratings of ADT (Value, Growth, and Sentiment).
Viatris Inc. (VTRS)
Healthcare company VTRS operates through four segments: Developed Markets; Greater China; JANZ; and Emerging Markets. The company provides prescription brand drugs, generic drugs, biosimilars, and active pharmaceutical ingredients (APIs). It offers drugs in various therapeutic areas, including oncology, immunology, ophthalmology, dermatology, cardiology, and neurology.
On January 3, 2023, VTRS announced closing its Oyster Point Pharma and Famy Life Sciences acquisitions to establish a new Viatris Eye Care Division.
“We are starting the year out strong with the closings of our acquisitions of Oyster Point Pharma and Famy Life Sciences, bringing together our collective commercial expertise, scientific capabilities and global infrastructure to create the Viatris Eye Care Division, which has the potential to deliver even more access to patients and showcases the power of our Global Healthcare Gateway,” said VTRS’ CEO Michael Goettler.
For the fiscal year that ended December 31, 2022, VTRS’ gross profit increased 16.5% year-over-year to $6.50 billion. Its EBITDA grew 41.7% from the year-ago value to $6.43 billion. Also, the company’s net earnings stood at $2.08 billion, compared to a net loss of $1.27 billion in the prior-year period.
Over the past three years, VTRS’ revenue and EBITDA have increased at CAGRs of 12.2% and 20.5%, respectively. Also, over the same period, the company’s net income and EPS have grown at 398.3% and 284.9% CAGRs, respectively.
Shares of VTRS have gained 1.5% over the past six months to close the last trading session at $9.43.
VTRS’ promising fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
VTRS has an A grade for Value and a B for Growth. In the 166-stock Medical-Pharmaceuticals industry, it is ranked #23.
Beyond what we stated above, we also have VTRS’ ratings for Momentum, Sentiment, Quality, and Stability. Get all VTRS ratings here.
trivago N.V. (TRVG)
Headquartered in Düsseldorf, Germany, TRVG operates a hotel and accommodation search platform internationally. The company offers an online meta-search for hotels and accommodations through online travel agencies, hotel chains, and independent hotels.
On December 8, 2022, TRVG announced an official partnership with the 2023 Men’s IHF World Handball Championship, encouraging sticking together by combining sport and travel. This sponsorship provided trivago with an opportunity to extend its market reach and boost its profitability.
On October 18, TRVG and AXS, a digital ticketing platform for live sports and entertainment, announced a global partnership to allow event goers to access affordable stay booking options with event ticket purchases made via AXS. The collaboration also made TRVG the exclusive accommodation partner of AXS, which should benefit the company strategically.
For the fiscal 2022 fourth quarter that ended December 31, TRVG’s total revenue increased 17.7% year-over-year to €104.90 million ($111.88 million). Its operating income was 17.80 million ($18.98 million), an increase of 34.9% year-over-year. The company’s adjusted EBITDA rose 15.3% year-over-year to €22.60 million ($24.10 million).
Street expects TRVG’s revenue and EPS for the first quarter (ending March 2023) to increase 26.8% and 6.5% year-over-year to $135.40 million and $0.04, respectively. Also, the company has topped the consensus EPS estimates in three of the four trailing quarters.
In addition, the consensus revenue and EPS estimates of $715.91 million and $0.26 for the fiscal year (ending December 2024) reflect increases of 7.5% and 5.7% year-over-year, respectively.
The stock has declined 2.7% over the past six months to close its last trading session at $1.43.
This promising outlook is reflected in TRVG’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
TRVG has an A grade for Quality and a B for Growth and Value. In the Internet industry, it tops among 59 stocks.
Click here for additional POWR Ratings for Momentum, Stability, and Sentiment for TRVG.
Consider This Before Placing Your Next Trade…
We are still in the midst of a bear market.
Yes, some special stocks may go up like the ones discussed in this article. But most will tumble as the bear market claws ever lower this year.
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- 5 Warnings Signs the Bear Returns Starting Now!
- Banking Crisis Concerns Another Nail in the Coffin
- How Low Will Stocks Go?
- 7 Timely Trades to Profit on the Way Down
- Plan to Bottom Fish For Next Bull Market
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ADT shares were trading at $7.06 per share on Monday afternoon, up $0.12 (+1.73%). Year-to-date, ADT has declined -21.78%, versus a 2.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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