It's been a tough 2022 for the market. Although we've seen a few flashes of bullish brilliance here and there, the Nasdaq Composite (^IXIC +1.63%) currently sits more than 16% below its November peak. And it's showing signs of dipping even lower. Some Nasdaq-listed stocks, of course, have fared much worse.
This isn't a time to panic, though. Although it may be uncomfortable to do so, veteran investors can attest that the time to buy into good companies is when their stock prices are down. The market's ultimate undertow is bullish, even if it moves backward now and then.
With that backdrop, here's a rundown of three of the Nasdaq's most undervalued names following a brutal sell-off. These three picks are more primed than their peers for a rebound.
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1. PayPal Holdings
PayPal Holdings (PYPL +1.46%) may have been all the rage in 2020 and 2021 when consumers were suddenly forced to do most of their shopping online. However, the end of pandemic lockdowns and new competition are taking a toll on the stock. PayPal shares are now 64% below last year's highs and seem to be moving even lower.
Lackluster guidance for the current year accounts for much of the current weakness. As recently as November, the company anticipated top-line growth of 18% in 2022, in line with analysts' outlooks. That guidance was dialed back to 15% to 17% in February when earnings guidance was also reeled in.
NASDAQ: PYPL
Key Data Points
However, there's an important, glaring detail being obscured by the relatively disappointing expectation for the year now underway. Revenue growth between 15% and 17% is still solid, considering that online shopping was still happening in earnest for the better part of last year. Moreover, even at the midpoint of the company's lowered profit guidance range of $4.60 to $4.75, the stock is now trading at a forward price-to-earnings (P/E) ratio of around 23. Thanks to its overdone pullback, that's cheaper than shares have been in years.
While it's facing new competition, it's easier for a leading company to hold on to its lead than for a newcomer to dethrone that leader. To this end, market research outfit Maruti Techlabs believes PayPal is still the go-to payment option for more than 90% of e-commerce sites.
2. T. Rowe Price
When investors think of notable Nasdaq-listed stocks, T. Rowe Price Group (TROW 0.43%) typically isn't a name that comes to mind. While the mutual fund company is well known and well respected, it lacks the spark that excites investors.
Don't let the lack of pizzazz paint the wrong picture for you, though. This is a great business, and T. Rowe Price's shares are particularly tempting while they're trading 35% below last year's high, driving their dividend yield up to nearly 3.4%.
NASDAQ: TROW
Key Data Points
As most investors know, mutual fund companies don't get paid to produce market-beating results. While a streak of poor performance will take a toll on investors' willingness to stick with a particular fund or fund manager, merely keeping pace with the market's overall performance is often considered good enough. Mutual fund companies are paid based on a flat percentage of their asset pool every quarter, even if those funds have lost value during those three months.
In this vein, T. Rowe Price Group is expected to see an earnings slump this year, falling from the 2021 bottom line of $12.75 per share to $11.74, reflecting the broad market's weakness. An income of $11.74 is still healthy, though. It is projected to grow again in 2023 and will be more than enough to cover the current full-year dividend payment of $4.80 per share in the meantime.
3. Rivian Automotive
Finally, add electric vehicle (EV) maker Rivian Automotive (RIVN 2.54%) to your list of humbled Nasdaq stocks ready to bounce back.
If the name doesn't ring a bell, there's a good reason. Rivian's only been publicly traded since November, and it only made 1,015 EVs in its inaugural production year last year. For perspective, Tesla delivered more than 936,000 battery-powered cars in 2021. Rivian is hardly a top contender in the electric vehicle market, a reality that's been slowly but surely priced into the stock. While Rivian shares surged shortly after its November public offering, the stock currently sits nearly 80% below its November high and is still within reach of the record lows hit last month.
NASDAQ: RIVN
Key Data Points
However, the bulk of this pullback may have more to do with the market coming down from its pre-IPO euphoria than the company itself. While most analysts and observers correctly suspect the company could remain in the red for years, it's not necessarily destined to lose money forever. It needs scale, which it's gaining. Rivian made 2,553 electric vehicles during the first quarter and continues to ramp up its production capacity. As long as the company is making progress, investors are likely to gain interest in ownership of the stock now that the post-IPO jitters are out of the way.
There's certainly room for more than one EV player too. The U.S. Energy Information Administration estimates more than 670 million electric vehicles will be traveling the world's roads by 2050, up from around 10 million now.
