Sophisticated investors will always look to buy undervalued stocks. This is, after all, the essence of the slogan “buy low, sell high”. The problem, however, is determining which stocks are simply temporarily languishing in the doldrums and ready to rebound, rather than indicating that their depressed prices are simply not worth the time of day.
Of course, there are many ways to assess this scenario, and one simple strategy is to look at insider actions. These corporate officers operate “from the inside” and possess knowledge not accessible to the occasional investor. Once they are seen picking up shares of the companies they work for, especially in bulk, it sends the message that they may consider the shares to be undervalued.
With that in mind, we opened up TipRanks’ “Insiders’ Hot Stocks” tool to find two stocks that fit a certain profile: stocks that have been on the back this month, but insiders have been loaded by truck – that is, they poured millions into it recently. In fact, according to some Wall Street analysts, these names may well be ready to rebound.
EVgo, Inc. (EVGO)
We’ll start with the electric vehicle sector, or more specifically, electric vehicle charging, with a look at a leader in the field. EVgo operates the largest public fast-charging network for electric vehicles in the United States, with 850 fast-charging locations north. These serve more than 60 metropolitan areas across 30 states, all powered by 100% renewable energy.
The comprehensive charging infrastructure includes fast and ultra-fast chargers strategically located in convenient locations such as shopping malls, grocery stores and public parking lots. Through its mobile app, drivers can easily locate and initiate charging sessions, monitor charging progress, and even pay for services. EVgo’s charging stations are compatible with various models of electric vehicles, making them accessible to a wide range of electric vehicle owners.
With the growing adoption of electric vehicles in the coming years, the company is poised to capitalize on this trend. However, despite this positive outlook, the company’s recent performance has been quite abysmal, with a 38% decline in May.
This decline can be attributed mainly to two factors. First, the company’s first quarter results fell short of expectations. Although revenue jumped 228.6% year-over-year to $25.3 million, it fell $1.45 million below consensus estimates. Additionally, the company’s projected 2023 revenue of $105 million to $150 million fell short of analysts’ expectations of $138.76 million. Second, the company exacerbated the situation by announcing a public offering of $125 million of Class A common stock, which triggered a subsequent sale.
The decline in EVgo stock does not appear to be on the company’s chairman, David Nanus. In response to the decline, Nanus took action last week by loading 5,882,352 shares of EVGO, which are now valued at $21.76 million.
This act probably sounds good with Evercore’s James West. The analyst believes the company is poised to take advantage of the EV boom and writes, “As a pure play on owner-operated public DCFC charging and charging as a service, EVGO is well positioned to benefit from the ongoing rapid growth of public electric vehicle charging with its leverage on the mega-theme of mobility electrification… The company uses proprietary algorithms that analyze censuses and other data sources to identify the Premium and convenient charging station locations that meet the company’s high yield rates.
How does this translate for investors? West rates EVGO as an outperformer (i.e. a buy), supported by a price target of $12. If the figure is reached, investors will be sitting on returns of 224% per year from now. (To see West’s track record, click here)
Now on to the rest of the street, where the stock garners 3 additional buys and holds, each plus 1 sell, for a moderate buy consensus rating. Based on the average price target of $8, the stock will show gains of around 116% over the next 12 months. (See EVGO Stock Forecast)
Island Corporation (PODD)
Now let’s move on from electric vehicles to healthcare and focus on Insulet, a leading medical device manufacturer specializing in the development and manufacturing of innovative insulin delivery systems.
The company’s main focal point is its Omnipod insulin delivery system, which received FDA clearance in January 2005. Most recently, in January 2022, the FDA gave the green light for the Omnipod 5, an automated insulin delivery system that works without the need to attach plastic tubing to the body and can be fully controlled by a smartphone app.
The product was launched in the United States in August last year and helped the company exceed expectations in the recently released Q1 release. Revenue reached $358.1 million, up 21.2% year-over-year and beating consensus of $27.89 million. On the other end, EPS of $0.23 is well above the $0.10 expected by analysts. And for the full year, the company has raised its revenue growth expectations from the previous range of 14% to 19% to between 18% and 22%.
Investors appreciated the results and pushed stocks higher after the report was released. However, the stock has since retreated (in total, down 14% in May), and hasn’t been helped by recent news of rival Medtronic’s deal to acquire South Korean patch maker EOFlow. portable insulins.
Meanwhile, a leader must be convinced that the company is up to the challenge of its competitor. Director Michael Minogue recently purchased 3,300 shares, spending over $1 million on the purchase.
The company also has the backing of Canaccord analyst Kyle Rose, who writes, “There’s A LOT to like here, and we think the fundamental thesis remains intact, bolstered by O5 momentum, the outlook for more long-term for Q2-specific products and IP initiatives.That said, we expect continued pressure on GMs as the O5 becomes a higher percentage of sales (and carries a negative mix up scale) , as PODD sells via stockpiled inventory at high component costs, and macro headwinds remain.We continue to believe that the combination of the pharmacy channel, recurring revenue model and patient interest T2 positions PODD with a ‘floor’ for growth.”
“We believe the launch of O5 closes any perceived competitive gap with existing AP/HCL pumps and will amplify the competitive advantage of the pharmacy channel and the benefits of the risk-free, pay-as-you-go model, which is expected to sustained support on the upside against consensus growth expectations,” the 5-star analyst added.
These comments underpin Rose’s Buy rating, while its price target of $355 implies a 30% 12-month stock appreciation. (To see Rose’s track record, click here)
So, that’s Canaccord’s view, how does the rest of the street see the next 12 months unfolding for Insulet? Based on 6 buys and 4 holds, analyst consensus rates the stock as a Moderate Buy. At $352.9, the average target represents 29% upside potential. (See Insulate stock forecast)
To find great stock trading ideas at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock information.
Disclaimer: The opinions expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.