Over the week, the S&P 500 market benchmark broke even at +0.21% gains. It has been on an upward trajectory over the last three months at +8.40%. Since the beginning of the year, SPX has reached an all-time high 17 times, led by the Magnificent Seven stocks riding the AI hype.
At the same time, with sticky inflation showing up after two consecutive months of beating expectations, Bitcoin crossed ATH thresholds four times over the week. According to Bank of America’s Chief Investment Strategist Michael Hartnett, the market is “front-running” the Fed’s monetary policy.
The cost of interest payments has grown to astronomical proportions, crossing $1 trillion in Q4 2023. Despite unfavorable inflation trends, this translates to the Fed’s need to cut rates sooner rather than later. Presently, fed fund futures priced the first rate cut for June at 58% probability.
Accounting for cheaper borrowing capital in the second half of the year, which cheap stocks should investors put on a watchlist?
Opendoor Technologies Inc.
This real estate company has yet to generate profits, with Opendoor Technologies Inc (NASDAQ:OPEN) shares having lost 40% of their value year-to-date. The company’s business model revolves around buying homes and then promoting them for sale via its digital real estate marketplace.
This business model suffered accordingly during the interest rate hiking cycle, alongside real estate depreciation. In its latest Q4 2023 report, Opendoor reported a 70% year-over-year revenue decline to $870 million. Although it generated a $91 million net loss for the quarter, this is a significant improvement over the $399 million net loss in the year-ago quarter.
With rate cuts on the horizon setting “a more normalized macro backdrop,” the company expects a trend reversal. For Q1 2024, Opendoor’s revenue guidance is $1.05 – $1.1 billion. Whether Opendoor succeeds in rescaling its operations or not, investors have an opportunity for exceedingly cheap exposure.
Based on 12 analyst inputs pulled by Nasdaq, the average OPEN price target is $3.25 twelve months ahead vs. the current $2.57. The high estimate is $4.5, while the low forecast is $1 per share.
Jerash Holdings
This sportswear/outwear apparel company is down 7% year-to-date, continuing its downward trajectory of JRSH losing 38% of value over one year. Harnessing cheap labor, Jerash Holdings US Inc (NASDAQ:JRSH) is known for its popular brands New Balance, American Eagle (NYSE:AEO), Skechers USA Inc (NYSE:SKX), G-III Apparel Group Ltd (NASDAQ:GIII), and Delta Apparel (NYSE:DLA).
The Red Sea turmoil has caused the company some supply chain disruptions, which will likely wind down as Israel finishes its operations under the USG umbrella. In Q3 FY24 earnings delivered in February, Jerash reported $15.4 million gross profit vs $19.3 million year-ago, ending up with $19.6 million cash flow.
This places the company at $77.8 million in assets vs. $9.5 million in overall liabilities, which have been reduced from $15.5 million ending March 2023. The company offers a generous 6.83% dividend yield at a $0.20 per share annual payout, making it a cheap dividend stock.
Based on two analyst inputs pulled by Nasdaq, the average JRSH price target is $5 vs. the current $2.93 per share. Accounting for the volatile situation in the Middle East, Jerash didn’t provide longer-term guidance. However, based on gross margin improvement of 16.2% vs. 13.5% from a year-ago quarter, JRSH could rally later in the year.
Grab Holdings
As a digital mediator/aggregator between users and services, from ride-hailing to grocery delivery, Grab Holdings Ltd (NASDAQ:GRAB) stock has declined slightly since the beginning of the year, at -3%. Over one year, GRAB shares delivered 12% returns.
Taking commissions from deliveries and rides, Grab’s business model counts on partnership expansion, targeted promotions, and advertising in the Southeast Asian market. In February’s Q4 FY23 earnings, the company reported a 30% year-over-year revenue growth to $653 million.
Compared to the operating loss of $1.37 billion in 2022, Grab cut 2023’s loss to $519 million, delivering a quarterly profit of $11 million vs the $391 million net loss in the year-ago quarter. This increased the company’s cash liquidity to $6 billion compared to $5.9 billion the year prior.
For FY 2024, Grab expects further revenue growth within the 14% – 17% YoY range of up to $2.75 billion. Grab’s full-year 2023 revenue was $2.359 billion, a YoY uptick of 65%. Based on 14 analyst inputs pulled by Nasdaq, the average GRAB price target is $4.43 vs the current $3.20. The high estimate is $5, while the low forecast is $3.8 per share.
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Disclaimer: Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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