May 4, 2022, was a day that showed why investors should never panic, remain levelheaded, and be a little gutsy sometimes and buy the dip. The Dow Jones closed up 932.27 points, or 2.8%, for its best day since November 2020. After April’s bloodbath, the indices are officially on a much-needed multi-day winning streak.
Markets reacted encouragingly to the long-waited 50 basis point interest rate hike. They cheered even louder when Fed Chair Jay Powell came in more dovish than expected. Much of April’s broader market dip was pricing in fears of 75 basis point hikes in June and July. After Powell ruled those out, investors were encouraged that the Fed could tame inflation while potentially avoiding a recession.
After reporting the economy looks “solid” for the rest of the year, Powell said, “nothing about it that says we’re close or vulnerable to a recession.”
Things change fast in the markets sometimes.
Market sentiment is not perfect, and there are still the very real headwinds of war in Europe, inflation, supply chain backlogs, and the always lurking threat of COVID-19. Recession fears are understandable, and the market may have reacted over-euphorically just as it reacted over-depressed throughout April. Keeping emotions out of trades is paramount for investors focused on the long term as there are plentiful undervalued rock-solid opportunities.
Today, we have two of those stocks in Tesla, Inc (NASDAQ:TSLA) and Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH), two of the sexiest picks following the pandemic crash in 2020. Since then, some of their shine may have worn off, but many analysts are as bullish as ever. These stocks could be at mouth-watering buy levels for what could be a furious rally into the second half of the year.
Tesla, Inc. (NASDAQ:TSLA)
The world’s most valuable automaker could be gearing up for a dramatic reversal after falling on Musk’s Twitter news.
Much of the reason why Tesla has been in the news lately has nothing to do with Tesla at all. It has to do more with Tesla’s founder and CEO, Elon Musk, otherwise known as the world’s richest man, and his plan to acquire Twitter for $44 billion. It recently came out that Musk secured another $7 billion in funding for his acquisition and will temporarily serve as CEO.
Unfortunately, Tesla’s stock didn’t take news of Musk’s planned acquisition well. According to SEC filings, Musk sold roughly $8.4 billion worth of Tesla shares in the days following the initial Twitter announcement. After TSLA touched a 3-month high of $1152.87 in early April, it sharply declined by -28.73% to a low of $821.70 by month’s end.
Overblown? Perhaps. The backdrop for Tesla remains immensely strong despite what people say about Musk, inflation, and supply chain problems. After all, since touching that $821.70 low, the stock rallied roughly 15.93% in a week.
Tesla is a prominent player in the automobile industry and is the world’s most valuable automaker based on market cap. Despite recent hiccups, it has also seen gargantuan returns over the past five years.
It’s fundamentally sound with cash flows that can sufficiently cover interest payments and, as we’ve seen in its last four quarters, habitually crushes earnings and revenue estimates.
Back in April, when Tesla reported its Q1 2022 results, it announced that it produced 305,407 vehicles, a dramatic year-over-year increase from the same quarter, and fought through inflation, factory shutdowns, and supply chain issues to deliver over 310,000 vehicles.
Tesla also reported $3.22 EPS vs. $2.26 expected, $18.76 billion in revenue vs. $17.8 billion expected, and record margins of 32.9%.
On the company’s earnings call, both CFO Zachary Kirkhorn and CEO Elon Musk remained convinced that Tesla could grow at least 50% over 2021 numbers.
Furthermore, BarChart says Tesla is flashing some technical BUY signals based on its 20 – 50 Day MACD Oscillator, 20 – 100 Day MACD Oscillator, 20 – 200 Day MACD Oscillator, 50 – 200 Day MACD Oscillator, and 200 Day Moving Average.
Several analysts are immensely bullish on the TSLA stock’s potential. Yet, according to TipRanks, someone has only a $67 price target, significantly bringing down its average price target. A price target like this for Tesla is tough to fathom and a ridiculous outlier. Especially considering that based on 27 total ratings from the past three months, the general consensus is that Tesla is a MODERATE BUY. 14 rate it a buy, 8 a hold, and 5 a sell. Besides that absurdly low target of $67.00, Tesla has an average price target of $980.41 and a high forecast of $1500.00. The average price target represents a 2.92% upside move from May 4, 2022’s close of $952.62. But chances are, that upside potential is drastically higher, as the $67 target unjustly lowers the average.
Most recently, in April, Deutsche Bank and Oppenheimer maintained Buy and Outperform ratings, with price targets of $1250 and $1291, respectively.
Leading the way with the highest price target of $1500 is Trip Chowdhry from Global Equities Research.
Chowdhry has long been a Tesla bull due to its massive EV demand. Chowdhry emphatically noted that customers want to buy Tesla not just because it’s an EV but because it’s a Tesla. He called Tesla an experiential company and compared it to Apple. He explained that a Tesla vehicle feels like a new vehicle every day. No other company can create that same type of experience.
As far as catalysts go, Chowdhry noted Hertz adding the Tesla Model Y to the fleet and the recent opening of Tesla’s Giga Berlin factory.
The Company’s year-to-date low and high are $1208.00 and $700, respectively. So while Tesla may still see some volatility in this environment, it’s imperative to understand why Tesla has so much upside and why many negative catalysts are nothing but noise.
Is this quintessential growth play now a mouth-watering value play?
Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH)
An undervalued cruise industry giant boasting 28.96% of consensus upside.
Norwegian Cruise Lines was a favorite of the Robinhood crowd after cruise line stocks were some of the most beaten down after the COVID-19 market crash in 2020. NCLH bottomed at $7.03 a share in March 2020 and ballooned to as high as $34.49 by February 2021. Of course, since then, the stock has cooled off somewhat because COVID has remained a threat longer than many anticipated.
While the stock has primarily slogged through 2022 thus far and failing to see sustained momentum, the second half of the year could be a different story. Countries are finally lifting travel restrictions and learning to live with the coronavirus. The disease is no longer the killer it once was and is more of an annoyance now than a shutdown threat. The NCLH stock could be exposed to substantial upside potential for a red-hot summer travel season filled with pent-up demand.
Although Norwegian’s last earnings announcement in February missed both top and bottom-line estimates, it attributed much of that to Delta and Omicron-related travel cancelations. These COVID-related headaches resulted in lower gross bookings and higher cancellations, primarily during the first half of 2022. The impact has since stabilized, and net booking volumes have continued to improve sequentially. Norwegian Cruise Lines also anticipates seeing positive net income for the second half of 2022.
With NCLH scheduled to report its next quarterly earnings on May 10, 2022, there’s reason to get excited. In February, NCLH cited strong demand for future cruises, particularly for the second half of 2022 and all of 2023. It also announced that its full fleet is expected to be sailing by the month of May.
May 2022 has finally arrived, and the potential is massive.
In addition to its current fleet, on May 2, 2022, a Reuters report announced that Fincantieri and Norwegian are in discussions over a lucrative order worth $4B to construct new cruise ships.
The stock’s seen some peaks and valleys, yet ever since touching a 3-month low of $14.90 in early March, it rallied an impressive 36.71% to its May 4, 2022 close of $20.37.
The NCLH stock is flashing some bullish technical indicators too, as BarChart points out its 20 – 50 Day MACD Oscillator, 20 – 100 Day MACD Oscillator, and 50 Day Moving Average, as BUY signals.
Based on 11 total ratings from the past three months, according to TipRanks, the general consensus is that the NCLH stock is a MODERATE BUY. 5 rated it a buy, 6 a hold, and 0 a sell. The average price target is $26.27, with a high forecast of $38.00 and a low of $19.00. The average price target represents 28.96% of upside potential from its May 4, 2022, closing price of $20.37.
Most recently, Wells Fargo initiated OVERWEIGHT coverage for NCLH with a price target of $27. Wells Fargo sees the NCLH stock as one of the few remaining recovery stories in the consumer sector. Its high operating leverage could also be a tailwind positioning the stock to heat up well into 2023. Citi also recently bumped its price target from $22 to $24.
With the NCLH stock’s year-to-date low and high of $23.90 and $14.90, respectively, it could be at a very attractive entry point.
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