5 Club stocks that did worse than the Nasdaq since year-ago record but are well-liked by analysts

Published Wed, Nov 23 20226:38 AM EST

Kevin Stankiewicz @in/kevinstankiewicz @kevin_stank

One year ago Tuesday was the beginning of the end of an epic Nasdaq run from its early 2020 Covid lows. We just didn't know it yet. It turns out the tech-heavy index peaked on Nov. 22, 2021, one session after its last closing record. Since that closing high on Nov. 19, 2021, the Nasdaq has fallen more than 30%, in what turned into a nasty bear market as the Federal Reserve turned hawkish to fight inflation and investors headed for the exits. Using the one-year anniversary of the Nasdaq's record , we wanted to see where Wall Street stands on the 13 Nasdaq-listed stocks in the Club portfolio. We screened them for (1) how they performed relative to the Nasdaq between Nov. 19, 2021 and Tuesday's close, and (2) what percentage of analysts rate the stocks as a buy or a buy-equivalent. For purposes of this story, we selected the five that underperformed the Nasdaq the most over that stretch but also have at least two-thirds of the analysts covering them assigning a buy or a buy-equivalent rating. Those were a pair of tech giants and a trio of chipmakers: Amazon (AMZN), Alphabet (GOOGL), Advanced Micro Devices (AMD), Nvidia (NVDA) and Qualcomm (QCOM). For context, here are our eight other Nasdaq-listed stocks in our portfolio: Apple (AAPL), Costco Wholesale (COST), Cisco Systems (CSCO), Honeywell (HON), Meta Platforms (META), Microsoft (MSFT), Starbucks (SBUX) and Wynn Resorts (WYNN). It's worth noting that for each of the five underperformers, listed below in alphabetical order, the average analyst price target is at least 20% higher than Tuesday's close. While typically encouraging, we think it's wise to take price targets nowadays with a grain of salt for two reasons. First, we're in a period of downward revisions, and price target cuts from sell-side analysts can come well after facts have changed materially and a company's outlook is less favorable. Analysts also cut their price targets because of, say, lower earnings estimates, but keep buy ratings on the stock. Second, analysts, of course, can also be late in downgrading stocks, but we think it's more prudent in this uncertain environment to focus on those overall ratings than on the upside to price targets. 1. Alphabet shares declined 34.8% between Nov. 19, 2021 and Tuesday's close. The vast majority of analysts who cover Google's parent company see brighter days ahead. According to FactSet, 91.7% of the 48 analysts rate the stock a buy or buy-equivalent. We have a 1 rating on Alphabet, which we consider one of the Club's 10 core holdings . Despite our optimism over a multiyear view, we think shares may struggle to really break out until Alphabet's expenses get more in line with revenue growth . That's because we're in a new paradigm for these tech behemoths. The market cares about protecting earnings, not just topline growth at all costs. 2. Amazon shares fell 49.3% between Nov. 19, 2021 and Tuesday's close. However, Wall Street believes the next 12 months should be better for shares of the e-commerce and cloud computing giant — about 92% of the 51 analysts who cover the company has either a buy or overweight rating on the stock, according to FactSet. At the Club, we see still like Amazon over the long term and have our equivalent of a buy-it-here, 1-rating on shares. We'd grow more near-term bullish, though, if we see management exercise more cost discipline. The tech firm has already started to let some employees go , and CEO Andy Jassy wrote in a memo last week that h eadcount reductions will continue into next year . With concerns about a slowing economy, we believe traditionally growth-oriented companies such as Amazon must come to terms with the new operating reality. 3. AMD shares tumbled 51.6% between the Nasdaq's all-time closing high and Tuesday. Three-quarters of the analysts who cover the stock rate it a buy or overweight. We are beginning to believe the PC inventory glut that's hurt AMD will improve soon. Nevertheless, we maintain a 2 rating on AMD, meaning we want to see further weakness before we'd step in and buy additional shares. We just think patience toward the chip sector is appropriate here, but still want to maintain exposure to the group because of its importance to key secular growth trends like cloud computing. 4. Nvidia shares declined 51.4% over roughly the year between the Nasdaq's peak and Tuesday. From here, though, 72.7% of the 44 analysts who cover the stock consider the stock a buy or buy equivalent. Our Nvidia position is smaller now than it was at the start of 2022 — and as with fellow chipmaker AMD, we rate the company's shares a 2. While it's possible the stock's October bottom could hold , uncertainty around chip exports into China and the overall economy render us still generally cautious about Nvidia. 5. Qualcomm shares fell 33.2% between the close on Nov. 19, 2021 and Tuesday's close. But again, analysts are more positive on the future, with 70% of the 30 who cover the company classifying the stock as a buy or giving it an overweight rating, per FactSet. We have a 2 rating on the chipmaker. While we trimmed the position earlier this fall , we think the position has been right-sized and we're done selling. Still, we'd need to see further declines in the stock before growing the position. For Qualcomm, in particular, we're monitoring the state of the Chinese economy because the company is a big player in the smartphone market there. Beijing's adherence to its zero Covid policy has weighed on consumer demand, which has