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Experts Say These 3 Nasdaq Stocks Are Seriously Undervalued

Looking for good deals on large-cap stocks? Wall Street Memes lists three of the Nasdaq 100's worst-performing stocks, each of which may be undervalued, according to Wall Street experts.

Nasdaq 100 Large Cap Growth  (QQQ) - Get Invesco QQQ Trust Report is considered by many to be a solid investment choice. This group is composed of all large-cap companies (market capitalizations above $10 billion) – big, stable businesses like these tend to offer more predictable cash flow and, at times, more resilience to volatility.

In search of good deals, Wall Street Memes looked at some of the Nasdaq 100 stocks that have performed the worst over the past 52 weeks. Could negative momentum give way to bargain hunting and turn some of these stocks into winners within the foreseeable future?

Below are three potential buy-the-dip ideas backed by Wall Street experts.

3# Activision Blizzard - $ATVI

The Santa Monica-based video game company Activision Blizzard  (ATVI) - Get Activision Blizzard, Inc. Report develops and publishes interactive entertainment content and services worldwide. Some of the most famous games the company has produced include Call of Duty, World of Warcraft, the Diablo series, and Guitar Hero. But the company has been struggling all this year. ATVI stock, which is down 34% year-to-date, is one of the biggest Nasdaq 100 losers in 2021.

Figure 1: Activision Blizzard's gamming event.

Figure 1: Activision Blizzard's gamming event.

Activision Blizzard currently sports a $44 billion market cap and has solid fundamentals; impressively, the company has beat earnings estimates every quarter since 2018. However, in the past quarter, even though it reported both earnings and revenue beats, light guidance for the upcoming year caused the stock to crater. Since November 2, shares are down 23%.

In addition, throughout this year, the company has faced internal employee issues, with many workers pointing to repeated instances of discrimination and harassment. Activision's low morale ended up causing some delays in key game releases.

Despite a troubled 2021, and despite several post-earnings downgrades this last quarter, Wall Street is still overall bullish on ATVI stock. Consensus for ATVI is a “moderate buy” with an average price target of $90 – that implies a strong, 52% upside ahead.

Truist Financial analyst Matthew Thornton expects a CEO change amid recent developments. Thornton believes that Bobby Kotick, the current CEO, keeping his post would only maintain the uncertainty around the company’s morale and productivity. However, he is still bullish on the company’s fundamentals and reiterates a buy recommendation on the stock and a price target of $74 —representing a 24% upside.

2# Peloton Interactive - $PTON

This company, which provides interactive fitness products and subscriptions, was a pandemic darling last year; 2021 has been a different story, however, and the stock has been struggling while economies have gradually reopened. Peloton stock  (PTON) - Get Peloton Interactive, Inc. Class A Report is down 72% year-to-date, sitting at about $40 as of our last check.

Figure 2: Peloton when Nasdaq listed.

Figure 2: Peloton when Nasdaq listed.

Despite the poor momentum, Wall Street believes that this could be a good time to invest in Peloton stock. The $13 billion market cap company has a “moderate buy” consensus and a $78 price target, which implies a 70% upside. Those figures are based on 26 reports issued over the last three months.

The most recent Wall Street rating provided came from Deutsche Bank analyst Chris Woronka. He initiated coverage on PTON with a $76 price target and a “buy” recommendation. He justified this rating with a straightforward analysis of Peloton’s earnings potential in a normalized (i.e., non-pandemic) economic environment.

Lastly, famed investor Cathie Wood purchased a sizable batch of PTON stock in late August of this year. Wood’s Ark fund bought the dip as the company missed Q4 earnings estimates, scooping up 1.7 million shares of PTON. However, as PTON stock kept dipping, Wood’s Ark fund ended up dumping almost half of its shares a few months later, right before PTON ended up plummeting 40% after fiscal first-quarter earnings revealed poor guidance ahead.

1# MercadoLibre - $MELI

Buenos Aires-based MercadoLibre  (MELI) - Get MercadoLibre, Inc. Report is an e-commerce marketplace and fintech provider (the latter via MercadoPago, an online payment platform) that serves much of Latin and South America. MELI is also one of the Nasdaq 100’s worst performers of the year. The company – along with the rest of the e-commerce sector - was a big beneficiary of pandemic “stay-at-home” trends. MELI shares jumped an eye watering 312% between March 2020 and February 2021.

Figure 3: MercadoLibre debut on Nasdaq.

Figure 3: MercadoLibre debut on Nasdaq.

The Argentine company, which has a market capitalization of $57 billion, increased its revenues by up to triple digits during the apex of the pandemic, but those results may have worked to set the bar too high for the company. Last quarter, the company missed revenue estimates for the first time since 2018. Plus, there was news that MercadoLibre would be selling 1 million shares for general corporate purposes. Higher interest rates hurting growth stocks in general also helped to bring down MELI’s shares, which have tanked 32% since early November.

Even with all the bearishness surrounding MELI’s recent performance, the Wall Street consensus on the stock is bullish, predicting an 80% rally ahead. The stock currently has a “strong buy” rating and a target price of $2,187 based on 8 analyses, most of which were provided after the company's fiscal third-quarter earnings.

One of those bulls is Barclays analyst Trevor Young, who raised MELI's price target from $2,100 to $2,200, reiterating his recommendation to buy the stock after its third-quarter results. The analyst is optimistic about MercadoLibre’s “execution on all fronts,” especially in terms of value proposition and services.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)