- Rivian Automotive (RIVN): On track to meet production guidance for 2022. Strong cash buffer for upside in manufacturing capacity.
- Roblox (RBLX): Possibly among the top metaverse plays. Healthy growth likely to sustain along with upside in free cash flows.
- Marathon Digital (MARA): Undervalued Bitcoin (BTC-USD) miner with the best part of growth still to come.
- Kinross Gold (KGC): Undervalued gold mining stock with upside potential as gold trends higher on accelerating inflation.
Market reactions are often on the extreme side of things. In particular, when it comes to growth stocks, there is a period of euphoria that’s followed by a deep correction. Getting into oversold stocks can provide good trading opportunities. Further, for long-term investors, it provides a good entry point.
A good example is Snap (NYSE:SNAP) stock, which traded at lows of $24.5 in the beginning of February 2022. With strong quarterly results, SNAP stock surged by more than 50% in a single trading session.
The broad markets have also been sideways to lower in the first few months of 2022. This has created some good buying opportunities.
My focus is on oversold stocks from four different sectors that have multi-year positive tailwinds. Near-term challenges or growth concerns have impacted the valuation of these stocks. However, I believe that it’s a good accumulation opportunity for healthy returns in the next few quarters.
It’s worth mentioning that inflation has surged to 8.5% in the United States. For consumers to maintain purchasing power, it’s important to consider exposure to equities. Growth stocks are the best option for beating inflation.
Let’s discuss four oversold growth stocks that are also worth holding in the long-term portfolio.
| RIVN | Rivian Automotive | $39.50 |
| RBLX | Roblox | $42.84 |
| MARA | Marathon Digital | $21.12 |
| KGC | Kinross Gold | $6.13 |
Rivian Automotive (RIVN)
After a euphoric listing and highs of $179.50, Rivian Automotive (NASDAQ:RIVN) stock has been in correction mode. At current levels of $39.50, RIVN stock seems poised for a reversal rally.
For the first quarter of 2022, Rivian reported production of 2,553 vehicles. During the same period, 1,227 vehicles were delivered. The company has also reaffirmed the guidance for production of 25,000 vehicles in 2022.
It’s worth noting that Rivian has a current production capacity of 150,000 vehicles. The company plans to boost annual capacity to 600,000 vehicles between its Normal, Illinois and, still to be built, Georgia plants. If delivery numbers remain robust, Rivian has strong growth visibility in the next few years.
As of March 2022, Rivian already had 83,000 pre-orders for R1 from U.S. and Canada. Furthermore, the Amazon (NASDAQ:AMZN) order is for 100,000 electric delivery vans. The company has indicated that its exploring ways to further expand the partnership with Amazon.
From a financial perspective, Rivian reported cash and equivalents of $18.4 billion. This excludes the amount available under the credit facility. Therefore, the company is fully financed for near-term growth plans.
Overall, supply chain constraints have impacted electric vehicle stocks. However, it seems that the worst is over for RIVN stock. With the company meeting its production and deliveries guidance, the oversold stock looks poised for a rally.
Roblox Corporation (RBLX)
Roblox (NYSE:RBLX) stock is another name among oversold stocks that looks poised for a bounce back. Recently, Citi initiated coverage on RBLX stock with a buy rating. Analyst Jason Bazinet has a price target of $59 for the stock. This would imply an upside potential of 37% from current levels.
One reason to be bullish on Roblox is the company’s early mover advantage in the metaverse space. It’s expected that the metaverse might be a $800 billion market by 2024. There is headroom for sustained growth in the business.
For 2021, Roblox reported revenue growth of 108% to $1.9 billion. With industry tailwinds and inroads in international markets, there is ample scope for strong top-line growth.
For last year, Roblox also reported free cash flow of $558 million. The ability to generate positive cash flows is another reason to be bullish on the company. For the fourth quarter of 2021, Roblox reported 11.9 million monthly payers with a repurchase rate of 89%. As the subscriber base swells along with a high retention rate, there is visibility for sustained upside in cash flows.
Another important metric is that as of Q4 2020, there were 46% of daily active users above the age of 13. In the comparable quarter for 2021, the DAU above the age of 13 were 52%. With Roblox attracting a wider age group, the addressable market is significant.
Marathon Digital (MARA)
With renewed correction in Bitcoin (BTC-USD), Marathon Digital (NASDAQ:MARA) stock has struggled. After a downside of 33% for year-to-date 2022, MARA stock is in my list of oversold stocks for two reasons.
Marathon expects to significantly ramp-up mining capacity in the next few months. As of March 2022, the company reported mining capacity of 3.9 exahash per second (EH/s). The company expects mining capacity to increase to 13.3 EH/s by mid-2022. Marathon is also targeting further capacity expansion to 23.3 EH/s by early 2023. Of course, deployments have been slow and that concerns investors.
However, there is another possible catalyst for Marathon. The company’s CEO recently indicated that Marathon is open to being acquired at the right valuation.
I believe that an acquisition is likely to be at a significant premium to the current company valuation of $2.3 billion. After full mining capacity deployment, Marathon is positioned to deliver revenue in the range of $1.0 to $1.5 billion. Current levels are therefore attractive for fresh exposure.
Bitcoin has been volatile and that’s a potential risk. However, it seems that the digital currency is in a broad consolidation range. Furthermore, even at a price range of $40,000 to $45,000 per BTC-USD, Marathon is positioned to deliver healthy gross margin.
Kinross Gold (KGC)
Even with gold trending higher, Kinross Gold (NYSE:KGC) has been lower by almost 14% in the last 12-months. I believe that there are several possibly catalysts for KGC stock upside.
Inflation in the United States has surged to highest levels since 1981. In an inflationary scenario, precious metals tend to out-perform. I therefore expect the upside momentum for gold to sustain.
There is a likelihood of multiple rate hikes in 2022. However, with real interest rates remaining negative, money will flow into precious metals. It’s also worth noting that geopolitical tensions are likely to remain high. That’s an additional factor that supports gold on the upside.
With some speculations of a possible recession in the United States in 2023, there is another case for holding gold. In recessionary times, investors go overweight on risk free assets like Treasuries and precious metals.
Specific to the company, Kinross announced the sale of Russian assets for a consideration of $680 million in cash. While production will be impacted, this is a positive development from a stock price perspective. The company can divert the funds to acquire assets in a lower geopolitical risk region.
It’s also worth noting that for 2021, Kinross reported production of 2.07 million ounces. For the current year and 2023, the company expects production of 2.65 and 2.8 million ounces.
Higher gold price coupled with incremental production is likely to boost cash flows. KCG stock is therefore attractive at current levels and among the oversold stocks to consider.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.