These 3 Stocks Recently Hit New 52-Week Lows. Could They Be Bargain Buys?
Key Points
When a stock falls to a 52-week low, it's important to understand the reason for the decline before buying.
The stocks listed here have been struggling for various reasons, and the market may be overreacting.
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When a stock hits a new 52-week low, it can be due to several factors, including a poor business performance or broader macroeconomic conditions weighing on its valuation. A stock that's fallen to a new low isn't always going to recover, but it may not always be destined to go even lower, either. It's important to consider the context and to understand why a stock is performing poorly. Understanding the reason can help you assess whether it's, in fact, a deal and the market may be overreacting, or whether the business is indeed facing concerning headwinds and should be avoided.
Three stocks that recently hit fresh 52-week lows are AutoZone (NYSE: AZO), Intuit (NASDAQ: INTU), and PDD Holdings (NASDAQ: PDD). Let's take a look at why they're struggling, and if they could be good bargain buys right now.
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AutoZone
AutoZone shares fell recently after the company reported its latest earnings numbers. Although it technically beat expectations, the auto-parts retailer still fell sharply due to concerns about slowing growth and challenges in international markets.
The company said that "unseasonably cool weather" had been slowing its sales recently. Revenue for the quarter ending May 9 was up 8% year over year, totaling $4.8 billion. But its same-store sales growth rate was 3.9%, with the growth rate in its international segment being fairly low at just 1.6%.
This year, AutoZone's stock is down around 10%, and with its decline, it is trading at a forward price-to-earnings multiple of 17, which is based on analyst projections for its future profits. I think the stock could be a good buy at its current price, as its valuation is modest, and with AutoZone selling essential auto parts, its business should be fairly resilient over the long haul.
Intuit
One stock that can't seem to stop falling is Intuit. Its shares have crashed more than 50% this year. While it recently reported earnings, which didn't help the stock, it has largely fallen this year as investors have grown concerned about software stocks and their ability to do well with artificial intelligence (AI) potentially disrupting their business models.
This is what I'd consider an overreaction in the markets. Intuit's business centers around software that finance and accounting professionals rely on, including QuickBooks and TurboTax. This is not software I believe AI can readily replace, and even if it could, professionals would not readily trust it. Intuit's business remains strong, and the company generated solid 10% revenue growth in its most recent quarter, which ended on April 30.
At a forward P/E of only 11, I really like the stock and am contemplating buying it because of its fantastic fundamentals and extremely low valuation. This is a tech stock that could have tremendous upside for long-term investors.
PDD Holdings
PDD Holdings, the company that owns online marketplace Temu, reported earnings on Wednesday morning, and its shares crashed more than 10% out of the gate. Investors weren't pleased with the numbers, and this struggling e-commerce stock hit new lows. Since the start of the year, it's now down around 25%.
While the company's top line came in at $15.4 billion for the three-month period ending March 31, which was an increase of 11% year over year, its net income fell by 15% to $1.8 billion. The company says it has begun a "deep transformation" in its business this past quarter and is investing heavily in its supply chain.
A decline in profit alongside the word "transformation" can be troubling, but PDD's stock has already been trading at reduced levels, with investors likely concerned about ongoing trade uncertainty between the U.S. and China. However, the company's profit slid mainly due to other income and expense items; its operating profit actually rose by 22% this past quarter.
At a dirt cheap forward P/E of eight, PDD is another beaten-down stock that could make for a good contrarian pick right now. With the company investing in its supply chain and improving its operations, now may be a good time to buy and simply hang on. It'll require some patience, but investing in PDD stock right now could pay off in the long run.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuit. The Motley Fool has a disclosure policy.
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