Contrarian Investors Should Eye UPST, AI & SBSW in June
There are emerging opportunities for contrarian investing by considering a blend of systematic factors, company-specific events, and valuation multiples. If you're on the hunt for the best contrarian plays in the market, here are three stocks worth considering now.
1. $Upstart Holdings, Inc.(UPST)$
Upstart Holdings, an innovative lending intermediary, has a whopping 33.7% short interest, indicating many investors are pessimistic about its prospects.
However, the company's business model relies mainly on loan volumes. Sure, rising interest rates can be a pain when consumers prefer to borrow at lower rates. But Upstart's first-quarter earnings in May showed that it wasn't phased by rising rates, with quarterly trading volumes still growing 13% year-on-year to $1.1 billion.
Moreover, its loan conversion rate hit 14%, an 8% increase year-over-year, resulting in quarterly revenue of $118 million, which is expected to increase to $125 million in the second quarter. The management even believes that by year-end, the company's EBITDA will turn positive.
With the Fed starting to cut rates, investors have reason to believe that Upstart has the potential for a significant upside. In addition, its Relative Strength Index (RSI) stands at around 41.28, indicating a contrarian play. Sure, there's some risk, but the upside potential of this financial stock is mouth-watering.
2. $C3.ai, Inc.(AI)$
C3.ai once shined bright in the growth of AI commercialization. But now, the stock is down over 30% from a year ago, indicating that the initial investor crowd has overlooked it. So, it might be a good time to hop back on the C3.ai train.
Of course, competition in the commercial AI space is heating up. But the enterprise AI market is expected to grow at a whopping 43.9% annually until 2028, providing long-term growth opportunities for C3.ai.
The fundamentals also show good short-term support. For instance, in May, it released fourth-quarter earnings with revenues beating analyst expectations by $2.2 million. Third-quarter earnings per share were 19 cents above analyst forecasts, indicating improved efficiency.
Given that enterprise AI will continue to grow, and C3.ai has shown it can be a significant player in the industry. Valuation-wise, its current price-to-sales ratio of 11.23 suggests it's in a buying zone.
3. $Sibanye(SBSW)$
Sibanye-Stillwater, a South African precious metal mining company, has seen its stock languish in the dumps over the past two years. Luckily, those threats have largely subsided, with mines in the US resuming operations, and South Africa seeing labor market easing and reduced power outages.
Sibanye can also benefit from a more favorable commodity price environment. For instance, the platinum futures forward curve is tilting upward, indicating an upward move in prices.
The expectation of rising commodity prices, coupled with the disappearance of Sibanye's former headwinds, provides a foundation for this stock to outperform in the future, especially given its significantly undervalued price-to-sales ratio of just 0.51.
In addition, Sibanye's RSI is moderately low at around 40.54, suggesting a potential technical turnaround. In summary, while there are inherent risks, investors shouldn't be surprised if this metal stock doubles in price next year.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
