ARLO - Buy the Dip: 3 Suppressed Stocks With the Potential to Rip Higher

2024-04-24 06:00:00 ET

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

If you believe in the random walk theory , then the idea of stocks to buy on the dip might not make much sense. That’s because this belief system states that the market prices in all publicly available information about a particular security.

Still, a counterargument is that the modern market features thousands upon thousands of securities. It’s practically impossible for investors to adequately provide covering to each one. So, it may be inevitable that a few ideas simply fall by the wayside.

In turn, this dynamic sets up the case for underappreciated opportunities. On that note, it’s time to consider these contrarian stocks to buy on the dip.

Stride (LRN)

Operating in the education and training services category, Stride (NYSE: LRN ) provides proprietary and third-party online curriculum, software systems and educational services to facilitate individualized learning for students primarily in kindergarten through 12th grade. Fundamentally, Stride may enjoy upside demand due to the need for American students to play catch-up with the rest of the world .

To be sure, LRN has enjoyed a strong performance in the charts. In the past 52 weeks, it gained more than 52% of equity value. However, it’s down 4% on a year-to-date basis. What’s more, in the trailing month, it slipped over 9%. Still, the volatility makes LRN a solid candidate for stocks to buy on the dip.

Financially, Stride is a very strong performer. Last fiscal year, the average positive earnings surprise clocked in at 46.65%. For the current fiscal year, experts are looking for earnings per share of $4.42 on revenue of $2.02 billion. That’s substantially higher than last year’s result of $2.97 EPS on sales of $1.84 billion.

Not surprisingly, analysts rate LRN a strong buy with a $71.75 price target, projecting over 23% upside.

Six Flags (SIX)

Working under the leisure category, Six Flags (NYSE: SIX ) owns and operates regional theme and waterparks under the Six Flags name. Per its public profile , the parks offer various thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues and retail outlets. Fundamentally, SIX could be intriguing because of consumers’ potential prioritization of travel and related experiences.

Of course, it’s a risky narrative which is why SIX stock hasn’t really performed well this year. Since the beginning of January, it’s down 2.5%. In the past 30 days, SIX lost 6% (funnily enough). Nevertheless, the red ink could make shares a candidate for stocks to buy on the dip.

It must be said that the past performance of Six Flags isn’t exactly flattering. For fiscal 2023, the average quarterly surprise came out to 69.08% below parity (that is, below analysts’ bottom-line targets). However, fiscal 2024 could be the recovery year, with EPS forecasted to reach $1.79 on revenue of $1.51 billion.

Last year, Six Flags posted EPS of 46 cents on sales of $1.43 billion. Should people continue to value their vacations, SIX would be a name to watch.

Arlo (ARLO)

Falling under the building products and equipment category, Arlo (NYSE: ARLO ) provides a cloud-based security solution. Per its corporate profile , the company offers Arlo Essential Cameras and Doorbells, which deliver smart home protection. Further, its security system provides an all-in-one multi-sensor platform, enabling monitoring and effective responses to emergencies.

Fundamentally, the rise of various security threats has boosted demand for ARLO stock. Over the past 52 weeks, it gained almost 63% of equity value. However, it’s still one of the stocks to buy on the dip because of its recent underperformance. In the trailing month, shares fell more than 15%. Despite the red ink, though, Arlo should recover relatively quickly.

Financially, it’s a powerhouse, plain and simple. Last fiscal year, its average positive earnings surprise clocked in at just over 59%. That’s a wildly impressive figure. For the current fiscal year, experts forecast EPS to hit 41 cents on revenue of $530.52 million. That’s a decent step up from last year’s result of 28-cent EPS on sales of $491.18 million.

Unsurprisingly, analysts rate shares a unanimous strong buy .

On the date of publication, Josh Enomoto did not have (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 .

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