When looking for tattered stocks to buy for gains, I often cover under-the-radar stocks. However, sometimes the best deals are hiding in plain sight – you just have to be willing to take a contrarian view when others are fearful.
We saw this scenario play out in mid-2022. Many investors clung onto expensive defensive stocks, avoiding buying battered tech stocks. They missed out on massive gains in the ensuing rebound. Well, there are still plenty of quality names out there trading at tempting valuations for the long-term investor. As I’ve preached many times, buying great companies at low prices sets you up for outsized returns over time. Sure, you may suffer some short-term paper losses, but patience is typically rewarded, as solid businesses inevitably recover.
With that in mind, I want to highlight three tattered stocks that could realistically deliver triple-digit upside over the next 12-18 months. These are companies with staying power that Mr. Market has unfairly punished. Let’s take a closer look at the tattered stocks to buy for big gains!
PayPal (PYPL)
PayPal (NASDAQ:PYPL) has been one of the most tattered tech stocks in recent years, largely due to its status as a fintech company. The entire fintech sector took a major hit once the COVID-induced boom began to slow and online purchasing declined. This slowdown was exacerbated by ensuing rate hikes that made banks hesitant to partner with fintech firms. The lending environment has been challenging ever since banks began failing in 2023 and rates peaked.
Monthly active accounts on PayPal have declined for the past couple of quarters, which looks troubling on the surface. However, beyond this one metric, PayPal has been performing well across the board. It continues to grow revenue at a healthy 8.7% year-over-year clip, alongside expanding margins and 52% year-over-year net income growth to $1.4 billion in Q4.
PayPal is successfully extracting more revenue from its loyal user base. As an established fintech stalwart, I don’t believe this user decline to be catastrophic when core users rely on PayPal more than ever. This profitability has allowed PayPal to allocate billions to buybacks, including plans to repurchase $5 billion in shares in 2024. With shares trading at just 11-times forward earnings, PayPal looks like a clear bargain with multi-bagger return potential. PayPal offers substantial upside over time from its current price below $60 per share. It is one of the best tattered stocks to buy for gains, in my view.
Alibaba (BABA)
Alibaba (NYSE:BABA) is another tattered stock with solid upside for patient investors. Alibaba’s decline stems largely from China’s economic slowdown, coupled with a regulatory crackdown on tech companies. This double whammy has sunk the Hang Seng Index 42.5% over five years, certainly not an enticing backdrop. However, with shares plumbing new lows, I believe BABA stock offers deep value and limited further downside.
China is taking on serious stimulus measures, including recent interest rate cuts to counter deflation. More stimulus likely looms, which should lift established names like Alibaba and JD (NASDAQ:JD). In fact, JD recently smashed EPS estimates by 18% and beat on revenue, powering a 16% single-day surge on its earnings beat (more on this company later). Meanwhile, Alibaba missed expectations, but I foresee a turnaround over time.
Beyond e-commerce, Alibaba’s cloud business holds promise. It has slashed some cloud offerings by 55% to drive sales and capture market share against Chinese AI competitors – a massive captive market. Alibaba is poised to benefit enormously from current secular trends. With shares deeply oversold, BABA stock is definitely among the top tattered stocks to buy for gains.
JD.com (JD)
JD.com trades at bargain-basement valuations. like Alibaba. The Chinese e-commerce company impressed analysts by growing revenue by 3.6% to $43.1 billion. That’s hardly blistering growth compared to U.S. e-commerce giants, but a sign of a Chinese consumer recovery. JD also unveiled a new $3 billion share buyback program over the next 36 months, through March 2027.
With China’s stimulus driving a consumer rebound, I see multi-bagger potential for JD over the coming years. JD also lacks much of the regulatory baggage burdening Alibaba, allowing smoother operations amid ongoing Chinese regulation. Coming off a big earnings beat, JD looks positioned to capitalize on China’s gradual stimulus-fueled recovery. Overall, I believe there is substantial upside from current levels.
On the date of publication, Omor Ibne Ehsan 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.
