- (0:30) – Are growth stocks becoming classic value investments?
- (8:20) – Stocks to keep on your radar: Tracey’s top stock picks
- (18:50) – Great takeaways from the current down market: META, NFLX, PYPL, ZM, PINS, GME
- [email protected]
Welcome to episode #288 of the Value Investor podcast.
Each week, Zacks Value Investor Portfolio Editor Tracey Ryniec shares some of her top investing tips and stock picks.
This week, Tracey takes a look at some popular growth stocks that were once expensive but, due to the strong growth sell-off, can now be value stocks.
FTSE Russell reconfigures its key indices
FTSE Russell operates key indices such as the Russell 3000 Index and the Russell 1000 Value Index, which are used as benchmarks by many professional managers.
At the end of June each year, it reconfigures the indices, which means that the weighting of certain stocks and industries will change.
In 2022, some technology and communications stocks, which have seen their shares fall and their valuations fall, have seen their weighting rise in the Russell 1000 Value Index and fall in the Growth Index.
Meta-platforms are a store of value
META META Platforms was one of the stocks that saw its weight rise in the Russell 1000 Value Index and fall in the Growth Index after stocks fell 52% last year.
Meta-platforms now fit better into the value stock index than into growth.
It has a forward P/E of just 14.7 and a PEG ratio of 1.3. It has classic value fundamentals. It’s actually cheap.
Who could have predicted that Meta Platforms would be a value stock just 10 years after its splashy IPO?
From growth to value in 2022
Several other popular growth stocks also fell into the value category this year thanks to huge sell-offs.
Netflix was once the most expensive of the FAANG stocks with a P/E well over 50. It was also one of the best performing stocks from 2010 to 2020.
But after shares fell 65% last year as investors soared on streaming companies, Netflix is now trading with a forward P/E of just 17.3. Netflix also has a low PEG ratio of just 1.2.
Is this a buying opportunity on Netflix?
2. PayPal Holdings, Inc. PYPL
PayPal was a Wall Street darling in the pre-pandemic years and was also a pandemic winner, as fintech was a big winner when online payments dominated.
But over the past year, PayPal’s shares have fallen 74%, causing its P/E to drop to 18.9.
It has a low PEG ratio of just 1.1, which puts it almost in classic value territory below 1.0.
Is it time to review PayPal?
3. PINS Pinterest, Inc.
Pinterest was a pandemic winner when the world was locked indoors during the first wave of COVID restrictions. But upon reopening, Pinterest saw a drop in monthly active users in its key US market.
Shares of Pinterest have fallen 75% in the past year and nearly made a round trip to the start of the pandemic.
It now trades with a forward P/E of 24 and a PEG ratio of 1.6.
Is it cheap enough for value investors to put it on their wish list?
4. Zoom Video Communications, Inc. ZM
Who didn’t zoom in when the coronavirus pandemic hit in 2020? Zoom Video has been a big winner in the pandemic as revenues skyrocketed.
But upon reopening, as people began to return to offices and see people in person, business cooled.
Zoom shares have fallen 69% over the past year. This is before P/E went down but is still at 32x.
Has Zoom bottomed out or will value investors get it much cheaper later?
What else do you need to know about “new” value stocks?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey owns META in her personal portfolio.]
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Netflix, Inc. (NFLX): Free Stock Analysis Report
PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report
Zoom Video Communications, Inc. (ZM): Free Stock Analysis Report
Pinterest, Inc. (PINS): Free Stock Analytics Report
Meta Platforms, Inc. (META): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.