Trying to buy stocks that have been in a steady downtrend for weeks or months can be a difficult endeavor. Everyone wants to pick the exact bottom, but more often than not bottom fishing can lead to big losses.
The truth is that many of these stocks are in downtrends for a reason, whether it has to do with sentiment or fundamental changes in the business. On the other hand, there are a few big winners from last year that probably don't deserve the extent of heavy selling they have experienced in 2021.
That means they are prime candidates to rally after the recent selling pressure, especially given their quality business models and growth prospects. Here are 3 bounce-back stock candidates to watch going forward.
1. Advanced Micro Devices
First up is Advanced Micro Devices (NASDAQ:AMD), a semiconductor stock that has been a major underperformer this year, particularly given the semiconductor shortage. The stock is down roughly 10% year-to-date and is a company that is very likely being undervalued by investors at this time.
AMD is a leading supplier of microprocessors and graphics semiconductors that are used in computers and tons of other devices. It’s a high-quality stock that could be coming out of its recent downtrend for several reasons.
First, you have the upcoming acquisition of programmable logic devices supplier Xilinx (NASDAQ:XLNX), which will increase AMD’s addressable market opportunity from $79 billion to $110 billion and add revenue and cost synergies going forward.
The acquisition has been approved by both companies and is awaiting regulatory approval, which could be a positive catalyst for the stock once confirmed. There’s also AMD’s next-generation EPYC processor that is helping the company to gain a lot of market share in the CPU data center industry and could be a growth driver going forward.
Finally, AMD’s upcoming earnings report could be exactly what the stock needs to start rallying again, especially given the company’s strong performance in 2020 that saw sales and profits both rise more than 50% annually.
2. Baidu
It’s fair to say that Chinese stocks have lost their momentum in 2021 after performing very well for the majority of last year. Case in point, Baidu (NASDAQ:BIDU), a stock that hit an all-time high back in February but has since tumbled due to links with the Archegos Capital Management liquidation and concerns about growing delisting risks of Chinese stocks on U.S. exchanges.
The big selloff might actually end up being the perfect buying opportunity, especially when you consider this company’s solid business model and ambitious moves into the autonomous driving and electric vehicle industries.
Baidu is the leading provider of Chinese language online search services and the owner of the most popular search engine in China. The company generates revenue from auction-based interest search advertising services, which is intriguing given that China is one of the world’s fastest-growing economies.
Baidu is also worth a look as the company plans to supply self-driving systems to 1 million cars over the next 3-5 years and has partnered up with Chinese automaker Geely (OTC:GELYY) to produce electric vehicles. This is definitely a strong candidate to bounce back in the coming months, but keep in mind that it also comes with added risk.
3.Twitter
Social media stocks have been taking a hit over the last several months, and that includes Twitter (NYSE:TWTR), which is interesting because there haven’t been any material changes in the company’s business. The recent weakness could be a strong buying opportunity, especially if the company can figure out a way to further monetize its platform.
If you aren’t familiar with Twitter, it’s a social media platform that focuses on real-time content. It’s one of the strongest brands in online media and generates revenue with advertising services and by licensing data to third parties.
Twitter will report its Q1 2021 earnings on Apr. 29 and it will be interesting to see whether ad spending is picking up as the economy recovers from the impacts of the pandemic.
In Q4 2020, Twitter saw its revenues grow by 28.1% year-over-year to a record $1.29 billion and its average monetizable daily active usage grow by 27% to 192 million.
Thanks to optimism surrounding this business and its unique niche in social media, it’s a great bounce-back candidate to watch in the coming weeks, especially if the stock can reclaim the 50-day simple moving average with authority.