Credit Suisse analysts believe better days are ahead for these cheap growth stocks
Credit Suisse believes that some growth stocks which were hit hard by this year’s decline could make a comeback. Investors are uncertain about the Federal Reserve raising interest rates and rising inflation, which has put stock prices under severe pressure. This sell-off is especially severe for tech companies and growth firms, which depend on inexpensive money to expand their businesses. As of Tuesday, the tech-heavy Nasdaq Composite sits nearly 25% off its highs, while the S & P 500 and Dow Jones Industrial Average have fallen 13.8% and 10.3%, respectively. Andrew Garthwaite, global strategist wrote that growth has a long-term nature and therefore tends to outperform when equity costs rise. Credit Suisse believes there are still some growth stocks that have fallen too far. This bank highlighted a range of growth stocks as an appealing entry point to investors at these levels. This group of stocks has seen their shares fall more than 40% since their respective peak levels. They also boast superior ratings from Credit Suisse analysts. In addition, their consensus earnings estimates have been revised upwards over the past three month. The list includes Nvidia, which saw its share price fall by 36% over the past year and close to 46% off its 52-week peak. Although Nvidia reported stronger than anticipated results in its previous quarter, the chipmaker issued only light guidance for the next period due to the uncertain macro environment. Credit Suisse reported that Nvidia’s consensus estimate of earnings has increased by 1.7% during the past three-months. Semiconductor stocks such as Nvidia have been hit hard by supply chain disruptions, with the iShares Semiconductor ETF (SOXX) — which tracks the sector — down 21.4% since the beginning of 2022. Credit Suisse recently listed Nvidia among a slew of names that have plummeted from their peaks but have seen improving earnings per share. The earnings consensus estimate for Tesla, an electric vehicle manufacturer, has increased 18% in the last three months. Shares are now down almost 38% from their 52-week high, and around 27.2% over the past year. Lululemon remains a straggler, down 24.6% in this year and 39.2% from the 52-week high. The analysts however have raised their earnings estimates for this apparel company by 1.7%.