2022 has been a cyclic hurricane for investors unless you are an energy-minded investor. The year has seen a lot of plunges into bear market environs for the Nasdaq Composite, the S&P 500, and Dow Jones Industrial Average.
Nevertheless, there is always an investment opportunity in the darkest times; even if investors never expected the dip would be 2008 levels, 10% or more declines in major stock market indexes have historically ended up in a bullish cycle rally, during which stock prices rise. Here are two undervalued stocks poised for a bull market rally in 2023.
Lovesac
Lovesac is a potent stock to consider purchasing during a decline in the Nasdaq. Lovesac is in a prime position to disrupt the traditional furniture industry, with the company’s popular product, Sactionals, as a key differentiator.
Sactionals are configurable couches that users can rearrange in numerous ways and have a large selection of cover options made from recycled materials. Additionally, LoveSac’s products come from recycled materials and energy-efficient production processes, indicating the company is working with long-term sustainability in mind.
Lovesac has successfully navigated a challenging economic environment through a flexible sales platform that can adapt to different sales channels. The company’s omnichannel approach includes online sales, pop-up showrooms, partnerships, and traditional retail locations. This platform helps to keep expenses down and margins up.
Lovesac has recently become profitable, ahead of Wall Street’s expectations. The company’s stock is currently trading at about eight or nine times forward-year earnings, which is relatively inexpensive for a growth stock.
Datadog
Datadog, a software-as-a-service (SaaS) company, provides infrastructure and security-monitoring services. Datadog is an asset to consider purchasing during a decline in the Nasdaq. Datadog has a premium valuation, and its operating performance and niche positioning justify this valuation.
The company is in a prime position to take advantage of the hybrid work environment that has emerged in the wake of the COVID-19 pandemic, as businesses of all sizes need to be able to monitor applications and understand their customers to adapt to the changing business environment.
Datadog has maintained a high level of customer retention and increased the amount its customers are willing to spend with the company over time. This development is a positive sign for the company’s growth and profitability, as it suggests that its customers are finding value in its products and services and are willing to continue investing in them.
In addition, the percentage of customers using six or more products from the company has increased significantly over a relatively short period suggesting that the company has successfully convinced its customers to adopt additional products beyond their initial purchase. This development is because of the company’s ability to demonstrate the value of these products to its customers.