If we look at some of the seriously undervalued Nasdaq stocks, there are two primary reasons for the valuation gap.
First and foremost, these undervalued Nasdaq stocks have been flying under the radar. Once these stocks gain market attention, the upside can be sharp. Furthermore, industry factors have depressed some stocks. However, business developments remain positive and that’s a key reason to remain bullish.
I agree that overall market conditions remain uncertain with macroeconomic factors dominating headlines. My focus is therefore on blue-chip dividend stocks.
However, a small part of funds can be allocated to growth stocks that are undervalued. These stocks are typically portfolio catalysts. Blue-chip stocks do help in capital preservation. However, these stocks might not deliver returns that comfortably beats inflation.
Let’s discuss three undervalued Nasdaq stocks that are poised for a big rally in the next 12-18 months.
| LI | Li Auto | $26.52 |
| RADA | Rada Electronic | $9.64 |
| HIVE | Hive Blockchain | $5.68 |
Li Auto
From lows of $18.90 in May, Li Auto (NASDAQ:LI) stock had surged by 120% to $41.50 in June. The big rally has been followed by a correction that presents an opportunity to consider exposure to LI stock.
For Q2 2022, Li Auto reported 63% year-over-year growth in vehicles deliveries to 28,687. Deliveries growth has been robust on a sustained basis for the company’s first model, Li One. As a matter of fact, Li Auto has already been reporting positive operating and free cash flows.
A key reason to be bullish is the launch of the company’s second model, Li L9, which is a SUV. The company has already commenced deliveries of the SUV. It’s likely that deliveries growth will accelerate through 2023. It would also potentially imply growth in cash flows.
It’s also worth noting that Li Auto reported cash and equivalents of $8.0 billion as of Q2 2022. There is ample financial flexibility for aggressive retail expansion. Considering the relative valuation of Chinese electric vehicle stocks, LI stock seems undervalued. I would bet on a big rally for the stock in 2023.
Rada Electronic
With focus on the defense sector, Rada Electronic (NASDAQ:RADA) is among the top undervalued Nasdaq stocks to consider. The small-cap stock is poised for a big rally considering the business developments in the last few quarters.
It’s worth noting that in June 2022, Rada announced a merger agreement with Leonardo DRS. While the former is focused on tactical radar, Leonardo is a provider of advanced defense electronics products and technologies.
The business combination would therefore significantly increase the total addressable market. The company believes that the annual addressable market is likely to be $19.0 billion. Clearly, there is ample headroom for growth.
For 2021, the pro-forma revenue is at $2.7 billion with an adjusted EBITDA of $305 million. The merger is also likely to support EBITDA margin expansion.
Overall, RADA stock seems seriously undervalued from a long-term investment horizon. Multi-fold returns can be expected considering the fact that rising geo-political tensions imply positive industry tailwinds.
Hive Blockchain
Hive Blockchain (NASDAQ:HIVE) stock is among the undervalued crypto stocks to consider. Given the cryptocurrency crash, it’s not surprising that HIVE stock has slumped by more than 50% in the last six months. This however seems like a good accumulation opportunity.
As an overview, Hive Blockchain is a diversified miner with Bitcoin (BTC-USD) and Ethereum (ETH-USD) assets. As of August, the company reported 2.23EH/s of Bitcoin mining capacity. For the same period, the company’s Ethereum mining capacity was 6.49 Terahash.
With steady growth in mining capacity, the outlook is bullish for the company. As of June 2022, Hive reported $71.4 million in digital assets. Once cryptocurrencies start trending higher, these assets will drive valuations higher.
Recently, Hive also announced an at-the-market offering agreement with H.C. Wainwright. This will provide the company with ample financial flexibility to pursue aggressive growth. Hive has already been reporting steady upside in Bitcoin and Ethereum mining capacity.
On the date of publication, Faisal Humayun 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.