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US stocks have come under pressure in recent weeks with the Nasdaq now in correction territory. In fact, all of the gains made since the Trump administration started have now been wiped out. And in some parts of the market, especially the high-growth segments that I often target, it’s getting quite ugly.
However, while the current US market’s somewhat hard to navigate, quality companies that have been unduly sold off will come back. So here are some stocks worth considering as the market sell-off continues.
Celestica
Celestica (NYSE:CLS) was my highest conviction pick throughout 2024. But the recent sell-off in Celestica’s stock comes amid growing fears surrounding the US-Canada trade tensions, particularly the impact of tariffs.
However, it’s crucial to note that Celestica sources much of its production from Asia. This will minimise the impact of any Canadian-specific tariffs. While concerns about the trade war persist and absolutely could worsen, I believe these fears are overblown, especially as Celestica’s evolving business model increasingly focuses on high-value services, which are less susceptible to tariff disruptions.
Celestica’s recent Q4 2024 report showed impressive growth, with a 19% increase in revenue and a 46% rise in earnings per share (EPS). This beat expectations. Strong demand from hyperscalers and AI-driven infrastructure investments are expected to sustain growth.
Despite this, the stock remains undervalued, with a forward price-to-earnings (P/E) of 17 times and a price-to-earnings-to-growth ratio of 0.55. This suggests the stock is at least 45% undervalued. Given the strong fundamentals and growth outlook, this correction could represent an excellent opportunity to add to my position.
AppLovin
AppLovin (NASDAQ:APP) was another top pick of mine through 2024. Admittedly I incrementally sold my position as it reached 1,000% above my entry point. However, the recent sell-off has been incredibly sharp — falling more than 50% in one month. And at the current level, the stock looks a lot more attractive.
AppLovin is a mobile advertising and marketing platform that helps developers monetise apps through targeted ads and user acquisition strategies. And while its recent success has been driven by AI, it’s likely that the sell-off also reflects concerns about a recession in the US.
Nonetheless, the forecast remains enticing even if there will be some negative adjustments. The stock is currently trading at 33 times forward earnings, which may sound expensive, but with an expected earnings growth rate above 40%, the price-to-earnings-to-growth (PEG) ratio is just 0.75.
The risk here is that a Trump-engendered recession would see companies pull back on their advertising spend, and that could damage the earnings forecast in the near term. This is especially important as the firm pivots away from its traditional gaming market and into the much more lucrative e-commerce space. It’s worth watching closely.
Personally, with the price at $231 in the pre-market, I believe a lot of these risks are priced in. My daughter still has a reduced position in AppLovin, but I may consider re-adding it to my portfolio. After all, it’s a quality company with impressive margins.
