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2 Beaten-Down Stocks That Could Rally in 2022

Going bargain hunting in 2022? In this segment of Backstage Pass, recorded on Dec. 22, Fool contributors Rachel Warren, Deidre Woollard, and Danny Vena discuss two top stocks trading on sale that investors should take a second look at right now.

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Rachel Warren: Plenty of top stocks are trading off of their highs. Today, CNBC reported that two traders had identified a selection of stocks that are trading significantly off their highs. Look cheap, but look like they're poised to rally in the new year. One of those was AT&T (NYSE: T).

The question is, we know the volatile periods in the market when stocks are down. That can present a really great time to buy. If you have the cash on hand to do so, it can be a great time to build up your portfolio.

As we close out 2021, we look forward into 2022. What is the stock that's beaten down right now, that you think is on track to rally in the new year? Deidre, why don't you take this one first?

Deidre Woollard: I'm going to take it to real estate. That's my favorite area, and I'm going to talk about Zillow (NASDAQ: ZG) (NASDAQ: Z) because Zillow has had a tough year, obviously exiting iBuying, it's awkward, it's embarrassing.

They had to lay off a lot of people, a lot of investors are questioning Zillow, but I think it's not the end of the world for Zillow, I think that you are still dealing with a company that's got the biggest audience, biggest market share in real estate, and still, without taking iBuying out, has a very profitable core business in selling leads to agents and brokers, and that's not going anywhere anytime soon.

The real estate market is chugging along and will continue to do so at least in the next couple of years. I think the people that are kind of counting out Zillow are maybe missing something. Another one that's been in the news a lot related to real estate is DocuSign (NASDAQ: DOCU). Has been down a lot.

A lot of people are saying that it's reached all of its total addressable market. I don't think that's true at all. I think there's huge potential for DocuSign to move well beyond just being known as the digital signature company.

Warren: I think it's interesting with a company like DocuSign, I think it's one of those, and I'm interested to hear your thoughts Danny because I know you like this company as well. If it's more just a balancing out of expectations from what we were seeing earlier in the pandemic and having investors look at it, it is more than just a pandemic stock.

This is a company that provides a lot of real value to businesses and can keep doing so over the long haul. What about you, Danny, what are your thoughts?

Danny Vena: DocuSign is one of those companies where I think when investors misunderstand the situation, it presents opportunities for those who really dive into a stock and understand it. There's little doubt DocuSign is the leader.

They've got 70% share of the e-signature market. But they use that as a funnel. The CEO has come out in interviews numerous times saying that that's just the beginning of a customer's journey with the company, and then they help them manage their agreements.

They have the DocuSign Agreement Cloud, which helps them manage agreements and contracts through the entire lifecycle of the agreement, from inception of the idea to completion of the contract to renewal of the contract, and everything in between.

I think that that's something that investors don't really understand, that business doubles their total addressable market from $25 billion to $50 billion. So, I think that narrow focus on the e-signature market is really missing the forest for the trees. Personally.

Warren: I think we have one of those stocks that I think we've been seeing a lot lately where it had a good quarter. I was just looking, revenue was up 42% year-over-year. Billings were up 28% year-over-year. I think we've been seeing this a lot.

You've got stocks that are really doing quite well as we enter various and new phases of the pandemic that admittedly are very different from what we saw earlier on when everyone first went remote.

But it's still growing its business. The business is still looking good. This is something we've been seeing a lot with a lot of companies.

Danny Vena owns DocuSign. Deidre Woollard owns Zillow Group (A shares). Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns and recommends DocuSign, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool has a disclosure policy.


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