Netflix (NASDAQ:NFLX) and Advanced Micro Devices (NASDAQ:AMD) are two stocks that have underperformed so far this year. Taylor Dart explains why both stocks are setting up for a second-half rally.It's been an impressive year thus far for the Nasdaq Composite (QQQ), with the index up more than 15% year-to-date, knocking on the door of the 15,000 level. This strong performance in the face of multi-year high inflation readings and fears surrounding a 4th COVID-19 wave is even more impressive, but it's made it very difficult to find any bargains in the market. In fact, we have more than 60 growth stocks now trading at above 35x sales, the highest reading since this bull market began a decade ago. However, while most names look very expensive, two names look like solid buy-the-dip candidates. In this update, we'll look at these two names and assess their ideal buy-points.
(Source: TC2000.com)
While high-flyers like HubSpot (NYSE:HUBS) and Bill.com (BILL) are up more than 50% year-to-date, Advanced Micro Devices (AMD) and Netflix (NFLX) have been unable to keep up with the S&P-500 this year, up 15% and down 5%, respectively. This underperformance has left these stocks trading at more reasonable valuations than many of their peers, with NFLX looking much more undervalued in a rare period where it actually has a negative 12-month return. This is even though NFLX is on track to grow annual earnings per share by more than 65% in FY2021 alone. In AMD's case, annual EPS growth is accelerating after a massive year in FY2020, with FY2021 annual EPS growth projected at 104%, up from 87% growth last year. While not as cheap as Netflix, AMD is also reasonably valued, assuming if it can meet its FY2023 earnings targets. Let's take a closer look at both companies below: