The consumer discretionary sector, often hit hard by economic downturns, might currently present an enticing opportunity for value-seeking investors. Several stocks within this sector have fallen significantly, exhibiting signs of being oversold. This means their prices have dropped considerably, potentially creating a window to buy low and ride a potential rebound.
One way to identify oversold stocks is by using the Relative Strength Index (RSI), a momentum indicator widely used by traders. The RSI compares the magnitude of recent gains to recent losses, helping assess the strength of a stock’s price movement. A reading below 30 generally indicates an oversold condition.
Let’s examine three companies within the consumer discretionary sector that currently have RSI values close to or below 30, suggesting they might be undervalued:
Red Robin Gourmet Burgers Inc (RRGB)
Red Robin Gourmet Burgers disappointed investors with its recent second-quarter earnings report. The company missed adjusted EPS expectations and lowered its FY24 revenue guidance, leading to a sharp decline in its share price. Over the past month, RRGB stock has fallen around 38%, with an RSI value currently at 28.02. This suggests the stock is deeply oversold and potentially poised for a rebound.
Advance Auto Parts, Inc. (AAP)
Advance Auto Parts reported mixed results in its recent earnings announcement. While the company’s quarterly sales surpassed estimates, earnings per share fell short of expectations. Moreover, Advance Auto Parts revised its FY24 outlook downwards, further dampening investor sentiment. This resulted in a decline of around 26% in the stock’s price over the past month. With an RSI value of 21.42, AAP is considered significantly oversold.
Designer Brands Inc (DBI)
Designer Brands, despite exceeding first-quarter FY24 sales expectations, saw a decline in its stock price following its earnings report. The company’s shares have fallen around 22% in the past five days, bringing its RSI value to 29.52. This indicates that the stock might be oversold, although it has not reached the deeply oversold territory of an RSI below 30.
While these oversold stocks present potential buying opportunities, it’s crucial to remember that past performance is not a guarantee of future results. Thorough research and analysis are essential before making any investment decisions. Investors should consider their own risk tolerance and investment goals when evaluating these stocks. Additionally, it is always advisable to consult with a financial advisor for personalized guidance.
