We recently published a list of 15 Worst 52-Week Low Stocks to Buy Now According to Short Sellers. In this article, we are going to take a look at where Qualys, Inc. (NASDAQ:QLYS) stands against the other worst 52-week low stocks to buy now according to short sellers.
The U.S. Federal Reserve conducting a 50 basis point interest rate cut was the catalyst that stocks needed to bounce back from a period of stagnation. After weeks and months of uncertainty about what the Fed would do, certainty is slowly creeping into the market, helping bolster investor sentiments.
With the S&P 500 back to record highs, it’s the Nasdaq 100 that appears to be making the most significant moves, having gained more than 3% in the aftermath of the 50 basis point interest rate cut. The spike in the tech-heavy U.S. index is a clear indicator that tech stocks are well poised to edge higher after weeks of stagnation.
The interest rate cut is expected to positively impact short-term bank borrowing costs, making it easy for people and businesses to access cheap capital to fuel economic activity that has been slowing in recent months. Additionally, it should positively impact various consumer products like mortgages, auto loans, and credit cards.
While there were concerns that the U.S. economy was slowing due to disappointing employment data and a slowdown in the manufacturing sector, Fed Chair Jerome Powell reiterated that the 50 basis point cut was all about ‘recalibrating’ the economy.
Initially, there were concerns that the FED coming through with a 50 basis point would fuel fears about the health of the U.S. economy and consequently rattle stocks. However, that was not the case as stocks rallied, signaling that investors were optimistic about the economy and long-term outlook in the market.
Tom Porcelli, top U.S. economist at PGIM Fixed Income Policy, thinks the Fed policy was set up to handle much more inflation. Now that inflation is getting close to the target, the Fed can start to ease off on the tight money they’ve been applying. Consequently, the aggressive interest rate cut is not because we’re heading into a recession but because we want to keep the economic growth going.
While the focus will be on stocks that have been edging higher for the year, the focus is slowly shifting to stocks that have bottomed and that market participants are bearish on. Stocks that have been battered to 52-week lows are increasingly turning out to be bargains, especially on the monetary policy improving after months of uncertainty. Nevertheless, it is unclear whether stocks with high short interest rates will bounce back after coming under immense pressure over the past nine months.
With the Fed cutting interest rates with a bang, CNBC commentator and Fast Money host Jim Cramer believes investors should start paying attention to stocks well poised to benefit from a low interest rate environment. Some stocks to consider are companies providing products and services that depend on consumers’ purchasing power.
Our Methodology
We used the Finviz screener to find stocks that were trading near their 52-week lows and that had high short interest (at least 5%). We then picked the stocks with the highest short interest and ranked them in ascending order of this metric. We have also added the hedge fund sentiment for these stocks.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Qualys, Inc. (NASDAQ:QLYS)
52 Week Range: $119.32 – $206.35
Current Share Price: $123.32
Short % of Shares Outstanding: 10.15%
Number of Hedge Funds holding stakes as of Q2 2024: 31
Qualys, Inc. (NASDAQ:QLYS) is a technology company that provides a cloud-based platform for delivering information technology security and compliance solutions. It is best known as a cybersecurity company owing to its cloud-based security and compliance solutions.
While Qualys, Inc. (NASDAQ:QLYS) is trading close to its 52-week lows, its underperformance can be attributed to, among other things, highly volatile market conditions amid macroeconomic uncertainties. Growing fears over the Federal Reserve monetary policy trajectory and looming fears of U.S. recession have rattled the company’s sentiments.
Nevertheless, the sluggish sales growth has affirmed why Qualys, Inc. (NASDAQ:QLYS) is one of the worst 52-week low stocks to buy now, according to short sellers. The company’s revenue growth rate slowed down to a single-digit percentage range in the second quarter of 2024, marking a significant drop from the double-digit growth it has consistently achieved in each quarter since 2013. Revenues came in at $148.7 million, up 8% year over year.
Businesses putting off their big I.T. investment plans due to a weakening worldwide economy and continuing macroeconomic uncertainties have once again cast doubts on the company’s long-term prospects.
Some cybersecurity companies have noted that organizations must put off or take longer to finalize agreements or are even scaling back on agreements in the current uncertain economic climate. Shifts in consumer spending habits are also impacting Qualys, Inc. (NASDAQ:QLYS) earnings growth.
Concerns about the company’s growth metrics have been the catalyst behind short interest on outstanding shares soaring to 10.15%. According to Insider Monkey’s second-quarter database, 31 hedge funds were long Qualys, Inc. (NASDAQ:QLYS), compared to 25 funds in the last quarter. Terry Smith’s Fundsmith LLP is the largest stakeholder of the company, with 548,009 shares worth $78.15 million.
Here is what The London Company SMID Cap Strategy said about Qualys, Inc. (NASDAQ:QLYS) in its Q2 2024 investor letter:
“Initiated: Qualys, Inc. (NASDAQ:QLYS) – QLYS provides cybersecurity and compliance solutions, which enable its clients to identify, prioritize, and remediate risks to information technology infrastructures. QLYS also offers solutions through a software-as-a-service model, primarily with renewable annual subscriptions. QLYS should continue to benefit from the long-term secular tailwinds that drive sustainable growth in cybersecurity. QLYS’s products are critical but also low-cost relative to a company’s overall security budget, helping ensure high retention rates and recession resistance. We believe QLYS is among the best managed in the industry. Many past decisions have positioned QLYS ahead of peers in terms of product quality, structurally higher margins, and competitive moat. QLYS generates high operating margins with growing cash flow generation and has a very strong balance sheet. QLYS is also owned in our Small Cap portfolio.”
Overall QLYS ranks 11th on our list of worst 52-week low stocks to buy now according to short sellers. While we acknowledge the potential of QLYS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than QLYS, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.