Given the downward momentum, it may have another 5% to go but it looks to be a compelling buy around $135.
I have owned for years (trimmed along the way) and done well in the past by buying the dips. Is this yet another rare buying opportunity?
Cheers,
Steve
In general, we prefer not to catch falling stocks, as negative momentum can beget negative momentum. Forward analyst estimates have been somewhat flat, but yet, strong earnings growth is still expected. The challenging part with these high-quality, software names is that they typically trade at high valuations, which can later get compressed with weak sentiment. Right now, we are seeing a broad-based selloff of software names due to concerns over AI. These selloffs are not always rational, but yet, they can last longer than most would like them to.
DSG trades at 39X forward earnings, yet it was near 60X forward earnings several months ago. The tough part about spotting 'floors' is that no one truly knows where the floor might be, but it's at a 24% drawdown from its peak, and DSG typically sees 25% to 30% drawdowns. For long-term investors, we would be OK averaging in here, with the acknowledgement that it can decline further, but we like these prices for a long-term investor. But, depending on an investor's risk preference and timeframe, in the near-term, there are likely other opportunities for better near-term gains.