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A follower posted a simple question on X last week. Four stocks, all down around 80%, which one is the best buy? I almost replied on the spot. But I hadn't looked at any of these properly in a while and a confident take without fresh numbers is how you end up holding bags yourself. So instead I pulled a decade of data on all four and asked a question I could actually answer with numbers: which of these selloffs does the data justify?
PayPal is the one that surprised me most. Yes, growth slowed. Yes, they've had three CEOs in three years. The market repriced it from a growth stock to a mature company and that was fair. What wasn't fair was how far they took it. While everyone was focused on what PayPal wasn't doing, the business quietly got more efficient. Free cash flow grew from $2.5 billion to $5.6 billion. Operating margins improved. Return on equity hit an all-time high. The stock now trades at 8x earnings with a 13% free cash flow yield. You don't need anything to change for that to be a good deal. My fair value estimate is around $97 to $110 against a current price of $45. This one looks mispriced.
Duolingo is down 82% and the bear case is basically one word: AI. If AI makes language learning free, does Duolingo survive? It's a legitimate question. But the actual business hasn't cracked. Revenue grew 38% last year. Gross margins have held at 72% for seven years. They generate $370 million in free cash flow with almost no debt. The selloff was made worse by management deliberately guiding revenue lower to grow users faster, which the market hated. If you think Duolingo can coexist with AI, my fair value estimate is $239 to $330. If you think AI kills the category, none of that matters. It comes down to that one question.
Nike is the one I'd be most cautious about. Everyone assumes it bounces back because it's Nike. That brand loyalty is exactly the problem. Revenue fell nearly 10% last year. Net income dropped 44%. Free cash flow fell 51%. And despite all of that, the stock still trades at 29x earnings. That's a premium multiple for a business in decline. My fair value estimate is $45, which is almost exactly where it trades today. The market has this one right. Interestingly, however, it received the most bullish analyst ratings.
Hims is the most complicated one. The growth is real, revenue expanded 28x since 2019, but the foundation underneath it is shakier than it looks. Gross margins are compressing, debt spiked dramatically in a single year, insiders are not buying, and institutions cut their ownership by 8% in a single quarter. However, this is one stock that has recovered somewhat following its deal with NVO. My fair value for this is $28, suggesting a 46% upside.
So, the data supports Nike's selloff completely and Hims partially. It doesn't seem to support what happened to PayPal or Duolingo.
Would love to hear if anyone else is looking at these or sees something I am missing.
Not investment advice. DYOR. I currently don't hold any of the stocks mentioned.