The impressive 2023 rally of U.S. stock markets suffered a severe blow in the last two months. All three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — ended in negative territory in both August and September. Of these three indexes, the Nasdaq Composite was hit the hardest.

The tech-heavy index tumbled 2.2% and 5.8%, respectively, in August and September. In third-quarter 2023, the tech-laden index fell 4.1%. Market participants are worried as the Fed warned of one more rate hike of 25 basis points by the end of this year and pursued a higher interest rate regime for a longer period. The first rate cut is not expected before September 2024 and the inflation rate is unlikely to decline to the central bank’s target rate of 2% before 2026.

A higher market interest rate is detrimental to high-growth sectors like technology and consumer discretionary. Investment in growth stocks creates wealth over a long period of time. A higher market interest rate will increase the discount rate, which in turn will reduce the net present value of investment. Moreover, many of these companies depend on the chip source of credit for the business to grow.

As a result, the Nasdaq Composite suffered the most as it mostly comprises of growth sectors, especially technology. Despite the index’s recent bloodbath, several stocks within this stable provided double-digit returns in the past month. Investment in these stocks with a favorable Zacks Rank should be fruitful going forward.

Our Top Picks

We have narrowed our search to five Nasdaq Composite-listed stocks that have popped more than 10% in the past month. These stocks have strong potential for the rest of 2023 and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Virco Mfg. Corp. VIRC designs, produces, and distributes quality furniture for the contract and education markets worldwide. Examples of facilities served by VIRC include public and private schools, colleges and universities, convention centers, federal and state institutions, churches and other businesses.

VIRC also sells to wholesalers, distributors, retailers and catalog retailers. In order to divide the workload into manageable amounts, VIRC has divided the sales force into two groups: Education and Commercial.

Zacks Rank #1 Virco Mfg.  has an expected revenue and earnings growth rate of 24.5% and 9.8%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 35.8% over the last 30 days. The stock price of VIRC has soared 36.8% in the past month.

G-III Apparel Group Ltd. GIII has been benefitting from solid gains from its brands and digital business. GIII has been accelerating digital growth and strives to become the best omnichannel organization. GIII benefits in strength in outerwear and dress categories.

Zacks Rank #1 G-III Apparel Group has an expected revenue and earnings growth rate of 8% and 14.7%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 14.3% over the last 30 days. The stock price of GIII has jumped 22.8% in the past month.

SIGA Technologies Inc. SIGA is a commercial-stage pharmaceutical company, focusing on the health security related markets in the United States. SIGA’s lead product is TPOXX, an oral formulation antiviral drug for the treatment of human smallpox disease caused by variola virus.

Zacks Rank #2 SIGA Technologies has an expected revenue and earnings growth rate of 58.1% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.8% over the last 60 days. The stock price of SIGA has surged 12.7% in the past month.

Lantronix Inc. LTRX designs, develops and markets products that enable almost any electronic device to be controlled, configured or reprogrammed over the Internet and intranets. LTRX’s products connect these electronic devices to the Internet and intranets by using the infrastructure already in place to connect businesses and homes to the Internet, including fiber optic, Ethernet and wireless connections. LTRX’s primary products that connect electronic devices are its Device Servers and Multiport Device Servers.

Zacks Rank #2 Lantronix has an expected revenue and earnings growth rate of 32.5% and 94%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 60 days. The stock price of LTRX has climbed 13.1% in the past month.

Duolingo Inc. DUOL operates as a mobile learning platform in the United States, China, the United Kingdom, and internationally. DUOL offers courses in 40 different languages, including Spanish, English, French, German, Italian, Portuguese, Japanese, and Chinese through its Duolingo app. DUOL also provides a digital language proficiency assessment examination.

Zacks Rank #2 Duolingo has an expected revenue and earnings growth rate of 39.1% and 94%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 60 days. The stock price of DUOL has advanced 11.4% in the past month.
Lantronix, Inc. (LTRX): Free Stock Analysis Report

G-III Apparel Group, LTD. (GIII): Free Stock Analysis Report

Virco Manufacturing Corporation (VIRC): Free Stock Analysis Report

Siga Technologies Inc. (SIGA): Free Stock Analysis Report

Duolingo, Inc. (DUOL): Free Stock Analysis Report

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