By George Leong, B.Comm. Published : May 16, 2022
Why Contrarians Should Look at Everbridge Inc
Technology and growth stocks are currently being shunned by the market. So far, 2022 has been the opposite of 2021, when euphoria drove high-valuation stocks to excessive levels. With both the Nasdaq and Russell 2000 treading in bear-market territory, it might be time to look at some beaten-down stocks.
Everbridge Inc (NASDAQ:EVBG) is a provider of software that helps organizations automate and quicken their responses to critical events.
The company defines a critical event as “a disruptive incident which poses serious risk or threat to assets or people.” Examples of critical events include natural disasters, IT incidents, pandemics, civil unrest, and active assailants. (Source: “1Q22 Investor Presentation,” Everbridge Inc, May 9, 2022.)
Everbridge Inc has had more than 6,200 enterprise customers in more than 20 countries.
Significant Risk/Reward Opportunity With EVBG Stock
Everbridge stock debuted in 2016 at $12.60 and steadily moved higher to a record $178.98 in February 2021, up by a staggering 1,321%.
For traders who sold shares of Everbridge Inc at their peak, that was a great trade. But investors who entered EVBG stock near its high have been on a dismal ride. The stock fell to $27.81 on February 25, 2022, giving up all of its gains since 2017.
Everbridge stock’s record high wasn’t justified, but given its recent significant price deterioration, it’s worth a look for contrarian investors.
After trading at its high, EVBG stock declined before staging another rally from May to September 2021.
Again, the upside momentum faded and reversed to the downside. Shares of Everbridge Inc plummeted, with a downside trade gap in December 2021 that drove the stock down by 50% from $120.00 to the $60.00 level.
The selling of Everbridge stock was accompanied by a death cross, which is a bearish crossover pattern that appears on a stock chart when the 50-day moving average breaks below the 200-day moving average.
Chart courtesy of StockCharts.com
EVBG stock continued to lose ground on weak relative strength. Everbridge stock’s ability to mount an upside move is questionable at this point, considering the bearish sentiment toward technology stocks.
Traders might want to consider EVBG stock on price weakness if they’re willing to tolerate the volatility. The downside risk is around $30.00 and $27.00.
On the upside, shares of Everbridge Inc will need to recover to their 40-day moving average of $40.81. Above this level is the bottom of the trade gap at $60.00, followed by the horizontal Fibonacci retracement level at $82.48 and the 200-day moving average of $94.18.
Chart courtesy of StockCharts.com
Everbridge stock has strong institutional ownership and has been attracting insider buying. About 353 institutions hold the majority of Everbridge Inc’s outstanding shares, and over the last six months, insiders have added a net 140,338 shares. (Source: “Everbridge, Inc. (EVBG),” Yahoo! Finance, last accessed May 13, 2022.)
This offers some optimism.
Despite the sell-off of EVBG stock, as of April 29, there was a major short position of 2.9 million shares, or 6.7% of the float. If Everbridge stock can mount a sustainable rally, look for the shorts to cover and provide a lift for the share price.