Investing in stocks that have been doing poorly can seem risky. But if those stocks have strong underlying fundamentals, they can turn out to be attractive contrarian investments to buy and hold. Think of it as buying in a bear market. You might be scared to do so as you see stock prices go down, and the temptation is to think they’ll keep going down. However, buying at extremely low prices can set you up for significant gains in the future — as long as the business is in good shape.
Three stocks I think could be enticing contrarian buys today are Adobe (ADBE +1.28%), Chewy (CHWY 3.76%), and Duolingo (DUOL +0.47%). Their share prices haven’t been this low in years, and while there is some risk with them these days, here’s why they could prove to be excellent buys for the long haul.
Image source: Getty Images.
Adobe
Adobe’s stock has been struggling mightily, and it’s down 66% over the past five years and 48% in just the past 12 months. It’s trading at levels it hasn’t been at since 2018. Investors are concerned about the company’s long-term future. This is, after all, a company whose business centers on creating images, and with chatbots able to do so with ease, there are serious question marks about Adobe’s ability to compete in the long run.
However, Adobe has been incorporating artificial intelligence (AI) into its products as well, making it easy for users to create images and videos with AI. And with Adobe’s software, you can also make more precise edits and changes. As anyone who’s used chatbots to make images knows, there’s not always much consistency from one image to another, and users can quickly burn through credits trying to fine-tune the process. Creating an image with an AI chatbot may be easy, but creating precisely what you want is a whole other story.
Today’s Change
(1.28%) $2.50
Current Price
$197.40
Key Data Points
Market Cap
$77B
Day’s Range
$197.00 – $199.70
52wk Range
$190.12 – $392.58
Volume
21.5K
Avg Vol
6M
Gross Margin
88.82%
There still is a case for using Adobe’s software, particularly for professionals. Hence, the company’s results remain strong. In its most recent quarter, which ended on May 29, Adobe’s revenue reached a record $6.6 billion, up 13% year over year. For the current fiscal year (which ends in November), the company anticipates at least $26.5 billion in revenue, up from $23.8 billion in the previous year.
Adobe’s financials remain strong, and the numbers look good. While investors may be tempted to dump the stock due to AI, I believe there may be a significant overreaction here. Trading at just eight times its estimated future earnings (based on analyst expectations), Adobe’s stock is incredibly cheap and even provides investors with an attractive margin of safety. It might be a good, calculated risk worth taking.
Chewy
Another stock that’s down big is Chewy. In five years, it has plummeted 77%, and in 12 months, it’s down 58%. While that seems horrific, the reality is that its valuation spiked far too high in 2021, and it was grossly overvalued. The decline is more representative of an overvalued stock coming back to reality than of something seriously wrong with the business. It’s trading around a two-year low right now.
Chewy provides pet owners with a convenient online option for purchasing pet products and supplies, offering about 190,000 products and service offerings. The site can be an all-in-one option for consumers needing pet products, and even prescriptions and medications. It’s a niche that has proven to be successful for the business.
Today’s Change
(-3.76%) $-0.69
Current Price
$17.52
Key Data Points
Market Cap
$7.2B
Day’s Range
$17.41 – $18.03
52wk Range
$17.40 – $43.84
Volume
13.7K
Avg Vol
9.2M
Gross Margin
28.87%
Chewy reported earnings earlier this month, and net sales of $3.4 billion for the period ending May 3 rose by nearly 8% year over year. Net income of just under $95 million was also up by about 52%. With around 21.5 million active customers and Chewy continuing to add to the list, the business seems to be in solid shape.
The problem with Chewy’s stock before was its high valuation. But now, with the stock trading at a forward price-to-earnings (P/E) multiple of 12, it can be a great buy right now.
Duolingo
Duolingo’s 10% loss over the past 5 years doesn’t look too bad, but when you zero in on the past 12 months, you can see the stock has nosedived by more than 70%. Although the stock has been rising recently, outside the past few months, the last time it traded at these levels was back in 2023.
The tech company has been using AI more and undergoing a transformation, prioritizing user growth and enhancing its free tier rather than strictly pursuing revenue and profit growth. It’s a bold move, but one that may prove to pay off.
Thus far, the numbers continue to look strong for Duolingo. Daily active users rose by 21% during the first quarter of 2026 to 56.5 million, and revenue rose by 27% to $292 million. Its profit margin did fall slightly from 15.2% to 14.9%, but overall, its financials still look great.
Today’s Change
(0.47%) $0.60
Current Price
$127.85
Key Data Points
Market Cap
$5.9B
Day’s Range
$127.85 – $128.50
52wk Range
$87.89 – $468.00
Volume
477
Avg Vol
1.7M
Gross Margin
72.14%
Duolingo is technically the most expensive stock on this list with a forward P/E of just under 19, but that’s still below the S&P 500 average of 22. If you’re looking for a quality long-term buy, Duolingo is another great option to consider.
