Wall Road’s high analysts like these shares amid the stimulus stalemate
Signage is displayed outside the Campbell Soup Co. factory in Toronto, Ontario, Canada.
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This week, Wall Street looked to Washington as lawmakers tried to reach an agreement on a coronavirus relief package before the end of the year.
Both sides of the aisle appeared far from striking an agreement, with House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer rejecting Treasury Secretary Steven Mnuchin’s $916 billion proposal, as it featured less funding for unemployment benefits. The stimulus package was expected to come as part of the broader spending bill for the fiscal year, which also has not passed.
Against this backdrop, new jobless claims reached 853,000 last week, versus the 725,000 originally expected.
“The market is gasping and grasping for some new leadership signal. Vaccines, virus, stimulus, spending are all rather well priced into the market. People have different expectations, but they’re pretty much there as knowns in the marketplace… I think the next move, especially if you’re a trader, is probably greed. And there’s a greed catalyst out there that I think is very influential,” Sanders Morris Harris’ CEO George Ball commented.
So, how are investors supposed to find compelling investment opportunities? By turning to the pros that tend to get it right. TipRanks analyst forecasting service attempts to determine Wall Street’s best-performing analysts. These are the analysts with the highest success rate and average return per rating.
Here are the best-performing analysts’ five favorite stock picks right now:
For BTIG analyst Mark Palmer, EVO Payments remains a top pick going forward into 2021. On December 9, the five-star analyst reiterated a Buy rating and $30 price target. Based on this target, shares could surge 17% in the coming months.
“While the company’s shares have recovered much of the value they had lost in in the immediate aftermath of the COVID-19 outbreak, we still view the stock as a reopening play given its exposure to the restaurant, travel and hospitality spaces – almost 20% of its exposure prior to the crisis – and the increased facility of face-to-face meetings that would enable it to reaccelerate its expansion strategy,” Palmer opined.
As for EVOP’s expansion, the company is working on creating referral partnerships in countries that are in the early stages of the transition from cash to card payments, as it has done in Poland, Mexico, Ireland and Spain. The company is also likely to consider M&A in most areas of the world including Eastern and Central Europe, Asia Pacific and South and Central America, in Palmer’s opinion.
What’s more, management highlights the fact that the B2B payments business has experienced virtually no churn during the pandemic.
That said, the analyst acknowledges that investors have been somewhat skeptical of the company’s cost structure adjustment, which trimmed its core SG&A expenses by approximately 10% and translated to a 300-basis point improvement in its adjusted EBITDA margin, as they fear expenses will spike once the pandemic’s impact fades. However, Palmer notes that management is committed to maintaining the margin improvement.
With a 70% success rate and 19.9% average return per rating, Palmer is among the 100 best-performing Wall Street analysts, according to TipRanks.
Zimmer Biomet Holdings
Contrary to what was stated during its Q3 earnings call in November, Zimmer Biomet saw procedure volumes decline in the U.S., with volumes in EMEA also worsening. However, five-star analyst Mike Matson, of Needham, continues to stand with the bulls, reiterating a Buy rating on December 9. Along with the call, he has a $168 price target on the stock (13% upside potential).
Looking more closely at the updated figures, management guided for flat Q4 procedure volumes on a year-over-year basis, compared to a 3% gain in Q3. For EMEA, the company predicts Q4 volumes to be down double-digits to high-teens year-over-year, versus a 6% decline in Q3, with APAC volumes improving slightly.
“We expect these trends to continue into Q1 2021 before improving. Importantly, we do not believe that these trends are specific to ZBH and expect other med tech companies, particularly those with significant exposure to Europe, to see slower growth in Q4 2020,” Matson explained.
However, he added, “Given our expectation of improved growth after the pandemic and management’s target of reaching a 30% operating margin by the end of 2023, we expect ZBH to see stronger EPS growth in the next few years, and we also see potential for P/E multiple expansion.”
Based on data from TipRanks, Matson is currently tracking a 66% success rate.
Campbell Soup Company
Campbell Soup just received the RBC Capital stamp of approval, with five-star analyst Nik Modi reiterating a Buy rating and $59 price target. This target puts the possible upside at 25%.
On December 9, CPB reported that in fiscal Q1 2021, net sales gained 7%, with organic net sales up 8%. Management stated that this demonstrated the strong demand for its products. Additionally, adjusted EPS increased 31% to $1.02.
Going forward into fiscal Q2 2021, the company guided for sales growth of 5%-7% on a year-over-year basis, compared to sales of $2.16 billion in fiscal Q2 2020. It also expects EPS to land within the range of $0.81-$0.83, versus the 6.5% sales growth and EPS of $0.84 analysts had forecasted.
The Broth segment, however, remains a key concern because of capacity constraints, in Modi’s opinion.
“We understand CPB is leveraging co-packers to keep up with demand near-term, which should ease over time with increased capital investment. Importantly, while scanner share trends remain negative, we are beginning to see an inflection in buy rate and repeat purchase rates for CPB broth consumers, which tends to be a leading indicator for improvement,” Modi explained.
Speaking to CPB’s recovery, Modi commented, “We would argue that we are still in the early stages of a recovery. Yes, it will likely be choppy as stepped-up spending and reduced promotional intensity (against lots of promotions a year ago) create quarterly volatility, but we believe the company’s improved capabilities around consumer insights and R&D are just now starting to take hold.”
Modi’s impressive track record is backed by his 75% success rate and 12.7% average return per rating.
Following the release of its fiscal Q3 earnings report, Credit Suisse’s John Pitzer remains bullish on semiconductor company Marvell’s long-term growth prospects. In addition to maintaining a Buy rating, he kept a $50 price target on the stock, indicating 17% upside potential.
Investors were disappointed with the print as the company’s ability to meet demand has been negatively impacted by supply constraints, with this headwind expected to last through fiscal Q1. A lackluster performance by the enterprise/on-premises segments as well as China headwinds reflected additional causes for concern.
However, networking revenue of $445 million, up 34.8% year-over-year, beat the $432 million consensus estimate. On top of this, management expects storage to gain 13%-15% quarter-over-quarter in fiscal Q4 as Fiber Channel demand recovers and Cloud DIY Controller ramps.
Pitzer, though, is optimistic as the future opportunity is only set to improve, in his opinion. Significant 5G design wins in NOK/Samsung, an ASIC win at Tier 1 Hyperscaler, LiquidIO Smart NICs/LiquidSecurity HSMs momentum in Cloud, Datacenter SSD Controller momentum and the pending INPI acquisition should all work in the company’s favor.
“Despite near-term risks including: COVID, supply bottlenecks and U.S.-China tensions, MRVL remains one of the most strategic assets in Semis,” Pitzer opined.
Given Pitzer’s 75% success rate and 23.9% average return per rating, he more than earns his #40 spot on TipRanks’ ranking.
On December 9, intermodal marketing company Hub Group announced that it is set to acquire NonstopDelivery (NSD), a non-asset white glove last mile services company that provides warehousing, distribution, product assembly and reverse logistics to its customers in the U.S., for $94.5 million. Cowen analyst Jason Seidl thinks the move will “expand HUBG’s supply chain solutions for its customers.”
Expounding on this, Seidl stated, “The acquisition of NSD should create opportunities for Hub Group as its customer base will now benefit from its last mile delivery solutions and applying NSD’s logistics technology, which provides customers with real-time information and analytics to shipments. Hub Group and NSD have been working together for roughly 10 years, and we expect synergies in 2021 to be unlocked as technologies integrate, cross-selling initiatives begin to roll out, and operational efficiencies are deployed.”
What’s more, Hub Group is anticipating cost savings to be in the millions, with Seidl arguing the company will be active in the M&A market going forward.
As a result, the five-star analyst revised his 2021 EPS forecast to the upside. In addition, Seidl bumped up his price target from $62 to $65 (12% upside potential) and reiterated a Buy rating.
Scoring the #23 spot on TipRanks’ list, Seidl boasts a 77% success rate and 20.9% average return per rating.