Harley Finkelstein, COO, Shopify
Scott Mlyn | CNBC
Investors should take note when an analyst rates a stock positively after standing on the sidelines. This could indicate that the name is undervalued and geared towards long-term growth.
The stocks highlighted below have just been upgraded to Buy. The analysts who distribute these upgrades have a proven track record.
TipRanks’ analyst forecasting service finds the best performing analysts on Wall Street or the analysts with the highest success rate and average return per rating. These metrics take into account the number of reviews published by each analyst.
Here are five stocks recently upgraded by Wall Street’s top analysts:
ON Semiconductor has just received an upgrade from Baird analyst Tristan Gerra based on the operating margin catalysts and valuation. The top analyst has now rated the share with a buy and increased the price target from USD 38 to USD 48 (29% upside potential).
While management generated revenues that are below the seasonal norm, Gerra remains unfazed.
The analyst put it this way: “The company’s aggressive inventory shift … combined with a very significant recovery in occupancy rates enabled us to gain a share of what we saw in the second quarter by overtaking the competition. We are seeing the tentative sales of the Management’s third quarter sales outlook not below the seasonal sales outlook as a sign of an imminent downturn, but rather as a capacity constraint with the potential for the company to exceed expectations of the second half of better availability of supply.
In addition, the semiconductor company has been working to improve its mix. Gerra believes that these efforts are reinforced by the current “tight supply environment” rather than ON operating in an oversupply environment.
All of this prompted the analyst to state: “In the medium term, investors should be rewarded with both a clear upward trend and what is probably the most significant turnaround in the company’s history. Cost initiatives, mix and pricing should catalyze further expansion of the gross margin in both 2H and 2022 Initiatives to reposition products are gaining momentum. “
Gerra currently has a 62% success rate and an average return of 20.4% per review. This is based on recent data from TipRanks.
In a research report entitled “The Retail ‘Shift’ Seems to Stay Here”, Roth Capital analyst Darren Aftahi advocates the e-commerce name Shopify. In addition to appreciating the stock to buy, he also set a price target of $ 1,530, indicating upside potential of 37%.
Looking at the company’s first quarter results, the numbers “again” exceeded Aftahi’s increased and above consensus expectations “as growth accelerated in all major segments and metrics.” Total sales growth reached 110% and gross merchandise value (GMV) was $ 37.3 billion. This corresponds to a growth of 114% compared to the previous year and an increase in the number of analysts by 11%.
According to management, the strong result was due to increasing traction and integration on all social media platforms as well as additional international expansion. International GMV growth outpaced that of North America, implying, according to Aftahi, “SHOP’s growth was more than just a US stimulus test dynamic”.
“Although SHOP may not be able to grow beyond the upcoming growth rates of over 90%, it seems clear that the company will continue to gain market share and grow on the verge of the pandemic. International expansion is one of the most important upward catalysts for SHOP, where to start investing more directly and its international portfolio of merchant solutions has barely scratched the surface beyond payments, “commented Aftahi.
Against this background, the analyst has raised his forecast for sales for fiscal year 21 by around 3%.
“When we look at multiple catalysts from international expansion and upgrades from organic plans to Plus, and see that GMV kept up with first-quarter trends in April, we see growth for this world-class ecommerce / tech Name stays pretty healthy. “Aftahi said.
Aftahi is among the 66 top analysts tracked by TipRanks and offers an impressive average return of 44.5% per rating.
After the publication of the results for the first quarter of 21, Timothy Horan from Oppenheimer sees Cogent Communications as a convincing game in the area of Internet, Ethernet and colocation services. Because of this, the five-star analyst upgraded the stock from Hold to Buy. In addition, he set a price target of $ 90 for CCOI, which increases the upside to 16%.
For the first quarter, the company had total revenue of $ 146.8 million, which was a minor hit. In addition, the gross margin increased by 200 basis points compared to the same quarter of the previous year.
Looking ahead, management set long-term, multiyear goals of 10% annualized revenue growth and 200 basis points of annual adjusted EBITDA margin expansion. As a result, Horan is “increasingly positive for growth” after winning.
When it comes to network-centric business, thanks to international expansion and declining customers, it’s back on a growth path. In addition, according to the Oppenheimer analyst, corporate customers had to close branches due to the pandemic. After peaking in the middle of the fourth quarter, however, churn has improved significantly, with corporate purchasing activity (DIA) also receiving a boost. To this end, the analyst estimates that if company sales stabilize, they will increase by 2% to 3% compared to the previous quarter.
It should also be noted that this stock trades at a free cash flow yield of 3.6%, which Horan says is “attractive,” dubbed “free cash flow growth in the middle of 20% in the next two years “. The company is also striving to reduce costs and increase unit growth, “aided by its cost-effective positioning”.
In summary, Horan stated, “Fundamentals will improve if we exit pandemic and CCOI trading on attractive valuation, which has created a buying opportunity. In the long term, we believe the company will be able to get exposure to both companies ( ~ 20% market share today) and netcentric (~ 25% market share today) as a low-cost provider of Internet services in a commodity market. ”
Horan supported his position in TipRanks’ ranking of the best analysts and achieved a success rate of 67% and an average return of 17.5% per rating.
Cirrus Logic’s high valuation and concentration of Apple’s revenue had previously sidelined Needham’s Rajvindra Gill. Given that stocks have fallen sharply since mid-January and the price / earnings ratio has fallen 40%, the analyst has rethought his stance.
On May 4, Gill upgraded the fabless semiconductor supplier from Hold to Buy and set a price target of $ 100 for the stock. That target suggests the stock could gain 31% over the coming year.
While Gill acknowledges that the latest results and projections have been “disappointing,” he points out that “the numbers are due to the time of revenue recognition when the company sells camera controllers for use in camera modules with lead times shorter than that the rest of the components and will therefore be shipped earlier. “
Going on his bullish thesis, Gill commented, “New opportunities are emerging, including potential content gains at Apple with a new Power IC (with an ASP of $ 1). Net, we expect revenue growth to accelerate in FY22, and believe the stock is compelling here. “”
If you look at the analyst’s current iPhone dollar estimates, they are around $ 4.20 ($ 5.20 with an additional $ 1 ASP for the Power IC). This is to be integrated into iPhones in autumn 2021.
In addition, CRUS is working with its high-performance mixed-signal chips to expand beyond the audio domain. According to Gill, the “22nm chips could either lead to more digital processing closer to analog, or to a radically smaller or more energy-efficient chip.”
In addition, the company is making significant efforts to gain market share with Android-based phones with haptic controllers. The smart codec portfolio is also expanding for improvements in size and performance.
Gill is a top analyst for names in technology, averaging 15.5% returns. Its success rate is 67%.
General Dynamics is an aerospace and defense company offering products such as combat vehicles, weapon systems, ammunition, shipbuilding services, and communications and information technology systems and solutions.
For Baird analyst Peter Arment, the company’s long-term prospects seem even better. When “order growth at Gulfstream has returned and is a cyclical kicker for a defense business that continues to remove budget issues,” Arment upgraded GD from Hold to Buy and gave the price target a spike, with the number climbing from $ 180 to $ 243 (Jan. )% Upside potential).
In particular, Arment argues that a “flat” budget request and “heightened threat environment” in key regions helped allay investor fears. Combat Systems in particular saw a 6% increase in the quarter. He added, “Because of Marine’s long-term visibility on platforms like the Virginia and Columbia class submarines, the defense business is becoming an execution story in the medium term.”
In addition, the defense inventory currently stands at more than $ 77 billion, equivalent to approximately 2.6 years of revenue in this segment. This is backed by recurring submarine awards and a “growing pipeline” in Technologies that ended the quarter with $ 30 billion in proposals, according to Arment.
Although the recovery in commercial aerospace demand has been slower, bizjets are a whole different story as flight activity spikes so much. “As travel restrictions loosen internationally, we expect activity to continue and improve results for the year,” commented Arment.
It should also be noted that Arment believes this will be reversed in 2022, although aerospace profitability will come under pressure this year, with higher volume expected.
“Coupled with improved sales and profits at Aerospace, we see potential for GD to return to its premium position among the prime numbers,” said the Baird analyst.
Overall, Arment has achieved a 64% success rate and an average return of 13.8% per rating.