With markets apparently in a sustained bull cycle, Wall Street’s analysts have been working hard to find the ‘right’ stocks – the stocks that investors can trust to keep bringing in returns. And those returns may be better than thought possible just a couple of short months ago; the S&P 500 has returned to its pre-crash levels, closing recently just hair’s breadth away from its all-time high.
Diagnosing the market’s success from Canaccord, chief strategist Tony Dwyer sees record liquidity behind the high prices and surges in value – and he sees it another reason to keep up the buying spree. “As long as money availability and you’re seeing a pivot from historically weak levels in a synchronized global recovery, weakness is to be bought, not sold or feared.”
Dwyer sees fiscal stimulus and the Fed’s monetary policy has supporting the markets, saying of tighter belts, “What most people forget sometimes is that you have an economic or market problem when you have a need for money and very limited access to money.”
The Federal government has, for the moment, solved the ‘access to money’ issue. Congress and the Federal Reserve have turned on the cash spigot in response to the coronavirus crisis, and one result has been record-level buying on the stock markets. As Dwyer put said, when money is available, people will buy.
Wall Street’s analysts, of course, are reviewing the markets, seeking the stocks that investors should buy. We’ve pulled up the TipRanks data on two stocks that high-rated analysts have tagged as potentially strong investments. Between Wall Street’s professionals, and the latest data, here’s what makes them compelling buys.
J2 Global Communications (JCOM)
We’ll start with internet communications, a mainstay of our technological society. J2 Global offers communications, messaging, and storage services on the cloud, through a variety of media sites. The company has over 40 brands, including recognizable names like Mashable, PCMag, BabyCenter, and Everyday Health. J2 boasts a monthly reach of 230 million users, and sees some $1.4 billion in annual revenue.
Like many businesses, J2 saw earnings slip in the first half of 2020. Where Q4 2019 was the best in two years, Q1 EPS fell by nearly half. Since then, the trends have been in the right direction. Q2 earnings were low, but sequentially higher, and beat the forecasts. Projections for Q3 show earnings returning to normal levels.
RBC analyst Shweta Khajuria is impressed by J2’s ability to survive the corona crisis, come through intact, and beat the earnings forecast in Q2. She sees the stock’s current low price as an opportunity, and in the wake of the quarterly report she upgraded her stance on J2 to Outperform (i.e. Buy), while raising her price target to $90. This figure implies an upside of 27% for the coming year. (To watch Khajuria’s track record, click here)
Supporting her stance, the 5-star says, “JCOM has recently remained at depressed levels largely due to COVID-related uncertainties and downside pressure from intraQ short report. That said, we believe these two overhangs have largely been cleared up and we are now constructive—here’s why: a) Attractive valuation—JCOM is currently trading at 6.7x our ’22 EBITDA est. vs. the co.’s 3-year historical median of 8x and comps ranging 8x-14x ’22E EBITDA; b) Stable-to-improving trends & fundamentals—in addition to proven stability in the Cloud biz, the co.’s Media biz has also been more resilient than most other ‘Net Ad names in our SMID cap space. This resiliency has been driven by the diversification of J2’s Media Brands & assets, performance marketing tilt, limited exposure to travel/local/auto categories, and strength in the healthcare vertical. Mgmt expects stable trends in H2:20 with a “tilted” U recovery."
The conventional wisdom agrees with the RBC analyst. JCOM has a Strong Buy analyst consensus rating, based on 8 Buys and 1 Hold. The shares are selling for $70.81, and the average price target stands at $93.17, impaling a 31.5% upside. (See JCOM stock analysis on TipRanks)
I3 Verticals, Inc. (IIIV)
The next stock on our list, I3, lives in the crowded online payment sector. The company offers software solutions for electronic payments to the small- and mid-sized business sector. I3’s clients include education, non-profit, public sector, and health care companies. At a time when recessionary pressures struck a broad spectrum of the market, I3 was notable for keeping earnings positive. The company’s fiscal Q3 report (calendar Q2) beat the forecasts on both earnings and revenue.
BTIG analyst Mark Palmer sums up his view is IIIV in a simple, optimistic statement: “We believe the stock represents an attractive way to play the accelerated demand for digital payments resulting from the crisis without having to stretch excessively on valuation.”
In light of the earnings report, the 5-star analyst upgraded his stance on this stock from Neutral to Buy, and sets a $33 price target that suggests 17% growth for I3 this year. (To watch Palmer’s track record, click here)
"We believe IIIV demonstrated with its 3Q20 report that the company can weather a near-term slowdown in the education vertical associated with many schools adopting virtual models for the fall semester as the acceleration of digital payments in other verticals and in its B2B payments business is poised to more than offset that headwind," the analyst added.
All in all, IIIV has a Strong Buy rating from the analyst consensus, and it’s unanimous – there are 4 recent Buy ratings on this stock. Shares are selling for $28, and the average price target, at $33.75, suggests it has room for 19% upside growth. (See IIIV stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.