The ongoing COVID-19 pandemic pushed us into an economic recession in the first half of this year, but in odd ways, the downturn was artificial. The economy had been booming prior to the health crisis, and many of the factors that caused the boom are still in play – a general tax cut, and the deregulation policy of the Trump Administration.
But a decent governmental attitude toward business is not the only factor giving a lift to the economy. A combination of a generous stimulus package and extended benefits put in place earlier this year, along with pent-up demand from the long lock-down periods and a strong desire in many parts of the country to just get back to work, have given life to hopes of a V-shaped recovery.
A feeling of optimism, even in a tough time, and a perception that there are opportunities available, has Wall Street’s analysts tagging stocks for success. We’ve pulled up the TipRanks data on three 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.
Calix, Inc. (CALX)
We’ll start in the tech sector, with Calix, a cloud computing company offering business software platforms designed to allow customers to monetize the interactions between infrastructure and service subscribers. The company’s software products are cloud based, and make broadband access and data analysis easier for customers.
Calix’s success is clear from its annual revenues – and its growing sales and earnings recovery during the corona crisis of recent months. The company saw over $420 million on the lop line last year, and revenues in 1H20 grew sequentially from Q1 to Q2, coming in at $119 million for the second quarter. Earnings were negative in Q1, but quickly recovered and turned positive in Q2, coming in at 8 cents per share- the highest earnings the company has seen in over two years.
Share prices have predictably grown as Calix beat the macro trends on sales and earnings. The stock is up an impressively robust 157% year-to-date.
5-star analyst Richard Valera, of Needham, sees Calix as a long-term choice for investors, so much so that he has initiated coverage of the stock with a Buy rating and a $25 price target that suggest a 21% upside for the stock. (To watch Valera’s track record, click here)
“COVID-19 has accelerated the demand for robust consumer broadband service. As a provider of broadband access solutions, we expect Calix to benefit from this demand… Benefiting from growing secular broadband demand, a model transitioning towards software, and the imminent start of a $20B, 10-year broadband subsidy program (RDOF), we look for CALX to show sustained growth and margin expansion over the next several years,” Valera commented.
Overall, Calix has a unanimous Strong Buy analyst consensus rating, based on 4 Buy reviews. Shares are selling for $20.85, and the $25.50 average price target implies a one-year upside of 24%. (See CALX stock analysis on TipRanks)
Gores Metropoulos (GMHI)
Next on our list, Gores Metropoulos, is an associated company of the Gores Group. GMHI is a blank check company, existing to effect corporate mergers and capital exchanges, by acquisition of assets, stocks, and other business recombinations. Gores Metropoulos focuses on diversity in its portfolio, conducting acquisitions and management of companies in the business services, consumer products, healthcare, industrial, tech, and telecom segments.
GMHI’s most recent merger agreement is with Luminar, a company in the autonomous vehicle sector. The agreement was completed this past August and was valued at nearly $3 billion. Under the terms, Luminar gets a cash infusion of $400 million, and begins trading on the NASDAQ. This example is typical of GMHI’s transactions.
Analyst Gus Richard, covering this stock for Northland Securities, is impressed by the potential of the Luminar agreement. The possibilities induced him to initiate coverage of the stock.
“LARZ has developed an inexpensive lidar system design for the automotive market. LARZ has contracts with Volvo and one other top tier auto OEM. We believe the technology risk has been eliminated and contracts with Volvo and another top tier automaker provide customer validation,” Richard commented.
Richard, who has 5 stars from TipRanks and rated #83 of more than 7,000 professional stock analysts, notes that Gores Metropoulos is a winner here. He rates the stock as Outperform (i.e. Buy), and his $16 price target implies a strong 51% upside from the current share price of $10.57. (To watch Richard’s track record, click here)
AutoZone, Inc. (AZO)
The last stock on our list is another company that benefits when economic and social conditions start promoting Do-it-Yourself projects. Autozone is a leading retailer of aftermarket car parts and accessories, offering customers everything necessary for home-based vehicle maintenance and repairs.
Autozone saw top-line revenues of $2.5 billion in Q1, and has seen the top line grow sequentially through the next quarters. In Q2, revenues came in at $2.8 billion, and in the third quarter, the company’s fiscal fourth, revenues grew to $4.5 billion. Included in that result is a 21.8% growth in same-store sales year-over-year. The company credits the strong growth to customer behavior, and shift during the pandemic crisis toward DIY projects.
Like Amazon, Autozone does not pay a dividend and rewards investors through share appreciation. The company’s stock price is high, at $1,193, and has fully recovered from the mid-winter market crash, trading now within $2 of its December 31 closing price. Over the past three years, AZO shares have gained 96% in value.
Raymond James analyst Matthew McClintock is impressed by Autozone, and upgraded his stance from Outperform to Strong Buy. McClintock’s upgrade comes with a $1,565 price target that implies room for 31% growth over the coming 12 months. (To watch McClintock’s track record, click here)
"AZO is the proven, best-in-breed, consistent, long-term retail story that investors only get few chances over an entire career to acquire at a discount. AZO is now our top pick… We believe a premium relative to historical averages is warranted given that AZO's improving parts availability/e-commerce fulfillment capabilities position it exceptionally well to thrive — yielding outsized market share gains,” McClintock wrote.
All in all, Autozone holds a Strong Buy rating from the analyst consensus, with 12 recent reviews breaking down to 10 Buys and 2 Holds. Meanwhile, the average price target of $1,409 suggests a one-year upside of 18%. (See AZO 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.