According to CNBC, one strategy is to search for stocks that tend to be undervalued on Wall Street and have a lot of room to develop. The names below meet the criteria and have the backing of analysts with a proven track record of performance.
The TipRanks analyst forecasting service aims to recognize Wall Street’s best-performing analysts. Taking into account the number of ratings each analyst has released, these are the analysts with the highest performance rate and average return per rating.
Wells Fargo analyst Zachary Fadem was taken aback when Carvana shares fell in after-hours trading following its earnings report, saying, “we are scratching our heads.” The online used car retailer, whose stock has dropped 24% in the last three months, posted higher retail unit growth than anticipated and beat his GPU estimate by 6%. It also recorded a 50% smaller EBITDA loss than had been predicted.
As a result, Fadem reiterated his Buy recommendation. In addition, he maintained his $340 price goal, implying a 50% upside opportunity.
“CVNA continues to fire on all cylinders as average weekly units stepped up by +1,600/week (vs. +600-700 in Q3/Q4) suggesting throughput bottlenecks are alleviating, demand remains elevated and underlying business productivity is also tracking better-than-expected.” said Fadem.
The organization is on track to increase sales and unit growth in the future. Furthermore, CVNA expects sales growth to outpace retail unit growth in Q2.
So, what’s the story behind the recent reversal? An increasing rate setting, a shift to value from development, and a higher valuation are all factors listed by Fadem.
Despite this, the analyst remains upbeat. “Yet in our view, we would be hard-pressed to find a company of this size growing triple digits; and we see an attractive entry point for a long-term leader in a high growth, attractive category with considerable upward revisions on tap,” he said.
Fadem, who ranks in the top 30 on TipRanks’ list of best-performing analysts, has a 78 percent performance rate and a 31.2 percent average return per ranking.
GoDaddy posted a beat-and-raise quarter, thanks to good product execution across domains, commerce, and web-pros initiatives, with former CFO Ray Winborne “passing the baton” to new CFO Mark McCaffrey.
Furthermore, according to Deutsche Bank analyst Lloyd Walmsley, the fact that the customer cohort from the first quarter of 2021 appeared to be comparable in size to the Q2 and Q3 2020 cohorts indicates that most of his main concerns were answered. To that end, the analyst maintained a Buy rating and a price target of $89 for the stock (11 percent upside potential).
“One of our primary concerns exiting Q4 2020 results for the web presence space was whether new subscriber cohorts would shrink. This does not sound like it’s the case on either subscribers or the dollar size of the cohort. CFO Ray Winborne flagged that while they are seeing difference in demand around the world, there is a robust new business formation backdrop in the US,” Walmsley said.
Additionally, domain sales increased 19 percent year over year, and GoDaddy “positioned these results as a function of innovation, particularly within the aftermarket space which now represents a double-digit share of the business vs historically single-digit,” according to Walmsley.
“We believe there is room for further innovation in the segment through out the year as they look to experiment more here. As such, we believe the ‘double-digit’ full year guidance for the segment may prove conservative as it implies Q4 2021 would go negative assuming that they are able to effectively hold the 2-year stack in Q2 and Q3. We believe after market domains sales are booked as gross revenue and thus lower margin and somewhat less predictable.”
There is also a new $770 million repurchase authorization, but Walmsley does not believe the recent repurchasing activity signals a change in GDDY’s flexibly capital allocation strategy.
Walmsley is ranked #112 out of over 7,000 analysts tracked by TipRanks, with a 66 percent performance rate and a 29.3 percent average return per ranking.
Select Medical Holdings
Select Medical Holdings, according to RBC Capital analyst Frank Morgan, is a standout in the healthcare facilities and services space. In light of this, the analyst kept his Buy rating and raised the price target from $42 to $45. This means that the upside potential is 26%.
Morgan wrote, “SEM’s diversified post-acute platform appears very well positioned to continue driving solid growth over the next few years.”
The analyst singles out the company’s inpatient operations as a key point of power. According to its CIRHs, occupancy, volume, and rate growth have all remained high, resulting in a 19 percent increase in top-line revenue.
“The company continues to benefit from its demonstrated high-acuity patient care capabilities, leading to increased business with new and existing referral sources. While higher agency hourly staffing rates continue to pressure the SWB line, the segment drove solid margin improvement on the top-line performance, and SEM has not needed to institute bed-holds,” Morgan told investors.
Furthermore, according to management, hourly rates tend to be declining, and its IRF segment has delivered a strong result, with top-line growth of 14% and margin expansion of 310 basis points.
Despite some questions about how the Covid-19 pandemic’s fading would affect this part of the market, management does not anticipate a slowdown. According to Medicare reports, approximately 325,000 to 350,000 patients are eligible for the services provided by SEM’s facilities. However, the industry as a whole only produces 69,000 discharges per year, implying that the penetration of the overall addressable market is only 20%.
“Additionally, SEM has proven its ability to provide care for some of the most complex patients, so management expects acuity (and pricing) to remain high,” Morgan added.
In March and April, SEM’s outpatient section saw a major improvement. As a result, Morgan believes SEM’s modified EBITDA guidance range “the strong start to the year with continued momentum in CIRHs and IRFs, and the improving trends in Concentra and Outpatient Rehab,” Morgan thinks SEM’s adjusted EBITDA guidance range “could still prove conservative.”
Morgan is ranked #73 on TipRanks’ list, with a 70% success rate and a 23.3 percent average return per rating.
Following a strong first quarter for the online sports betting company, Northland Capital analyst Greg Gibas reiterated a Buy rating. Furthermore, the five-star analyst maintained his $70 price goal, meaning that shares could rise by 66 percent from current levels.
DraftKings made $312.3 million in sales in the first quarter of 2021, up 175 percent year over year and above the $237 million consensus forecast. In addition, sales in the B2C segment increased by 217 percent year over year to $280.8 million.
The impressive business-to-consumer performance was fueled by a 114 percent rise in monthly unique payers (MUPs) to 1,542 as a result of “strong unique payer retention and acquisition across the DFS, OSB, and iGaming segments,” according to management.
“Average Revenue per Monthly Unique Payer (ARPMUP) increased to $61 from $41 a year ago, which was positively impacted by increased user engagement with iGaming and mobile sports betting product offerings, in addition to successful cross-selling efforts,” Gibas continued.
Following the company’s strong start to the year, management increased sales expectations for 2021 from $900 million to $1 billion to $1.05 billion to $1.15 billion. This represents a 63 percent to 79 percent increase over 2020.
DKNG introduced mobile sports betting and iGaming in Michigan, as well as mobile sports betting in Virginia, during the most recent quarter. “25 state legislatures have introduced legislation to legalize mobile sports betting, five have introduced legislation to expand existing sports wagering frameworks and one introduced legislation to legalize retail sports betting.” according to Gibas.
Gibas said, “We expect this legislative momentum to continue for the remainder of 2021 and beyond,”
Gibas has a 49.4 percent average return per rating and a 59 percent performance rate, according to TipRanks reports.
Colin Rusch of Oppenheimer recently gave TuSimple, a company that develops autonomous technology for semi-trucks, a thumbs up. The top analyst initiated coverage of the stock with a Buy rating and a $55 price target less than a month after its initial public offering on April 15. (52 percent upside potential).
“While still a development stage company, we view TuSimple (TSP) as the global leader in autonomous trucking leveraging integrated hardware, motion planning and control algorithms, and infrastructure to address key pain points within the transportation and logistics (T&L) sector,” Rusch said.
According to Rusch, this vertical integration “is unique and essential to the success of the platform.” TuSimple has already completed over 3.7 million miles of on-road testing and has 6,775 reservations.
Furthermore, the organization is trying to fix labor challenges, as Rusch points out that driver shortages have created a major challenge for the industry, leading to wage inflation that is outpacing all other dollar-per-mile costs.
“We expect TuSimple’s subscription rate to represent a 10% to 15% discount relative to the dollar per mile rate charged by traditional freight carriers while alleviating one of the industry’s core bottlenecks,” the analyst said.
It’s worth noting that, in Rusch’s view, “route density is a key driver of value/mile” in the freight economy.
“Given the integration of terminals and route characterization underpinning TuSimple’s business, we believe a focus on high volume corridors is crucial to both adoption rates and earnings leverage in its multi-pronged business model,” the analyst added.
It will also be necessary to keep an eye on developments surrounding the rollout of its L4 trucks, according to Rusch.
Rusch is one of the top five analysts on Wall Street, with a 60.5 percent average return per ranking and a 61% performance rate.