The S&P 500 is showing a sustained rally, and has powered past the 2,750 to 2,850 range analysts had just three weeks ago predicted as resistance levels. That the economy is still in the midst of a serious recession, no one doubts – but the stock market’s performance is giving investors some reason for hope.
Finding the right stock plays in the current environment is a challenge for every investor. The crisis sparked by the coronavirus and the unprecedented economic shutdown policies has defied all the rules, making it difficult to predict where a given stock may head. Fortunately, TipRanks has developed the tool you need to interpret the market.
The Smart Score uses the accumulated information in the TipRanks database to develop a single rating for every stock. Based on 8 factors – ranging from analyst views to news sentiment to traditional fundamentals – the Smart Score lets you know at a glance how a stock is likely to perform. Today we’ll peer under the hood at three stocks with the coveted ‘perfect 10’ Smart Score – and upside potentials starting at 30%.
Vistra Energy (VST)
First up is Vistra Energy, a power company in the US. Like most utilities, Texas-based Vistra operates across the electricity utility industry: from power generation, to distribution, to transmission. As an electric utility provider, Vistra found itself with a natural advantage during the past several months, as its services are essential and its product is necessary for, well, most everything.
That Vistra is confident, even in these times, can be seen from the company’s dividend. VST paid out 13.5 cents per share in Q1, and announced another 13.5 cent payment for Q2, representing an increase from 2019’s quarterly payments. At 54 cents per share annualized, VST’s dividend yields 2.62%.
In Vistra’s Smart Score calculation, 6 of the 8 factors were strongly positive. Of particular note are the news sentiment, which is 100% bullish over the past week; the blogger sentiment, which at 100% bullish is much better than the utility sector average of 66%; and the insider sentiment, which is strongly positive as corporate officers have bought up over $2 million worth of the shares in the past two months.
Shahriar Pourreza, 5-star analyst with Guggenheim, is plainly optimistic about this stock. He writes, “We remain of the view that while VST’s high FCF yield valuation is frustrating, the model is poised to perform in a COVID-wracked 2020 and beyond – this is the year to prove-out the stability of the integrated business model. We continue to be strong supporters of shares…”
Pourreza rates VST shares a Buy and gives the stock a $34 price target, indicating strong confidence and a one-year upside of 64%. (To watch Pourreza’s track record, click here)
With 5 analyst review, breaking down to 4 Buy and 1 Hold, VST gets a Strong Buy from the analyst consensus. The share is priced at $20.63, while the average price target of $30.50 suggests it has room for a robust 47% upside potential. (See Vistra stock analysis on TipRanks)
PDC Energy (PDCE)
Next up we have an oil company, PDC Energy. This company both produces and distributes crude oil, natural gas, and natural gas liquids in the lower 48 states. The main production operations are located in Colorado and Texas. Oil production has been growing in recent years; in 2018, PDC averaged 110,000 barrels of oil equivalent per day, and that number is forecast to reach 170,000 to 180,000 per day for 2020.
Company earnings had been running near the break-even level through 2019, and took a sharp dive in Q1 2020 – the corona quarter. EPS came in for Q1 at a $8.07 net loss per share. Q2, however, is projected to show a loss of only 27 cents per share – much more in line with recent quarterly results than the Q1 numbers.
Turning to the Smart Score, we find that PDCE’s perfect 10 is mainly based on the hedge activity, insider sentiment, and blogger opinions. Hedge activity and insider trades both increased recently, showing institutional confidence in the stock. Hedge activity is up over 953,000 shares, while insider purchases have totaled almost $75,000 in the past three months. The bloggers are 100% bullish on this stock, well above the sector average of 65%.
One of PDC Energy's biggest supporters on Wall Street is Wells Fargo's Thomas Hughes. With a price target of $20 a share, the analyst sees 43% upside potential to back his Buy rating. (To watch Hughes’ track record, click here)
In his comments on the stock, Hughes wrote, “We think PDCE’s strong balance sheet (<2.5x levered by YE21) will one day be rewarded by the market. While the borrowing base was reduced ~19% with the spring redetermination, elected commitments are unchanged…”
Overall, the Strong Buy analyst consensus rating here is based on 7 Buys and 1 Hold set in recent months. Shares are selling for $14.05, and the average price target of $20.88 suggests a healthy 48% premium. (See PDC Energy stock analysis on TipRanks)
SkyWest, Inc. (SKYW)
Last up we have a regional airline. SkyWest operates connector airlines for Alaskan, American, Delta, and United, is the largest regional carrier in the US market. You may think that the airlines have been hurt badly by the coronavirus, most especially by the general economic shutdown and the further restrictions on trade and travel, and you would be right. SKYW shares are down over 40% year-to-date, while the S&P 500 is only down 3.5% in that period.
Between a solid balance sheet and Federal aid, SkyWest is actually in reasonably good shape, especially compared to its airline peers. The company reported $578 million in cash on hand at the end of Q1, along with a $438 million assistance package under the CARES Act, passed by Congress to help companies ride out the corona recession. Of the CARES money, only $101 million is a loan; the remainder was a direct grant. SkyWest’s liquidity is secure, at least for now.
In the Smart Score, SkyWest shows near-unanimity in the positive indicators. Only the technical analysis, which follows long-term chart movements and momentum, is in the red, that is easily understood as an artifact of the market slump. Other indicators – analyst consensus, blogger opinions, hedge and insider activity, and individual investor sentiment – are strongly positive.
Covering this stock for Deutsche Bank, 5-star analyst Michael Linenberg writes, “After incorporating all of the cash flow "puts and takes" we are estimating for 2020, we are projecting SkyWest's year-end cash balance north of $600 million. As the company focuses on enhancing its liquidity and reducing its cash burn, we think SkyWest is well-positioned to be the regional aircraft solutions provider for its major airline partners. And the timing couldn't be more propitious for SkyWest to take on that role in light of the volatile backdrop."
To this end, Linenberg reiterates a Buy rating on SkyWest shares along with a $47 price target, which implies nearly 27% upside from current levels. (To watch Linenberg's track record, click here)
The overall rating on SKYW shares is a Strong Buy, with that analyst consensus rating based on 6 reviews. These include 5 Buys and just a single Hold. The average price target stands at $44.25, and implies an 18% upside potential for the year ahead. (See SkyWest stock analysis on TipRanks)
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