A combination of factors – including the recent election, a growing ‘new wave’ of coronavirus cases, and the prospect of COVID vaccines on the market before year’s end – are buffeting the markets in recent weeks. The major impact, for now, appears to be the vaccine news. Pharma giants Pfizer and Moderna have both announced successful trials, with Pfizer’s vaccine showing 90% effectiveness and Moderna’s 94%.
The vaccine announcements are important, for public health but also for the economy. Numerous states are preparing new lockdown regimes which are certain to stifle economic activity – but a vaccine release will give state governors and legislators support in reopening. Even the announcement that such vaccines are showing success in late-stage trials was enough to boost stocks; the actual release for public distribution is sure to have a greater effect.
Wall Street’s analysts have been busy in recent weeks and days, scanning the market for stocks that are likely gainers in the weeks ahead. They are tagging plenty of choices, but some stocks stand out. These are the ones with Strong Buy consensus rating and a ‘Perfect 10’ from the TipRanks Smart Score.
The consensus rating is just what it sounds like – an overall view of what the Street’s analysts think of the stock. The Smart Score is unique tool available to sort through the TipRanks data. Using an array of 8 separate factors, each of which is known to correlate with future overperformance, the Smart Score gives investments a single-digit rating, letting investors know at a glance where the stock is likely going – according to quantifiable data.
Here, we look at three stocks with both a Strong Buy and a Perfect 10. Let’s find out what lies behind those ratings.
There’s a strong chance that you’re using one of Logitech’s products right now. This company, based in Switzerland, is major name in the peripheral market for home computers, producing keyboards, mouse devices, microphones, webcams, headsets – a whole range of external hardware tools that allow us to interact with our computers, and with each other via our computers. It’s a solid niche, and Logitech has filled it well.
As the ‘corona half’ got started, Logitech saw revenues and earnings slip – but quickly turned around as the move to virtual offices and remote work put a premium on the company’s product line. With more and more white-collar workers moving online, peripherals grew in importance. Logitech’s Q1 revenue was $709 million; for Q3, that number had grown to $1.26 billion. Earnings, just 35 cents per share in Q1 and 52 cents in Q2, expanded to $1.75 in Q3. And the stock took off starting in mid-March, with shares gaining 142% since hitting their bottom for the year on March 16.
J.P. Morgan analyst Paul Chung doesn’t beat around the bush on this one – he’s bullish on LOGI, and he’s blunt about it.
“We think the stock should trade at a premium to historicals and peers given strong fundamentals, diversified product lineup, excellent balance sheet, CF generation, and nice balance of reinvestments in the business, dividends, and M&A. With the structural step up in margins and scale benefits, and large cash balance approaching $1B, management has plenty of cushion to invest for growth, and we expect the stock to outperform the mean of our coverage over the next 12-18 months,” Chung noted.
In line with this optimistic appraisal, Chung rates the stock an Overweight (i.e. Buy), along with a $100 price target. That target indicates a 23% upside potential for the next 12 months. (To watch Chung’s track record, click here)
Overall, Logitech’s Strong Buy consensus rating is based on 12 reviews, including 9 Buys and 3 Holds. The average price target is $99.85, in line with Chung’s and also implying a 23% upside from the current trading price of $81.06. (See LOGI stock analysis on TipRanks)
GDS Holdings, Ltd. (GDS)
Next up is GDS Holdings, a data center holding firm from China. The Asian country is rapidly becoming a world high tech hub, and GDS operates high performance, cloud-neutral, data centers. Neutrality is a vital feature, as it allows GDS’ customers to access telecom networks in the PRC and around the globe. The company’s customer base is primarily composed of cloud service providers, financial institutions, information tech providers, internet companies, and telecom carriers in the Chinese market.
The value of the Chinese market is clear form GDS’ rising share value and revenues. At the top line, GDS’ revenues have grown steadily this year, with the third quarter showing a 43% year-over-year increase. The gain was driven by a similar increase in the total leased area of data centers, to more than 357K square meters of floor space. The company has another 135K square meters under construction. Subsequently, the stock has shown appreciation this year, growing 72%.
Covering the stock for Raymond James, analyst Frank Louthan notes, “GDS continues to show strength in its market and remains our best long-term idea in the space. With the highest organic growth in the sector over the next 2 years, we expect it to continue to command a premium valuation.”
Louthan rates GDS a Strong Buy along with a $110 price target. This figure suggests room for ~24% growth on the one-year horizon. (To watch Louthan’s track record, click here)
With 6 recent Buy reviews, the Strong Buy analyst consensus on GDS is unanimous. The stock is selling for $88.92 and has an average price target of $107.80. (See GDS stock analysis on TipRanks)
Americold Realty (COLD)
Last but not least is a real estate investment trust, a REIT, and a unique one at that. Americold specializes in acquiring, owning, and operating cold-storage warehouses. These make up a vital link in distribution chains for perishable products, especially food, and Americold has over 1 billion cubic feet of refrigerated storage space in its portfolio, in the US and Canada, Australia and New Zealand, and in Argentina.
COVID or no COVID, people have to eat, and food distributors have to move and store their products. For Americold, this has meant stable revenues through a year otherwise noted for high volatility. The company’s top line has held between $482 million and $497 million through the past four quarters, with the high and low values both coming during 1H20 – and that high value was recorded in the recent Q3 report.
As a REIT, Americold is required to return profits to shareholders, and like most of its peers, it uses the dividend to do that. The company raised its dividend in March of this year, at the height of the coronavirus crisis, and has held to the higher payment since. At 84 cents per common share annualized, the dividend yields 2.3%.
Analyst Michael Carroll, from RBC Capital, has only warm words for Americold.
“We are particularly encouraged by the new investments that expand COLD's footprint, build scale in key markets, and grow existing / add new customer relationships. We believe these strategic deals better position the company to execute on its operational strategy and deliver ~10% earnings growth for the foreseeable future,” Carroll noted.
To this end, Carroll rates Americold shares an Outperform (i.e. Overweight) along with a $43 price target. Investors could be pocketing a gain of 22%, should this target be met in the months ahead. (To watch Carroll’s track record, click here)
All in all, Americold gets a unanimous thumbs up from the analyst consensus, with 3 recent Buy reviews adding up to a Strong Buy rating. The stock is priced at $35.20, while the average price target of $42.67 is in line with Carroll's. (See COLD 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.