In stock investing, the game is all about returns. At the end of the day, every investor wants to see the portfolio choices pay off, and bring a return on the investment. A wise investor looks to balance risk against the return.
In today’s environment, with markets generally up – the S&P 500 has gained 12% so far this year – the main risk for now takes the form of ‘local’ losses; that is, short term slips in a rising stock environment. To cover that risk, investors need to remember the other truth about the stock market: it’s a long-term play. Don’t expect to realize huge gains quickly, stay in for the long haul, and look for stocks that offer high return potential. That’s the key to investing success.
Using the TipRanks platform, we’ve located three stocks that offer investors a 40% or better upside for the year ahead, along with a Strong Buy consensus rating. They come from a range of stock sectors, have shown individual quirks in their recent share performance – and some of Wall Street’s top analysts have given them the thumbs up. Let’s find out why.
Tenable Holdings, Inc. (TENB)
We’ll start in the tech sector, where Tenable is a holding firm that bills itself as ‘the cyber exposure company.’ Tenable’s flagship product, Nessus, is a vulnerability scanner that allows users to find and close vulnerabilities in their networked systems. Along with its other products, Tenable’s line of exposure protection software gives customers a threefold advantage: to see, predict, and act. The product line is popular, and Tenable boasts over 30,000 organizations in its customer base, including more than half of the Fortune 500 companies.
Along with a large customer base and a product line that is growing indispensable in the digital world, Tenable has featured steady financial growth. The company has registered quarter-over-quarter revenue gains for the past nine quarters, and shows no sign of stopping. In the most recent reported, 1Q21, Tenable reported $123.2 million at the top line, up 4% sequentially – but 20% year-over-year.
In other key metrics, Tenable reported $38.6 million in cash from operations, of which $37.6 million was free cash flow – an impressive 97% of the company’s cash flow. FCF was up a whopping 864% year-over-year. Tenable also reported more than 330 new enterprise platform customers in the quarter, 29 new customers with net contracts in the six-figure range.
Tenable has attracted attention from Daniel Ives, Wedbush’s tech expert rated in the top 1% of Wall Street’s analysts by TipRanks. Ives writes of Tenable, “TENB came out of the gates swinging in the March quarter as the company posted impressive revenue/billings upside along with stronger than expected guidance... We continue to view Tenable as one of our favorite cyber security names as the company's expanded product portfolio, cloud strategic focus, high caliber management team, and risk/reward is very compelling at current levels.”
Ives gives TENB shares an Outperform (i.e., a Buy) rating, along with a $62 price target that implies a one-year upside of 68%. (To watch Ives’ track record, click here.)
From the Strong Buy consensus rating, it’s clear that Wall Street generally agrees with Ives. The stock’s 6 recent reviews break down 5 to 1 in favor of Buy versus Hold. Shares are priced at $36.88 and the $57.50 average price target suggests an upside of 56% in the next 12 months. (See Tenable’s stock analysis at TipRanks.)
Trulieve Cannabis (TCNNF)
Let’s shift gears, and look at the cannabis industry. Cannabis has, in the last decade, gone from being an illegal controlled substance to a big business, as major countries like Canada and Germany (for medical use only) have legalized the drug, along with more than 30 US states that have full or partial legalization. As the drug has grown more accepted – and its medical use has become more mainstream – a whole network of cannabis providers has grown up to meet the demand.
Trulieve is one of the big players in the US medical cannabis sector. Since the drug is still illegal at the US Federal level, medical cannabis companies in the States must operate on a state-by-state basis. Trulieve has taken a leading position in the Florida market for medical cannabis, where the company boasts a 51% market share in the nation’s third largest state – and the second largest state with legal medical use. Trulieve also operates in California, Massachusetts, Connecticut, and Pennsylvania, boasts over 550 individual items in its product line, and offers a vertically integrated ‘seed-to-sale’ business model.
While the medical cannabis business in the US has to adapt to a wide range of legality regimes, preventing operations on a truly national scale, Trulieve has met the challenge and seen three years in a row of profitability. In the company’s most recent financial release, for 4Q20, the top line came in at $168.4 million, up 24% year-over-year to reach a company record. For the full year, revenues were $521.5 million, up 106% yoy. The company saw full-year net income of $63 million, up 19% from 2019, and $99.6 million in cash from operations.
Matt McGinley, 5-star analyst from Needham, likes Trulieve’s prospects going forward. He writes, “We expect FL to be 80%+ of Trulieve's revenue in '21, but new states should comprise 33% of growth. We think Trulieve's balance sheet is in a strong position to accelerate the pace of M&A, and to concurrently sustain higher levels of capex…. We believe that the stock will rate higher on EBITDA growth, and believe the multiple is low for a company with such strong operating fundamentals.”
The analyst’s comments back up his Buy rating on the stock, and his $60.75 average price target indicates confidence in 46% share growth for the year ahead. (To watch McGinley’s track record, click here.)
With 9 Buy recommendations on record, the Strong Buy consensus rating on TCNNF shares is unanimous. The stock is trading for $41.37 and has an average price target of $69.61, suggesting an upside of 68% in 2021. (See Trulieve’s stock analysis at TipRanks.)
Snap, Inc. (SNAP)
Last up, Snap, is best known as the parent company of the popular Snapchat app. Along with Snapchat, Snap also owns Bitmoji and markets the Spectacles smartglasses. The common theme is the combination of social media and camera apps, letting users play with photo filters, create temporary stories, and record videos. Snap bills itself as a camera company, that uses social tech to reinvent personal photography.
Snap reported its 1Q21 earnings last month, and saw revenue rise 66% year-over-year, coming in at $770 million for the quarter. Free cash flow hit $126 million, up $131 million from the year-ago quarter. This was the company’s first positive free cash flow print since going public in 2017.
The solid financial display is underpinned by strong user growth. The DAU – daily active user – number grew 22% yoy, to a total of 280 million. The company divides its operations into North America, Europe, and Rest of World – and DAU was up in all three, both sequentially and year-over-year. This was the first quarter in which Snap’s Android users made up a majority of the DAUs.
SNAP shares are covered for Wells Fargo by analyst Brian Fitzgerald, who is rated #9 overall by TipRanks. Fitzgerald sees the stock with plenty of potential going forward, saying of it: “[We] remain bullish given strong usage/engagement trends and ample monetization runway across an array of dimensions (increasing ad relevance, new formats, increasing AR adoption, increasing share of e-commerce and gaming activity on platform, and narrowing the domestic/int'l monetization gap)…. we view shares as attractively valued at current levels given SNAP's large and highly engaged audience, improved audience growth, rapid revenue growth and improving profitability profile.”
Along with these comments, Fitzgerald gives SNAP an Overweight (i.e., Buy) rating, and a $91 price target to indicate room for 68% upside in the next 12 months. (To watch Fitzgerald’s track record, click here.)
In recent weeks, Snap has picked up 36 analyst reviews. These include 29 to Buy, overbalancing the 6 Holds and 1 Sell, and giving the stock a Strong Buy consensus rating. SNAP sells for $55.78, and at $80.13 its average price target suggests a one-year upside of 43%. (See Snap’s stock analysis at 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.