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3 “Strong Buy” Stocks for the Santa Claus Rally

Santa’s powering up his sleigh, and he has it full of some serious stock market stocking stuffers! Because what better gift can there be than a gift that keeps on giving strong returns? Here at TipRanks, where we track and measure the performance of Wall Street’s analysts, we’ve dug into the database to find three “Strong Buy” stocks that will add some cheer to your holiday investing.

We’ve chosen three stocks with a low cost of entry, because a holiday gift shouldn’t break the bank, and put them into the Stock Comparison tool. A quick look at the results will show what drew them to our attention, and then we can dive into the details.

You can see that the stocks are all Strong Buys, but more importantly, they show some hefty upside, and each has a high 12-month gain to back up that potential. Statistically, the trading week after the Christmas holiday sees a “Santa Claus” rally. The key points of these three stocks show why the analysts believe they are likely to participate.

Now let’s take that closer look.

Callaway Golf Company (ELY)

Callaway is a sporting goods company, specializing in golf equipment. The company doesn’t just market and sell its products; it also designs and manufactures golf equipment, accessories, and other products. Callaway operates around the world, in more than 70 countries, and is the world’s largest golf club manufacturer.

As any golfer knows, the game is big business. Callaway proves that, with $1.2 billion in total sales in 2018. In the current year, ELY’s Q3 results beat the estimates on both the top and bottom lines. Revenues came in at $426 million, 1.3% over the forecast, while EPS beat by a wider margin. The bottom line, at 36 cents per share, was 57% higher than the 23-cent estimate. The strong sales performance has pushed the stock up 38% this year, well above the S&P’s 29% gain.

Stephens analyst Daniel Imbro reviewed ELY earlier this month, and highlighted that the company’s new Mavrik metalwood line of clubs was approved by the USGA. He wrote, “Pricing and availability are undisclosed … we expect additional details as we get closer to the PGA Show… Given Callaway's recent success leading innovation in the metalwoods category, we expect this to be a focal point heading into 2020.” Imbro puts a Buy rating on ELY shares with a $25 price target. His target implies an upside of 19% to the stock. (To watch Imbro’s track record, click here)

Callaway’s Strong Buy consensus rating is unanimous. A total of 6 market analysts have put a positive spin on this stock recently. Shares are selling for $21.05, and the average price target of $25.58 suggest a 22% upside potential for the stock. (See Callaway stock analysis at TipRanks)

See also: Cowen’s 3 Stock Choices for 2020

Funko, Inc. (FNKO)

Some people play golf for a hobby, and others get into collectibles. Funko caters to that second group. The company manufactures and distributes licensed pop culture products – bobble heads and vinyl figurines are its best-known products, but it also makes action figures, headphones, lamps, branded USB keys, and plushies. Basically, Funko cashes in on nostalgia – to the tune of $686 million in sales for fiscal year 2018.

Funko’s cool spot in the toy and collectible market has netted it a cool profit on the financial end. The Q3 earnings, the company’s most recent, showed a definite beat on EPS, based on strong revenues. At the top line, total sales of $223.3 million were above the estimated $220.4 million – and the bottom-line earnings did even better. EPS came in at 38 cents, well above the forecasted 32 cents.

Guidance, however, just missed the estimates. The company estimated between $840 million to $850 million for Q4, but Wall Street was expecting $848.5 million. It wasn’t a big miss, and the company’s number is still robust, but shares slid 16% after the news.

Even with that share price slip, the stock is still up 23% this year. And – Piper Jaffray analyst Erinn Murphy sees the lower share price as a buying opportunity. In her November comments on the stock, written after meeting with management, Murphy wrote, “Funko remains one of the most disruptive consumer products companies. We are encouraged to see several initiatives to diversify the revenue streams…” Murphy’s $24 price target indicates a strong 49% upside, more than enough to justify a Buy rating. (To watch Murphy’s track record, click here)

Murphy is just the most recent analyst to give FNKO a thumbs up. The stock has received 4 Buy ratings in recent weeks, along with 1 Hold, giving it a Strong Buy from the analyst consensus. At $26.20, the average price target suggests a 62% upside premium from the $16.13 share price. (See Funko stock analysis at TipRanks)

CarGurus, Inc. (CARG)

Every guy loves his car. And CarGurus exists to pair up people with the right vehicles. For 13 years, CarGurus has been a leading online research and shopping site for the automotive market, connecting buyers and sellers of new and used cars.

A strong economy and rising wages have helped the company’s overall position, and in Q3, CARG reported a 26% year-over-year revenue gain. The top-line number was a robust $150.5 million. This supported a strong EPS of 14 cents per share, a solid 40% above the estimates. It was the fourth quarter in a row that CARG had beaten the EPS and revenue forecasts.

Growth like that is sure to spark interest from top analysts, and in CARG’s case, it has. Mark Mahaney, 5-star analyst with RBC Capital, reviewed the stock after the earnings report and reiterated his Buy rating on the shares.

Mahaney took a long view on CARG, and said in a detailed report, “We still see CARG as the leading marketplace in the U.S. Online Used Car segment, attacking a market that is approximately $14B. The evidence is strong that CARG has an attractive business model… we believe the company has enough GCIs (Growth Curve Initiatives) … so that Revenue Growth can sometime in the next 9-15 months stabilize and then potentially accelerate.” While he did reduce the price target, at $50, shares could still surge 37% in the next twelve months. (To watch Mahaney’s track record, click here)

CARG has gotten love from 3 analysts recently, giving the stock a unanimous 3-vote Strong Buy consensus rating. Shares sell for $36.63, and the $52.33 average price target puts the upside potential at 43%. (See CarGurus stock analysis at TipRanks)

Check out these 5 ‘Strong Buy’ stocks that top Wall Street analysts recommend.