The tide is turning for these four stocks, according to the Street’s latest activity. These four stocks have received multiple analyst upgrades recently. Given that analysts usually reiterate recommendations, upgrades are a clear sign of increasing confidence in a company’s outlook. And when more than one analyst makes such a bold move, it’s time to pay attention. With this in mind, let’s take a closer look at four stocks showing particularly bullish signals from the Street right now:
Lyft Inc (LYFT)- the light is changing from yellow to green
Analysts are beginning to change their tune on ride-sharing stock Lyft. Despite the company’s 'awkward' IPO, bitter rivalry with market-leader Uber Technologies Inc (UBER), and current loss-making status- there is still much to celebrate about Lyft says the Street.
“We are upgrading LYFT shares to Outperform from Neutral after Lyft exhibited in 2Q19 many of the indicators we had been looking for to get more positive on the story” cheered Wedbush analyst Daniel Ives (a 5-star analyst according to TipRanks) on August 7.
He made the call after Lyft reported better than expected active riders, revenue per active rider, ridership, and profitability in its latest earnings report. This “was a major step in the right direction in our opinion towards gaining much needed Street credibility” commented Ives post-report.
“Where we once viewed the domestic only nature of Lyft as a detractor, we are beginning to view it as more of a near-term benefit given the execution we are seeing from Lyft in the field around key metrics, as the competitive dynamics domestically are much stronger than they are internationally” the analyst told investors.
In particular, Ives noted better operating leverage and a clearer path to profitability. “2018 turns into the peak loss year as Lyft sees y/y improvement in EBITDA losses, a year earlier than expected” he noted. As a result this top analyst bumped up his Lyft price target to $75 from $67 on higher estimates/ multiples.
Indeed, on the earnings call, Lyft CFO Brian Roberts suggested that higher prices "will accelerate Lyft’s path to profitability, and further, we believe these price adjustments reflect an industry trend.”
Overall Lyft shows a Moderate Buy analyst consensus. That’s with another recent upgrade from Atlantic Equities analyst James Cordwell (a 4-star analyst). He boosted Lyft to Hold from Sell, while raising his price target $8 to $60 post-earnings.
FMC Corp (FMC)- putting patent expiry fears to rest
If you haven’t heard of this niche stock before, welcome to an intriguing investing opportunity. FMC offers specialty Crop Protection Chemical exposure (~90% of sales, primarily herbicides and insecticides). Although the company currently licenses technology from larger developers, it is now hoping to develop its own Active Ingredients (AI’s) after snapping up DD Crop Protection’s assets.
“Given that FMC has key process and formulation patents that protect Rnaxypyr and Cyazypyr through 2025+, along with its well-built infrastructure and option on selling AIs to competitive third parties, our initial fears of competitive generic products are well put to rest” celebrated top RBC Capital analyst Arun Viswanathan (a 5-star analyst) on August 9.
“We upgrade FMC to Outperform from Sector Perform, as we had mistakenly thought the patent “cliff” in 2022 would result in a quicker deterioration of sales and EBITDA based on prior patent expiration in health care” the analyst told investors. Instead, FMC noted 16 key process patents that extend the protection date well past 2022. And from 2025, data protection in Europe and government registration timeline in US should extend the timeline even further says Viswanathan.
At the same time, as FMC pointed out on its recent earnings call, manufacturing complexity is a high barrier to entry. FMC benefits from cost, scale advantages, and superior execution experience. The analyst also praised FMC for slashing Brazil exposure (already high channel inventories) and focusing on soybeans to benefit from an estimated ~400% soybean demand growth over next the decade.
Meanwhile Goldman Sachs analyst Adam Samuelson (a 1-star analyst) upgraded FMC Corporation to Buy while bumping up his price target to $100 from $88. He termed FMC a "unique crop protection pure-play" with robust growth prospects and a "healthy" pipeline of crop protection active ingredients. Samuelson is now predicting that the company will record more than twice the annual revenue growth through 2023 vs other crop chemical stocks. FMC holds a 'Strong Buy' Street consensus.
Stitch Fix Inc (SFIX)- the fix is in
Online personal styling pioneer Stitch Fix has received two back-to-back upgrades recently. Both Goldman Sachs and Stifel Nicolaus gave the stock the thumbs up- with prices looking more attractive now SFIX is trading down 20% on a one-month basis.
Investors are feeling jittery about the stock after 1) a slowdown in active client growth and 2) threats from Amazon (AMZN). The e-commerce king has just announced that it is expanding deeper into the world of fashion via its new Personal Shopper by Prime Wardrobe service. Although shipping and returns are free, Prime members pay $4.99 to receive the specially selected items. Luckily for SFIX, Wells Fargo notes that the reaction from customers to Prime Wardrobe has so far met only ‘muted success.’
“While this gained some traction, a large number of consumers viewed the experience as overwhelming due to the number of products to choose from (a common issue we believe has held back Amazon’s ability to drive meaningful share in “fashion” apparel)” comments the firm.
What’s more, top Stifel Nicolaus analyst Scott Devitt (a 5-star analyst) isn’t concerned about the slowing client growth. He writes “Despite the slowdown in active client growth, we are confident in management’s ability to drive healthy ARPU growth in the intermediate term by continuing to improve keep rates through stronger personalization (Style Shuffle), high-quality client adds, and healthy retention.” Devitt believes that the scaling of the U.K. business represents an additional opportunity for active client growth, as do new features/capabilities.
“The ability to buy individual items and the potential to add more items per fix, could support further upside” the analyst tells investors. Rental provides another option to boost growth. On the F3Q:19 earnings call, CEO Katrina Lake said the company was looking at the rental market. At the same time he believes exclusive offers, the scaling of men’s business and shipping efficiencies should continue to benefit growth margins.
With a forecast revenue growth of 19% CAGR over the next three years, Devitt has a $35 price target on the stock- marginally below Goldman Sachs' $38 price target. “Although we are forecasting a ~19% revenue CAGR through FY:22, we believe the favorable ARPU trends and the potential for new features/services are increasing the likelihood that Stitch Fix outperforms our revenue growth expectations” the analyst writes. Overall the stock scores a Moderate Buy Street consensus, based on the last three months of analyst ratings.
Snap Inc (SNAP)- a newly augmented reality
Last but not least comes disappearing photo app creator Snap Inc. The stock has put on a jaw-dropping rally in 2019- exploding over 200% since the beginning of the year. That was helped by the company reporting a solid beat and raise quarter back at the end of July.
“Revenue growth accelerated, DAU growth turned sharply positive, Gross Margin expanded nicely & EBITDA loss narrowed materially – a 4- part Summer Cocktail” exclaimed five-star RBC Capital analyst Mark Mahaney (a 5-star analyst) post-earnings. So it is not surprising the stock has also scored several upgrades from the Street. We are talking about upgrades from UBS, Aegis Capital and Summit Redstone Partners- and before that, Goldman Sachs.
“Snap's 2Q19 results confirmed our work that led to our intra-quarter upgrade of the stock to Buy from Hold” commented Aegis Capital’s Victor Anthony (a 5-star analyst). Following the results this Top 100 analyst boosted his price target from $17 to $19 (12% upside potential), writing “we continue to be firm buyers of the stock.”
Snap's fundamentals have clearly improved, Anthony said, and the improvement is sustainable. This is something the analyst picked up on at the time of the stock’s upgrade where he highlighted Snap’s increasing per-user engagement, increasing advertiser interest, and revenue expansion opportunities.
“We walk back our previous assertion that Evan Spiegel should find a buyer for the business - Snap can stand on its own.” Anthony told investors in June. “This is our first Buy rating on the stock since our pre-IPO initiation work, when we were skeptical of Snap's ability to drive user growth, concerned that the ad platform was inferior to competitors in terms of targeting and analytics, and concerned that there was no clear path towards profitability and positive cash flow inflection.”
And the analyst makes a valuable point when he adds that “Snap is largely absent from the privacy, antitrust, and regulatory discourse in the U.S. that is increasing the risks to owning FAANG stocks.” Based on 26 recent ratings, analysts have a Moderate Buy consensus on SNAP right now.
Visit TipRanks’ Analysts’ Top Stocks tool, to find out which companies Wall Street’s top analysts are bullish on right now.