Analysts See at Least 50% Upside Potential in These 2 Stocks
Finally, some clarity. The US Federal Reserve has – at long-last – publicly announced a policy shift in its bond buying program, and given guidance on its interest rate stance going forward. The short version: the taper will begin this month, but don’t expect a rate hike any time soon.
The central bank has kept rates low for well over a decade now, and the financial world has gotten used to that – but the massive bond buying was put in place during the pandemic crisis as a way of maintaining liquidity in the markets, and the Fed’s Wednesday announcement was taken as a sign that the economy is starting to move past COVID. Chairman Jerome Powell let it be known that, later this month, the Fed will begin scaling back the bond purchases by as much as $15 billion monthly, a rate that is projected to end quantitative easing by mid-2022. Powell also indicated that the Fed is in no hurry to raise interest rates before the end of next year.
The key here, as mentioned, is clarity. Markets jumped to new record highs after Powell’s press conference, mainly on positive investor sentiment now that the cloud of uncertainty has been removed from the Fed’s policy stance. Investors are focused more on what the Fed is doing, and for the moment are not worried that Powell, in his statements, pretty much left the door open for any Fed policy move.
So for the short term, we can expect a good mood on Wall Street. And we can also expect the analysts to start tapping the stocks they see as winning on the back of that good mood. We’ve used the TipRanks platform to pull up the latest information on two stocks that have gotten a recent ‘thumbs up’ from the Street. Not to mention each offers up substantial upside potential, as some analysts see them surging over 50%.
Arbe Robotics (ARBE)
First up is Arbe Robotics, a tech company that has staked out an essential niche in the automotive industry. Arbe, founded in 2015, has developed an industry-leading radar system – the ‘eyes’ of autonomous cars, and one that is up to 100 times more sensitive that existing automotive radars. Arbe’s Phoenix radar can differentiate between true threats on the road and false alarms, and can recognize vulnerable road users such as bicycles, motorcycles, and pedestrians. The system has 300 meter range, 100 degree azimuth, and 30 degree elevation capabilities.
To bring in new capital, and take advantage of the rising market environment, Arbe recently entered the public trading markets through a SPAC transaction. The merger, with Industrial Tech Acquisitions, Inc., was completed on October 7, and the ARBE ticker debuted on NASDAQ the next day. Since it started trading, ARBE stock has already gained 30%, and the company boasts a market cap of $644 million. The SPAC transaction brought $118 million in new funds.
In other news, this month Arbe has announced two deals with Chinese companies that give it an entry into China’s automotive market. On Nov 2, the company announced an agreement with Weifu, a major supplier to China’s car makers, by which Weifu will use Arbe’s chipset and technology to manufacture imaging radars for Chinese cars, with full production planned for the end of next year. And, on Nov 3, Arbe announced that its imaging radar technology will be installed in cars manufactured by BAIC Group, one of China’s auto makers. China is the world’s largest market for new automobiles, and the Chinese government is actively pushing autonomous car programs – and so will need high end automotive radar systems.
Wells Fargo’s Gary Mobley is bullish on Arbe. Initiating coverage of the newly public stock, the 5-star analyst writes, “We believe Arbe will emerge as a market share leader in the emerging four-dimension (4D) radar market for automotive and industrial applications…”
Mobley goes on to add, “Arbe is a pure play on the secular growth trend whereby semiconductor content ($) per new motor vehicle produced grows at a fairly constant 5-6% annual rate, with growth fueled by megatrends such as electrification of the automotive power train, as well as ADAS/AV driving features. More specifically, Arbe is a pure play on new generations of radar sensing technologies being added to motor vehicle designs to allow for L2+ ADAS/AV driving capability.”
These comments support Mobley’s Overweight rating, while his $19 price target implies a 12-month upside of 83%. (To watch Mobley’s track record, click here.)
Since going ARBE has garnered 3 reviews and all are positive, giving the stock a Strong Buy consensus rating. The trading price of $10.38 and the $14.33 average price target give the stock an upside potential of 38% for the coming year. (See Arbe’s stock analysis at TipRanks.)
EQT Corporation (EQT)
However strong the push to a ‘green’ economy, for now our world still runs on fossil fuels. And that gives oil and gas producers strong leverage for profits. Combine this with rising prices for energy and fuels in the US markets, and you have a recipe for rising share values, at least in the near- to mid-term. EQT is particularly well suited to gain from this, being the largest producer of natural gas and gas products in the US.
EQT operates in the East, in the vast gas basins of the Appalachian region, with ops in the states of the Pennsylvania, West Virginia, and Ohio. EQT has over 1 million acres of land holdings with access to the Marcellus and Utica shale formations, where the company has more than 19 trillion cubic feet of proven natural gas reserves. This is a huge asset, especially given the increasing prices for natural gas in the US markets and the consistently high demand.
At the most basic, the rising prices and demand have pushed the stock up 60% year-to-date, outpacing the S&P 500’s 25% gain. The recent 3Q21 numbers, released October 27, showed nearly $1.8 billion at the top line, the highest in more than 2 years, and EPS of 12 cents, up dramatically from the 15-cent EPS loss in the year-ago quarter. The company revised its 2021 free cash flow guidance upward by $200 million.
Watching EQT for JPMorgan, analyst Arun Jayaram believes that conditions warrant an upgrade, and he bumps his rating from Neutral to Overweight (Buy).
Backing his stance, Jayaram writes, “We think the bear narrative has largely run its course, with the risk-reward decidedly skewed to the upside given a number of catalysts that we expect to play out over the next 6 months…. Management plans to unveil its cash return framework prior to year-end, which we view as an important catalyst to force the valuation higher. Another catalyst is the potential upgrade of the company’s debt rating to IG in 2022, which would not only reduce EQT’s cost of capital, but improve liquidity by removing margin postings and LOC requirements (~$700 MM tailwind).”
Along with his upgraded rating, Jayaram gives the stock a price target of $31, suggesting a one-year upside potential of 52%. (To watch Jayaram’s track record, click here.)
While bullish, the JPM view is no outlier here. There are 11 ratings on these shares, and they include 8 to Buy and 3 to Hold, for a Moderate Buy consensus view. The stock has an average price target of $28.82, implying an upside of 41% over the next year, from the current trading price of $20.37. (See EQT’s stock analysis at TipRanks.)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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.