2019 has delivered such plentiful returns, that heading into the new year, investors might be met with a sense of trepidation as to what lies ahead. Can the market extend the rally? Which stocks can continue handing out ample rewards through 2020 and beyond?
In such instances it is worth turning to the pros to get the lowdown. Multinational investment bank and financial services provider, Cowen, has a history of successfully picking up disruptive companies and emerging markets early on, Amazon being a case in point. The company was also the first Wall Street firm to exhibit serious interest in the fledgling cannabis industry.
With the help of TipRanks’ Stock Screener, we were able to get the full scoop on the company’s 3 favorite stocks for the new year. All 3 have had a strong 2019, yet Cowen thinks their growth is set to continue in the year ahead. Let’s take a look.
Charter Communications (CHTR)
2019 continued to hear talk of the ‘cord-cutting’ trend whereby old, traditional cable companies are about to become obsolete due to pay-tv customers moving over to newer, more flexible streaming services. Telecommunications giant, Charter, has stayed ahead of the curve by leveraging losses of cable customers by picking up more subscribers for its broadband service. As broadband becomes a must-have service for every household, and most areas only provide two options for broadband services, companies like Charter almost become recession proof.
Apart from success in the broadband sector, Charter’s entrance into the wireless phone market is also bearing fruit. Its mobile business has seen solid growth, adding 276,000 new lines in the last quarter alone.
Additionally, it has kept buying back company shares, always a promising sign for investors. In Q3, the company spent $3.1 billion on stock buybacks.
This cable giant has easily outperformed the market in 2019, delivering a year-to-date gain of 65%, but has the leading broadband provider climbed too high?
Not according to 5-star Cowen analyst Colby Synesael, who noted, “All said, despite the stock rally and premium valuation, we still see Charter as the ideal scaled pure-play Cable provider and best stock to play the Broadband story with underlying catalysts including the FCF story (24% CAGR), buybacks, attractive network assets ideal for the 5G topology, and strategic optionality. Longer-term, the company is well positioned to measurably build a DIY wireless network (trialing CBRS) and aggressively buy back shares, to be eventually taken out by a wireless carrier (because wireless carriers may have no choice).”
To this end, Synesael reiterated an Outperform rating on Charter along with a price target of $537, indicating gains of 14% could be in place. (To watch Synesael’s track record, click here)
What does the Street make of the communication giant’s prospects? A breakdown of 14 Buys, 7 Holds, and a solitary Sell, provide Charter with a Moderate Buy rating. The average price target stands at $503.16, which implies 7% upside potential. (See Charter Communications stock analysis on TipRanks)
Another high-flyer in 2019 is internet connection and data center provider, Equinix. Year-to-date, EQIX is up 58%, leaving the S&P 500 in the dust despite its stellar year.
The company is unusual given the fact that it is a REIT (real estate investment trust) but operates like a growth stock. Equinix provides the buildings and infrastructure for companies to house their servers in. Most companies use Equinix’s IBX (international business exchange), as along with a lack of alternatives, it is too expensive to build their own. Therefore, like REITS, the company has a recurring income stream.
The company reported good 3Q19 results with it breaking records for 3Q bookings, cross connect adds and bookings through its channel, which came in at 30%, indicating a loyal customer base is in place.
Synesael noted, “We continue to have a positive LT view of Equinix as the company is able to demonstrate stable/durable growth that coupled with its highly attractive returns we believe should continue to drive multiple expansion and further separate it from comps. We do not however expect upcoming 2020 guidance to alone act as a catalyst, and instead expect the stock to continue to grind higher over the NTM.”
All this has prompted the 5-star analyst to reiterate an Outperform rating on Equinix. A price target of $628 provides potential upside of 13%.
The Street is equally effusive about Equinix’s 12-month prospects. The data center provider has a Strong Buy analyst consensus rating, with the breakdown formed of 12 Buys and 1 Hold. The average price target is $615.25, providing 10% upside potential. (See EQIX stock analysis on TipRanks)
GDS Holdings (GDS)
Staying in the data field, we move on to Chinese high-performance data center provider, GDS Holdings.
Even with Cowen’s previous picks exhibiting fantastic growth in 2019, they are both dwarfed by GDS, which has seen its share price more than double in 2019, growing by 118%. Accordingly, the company ranks as Cowen’s no.1 choice for 2020.
A solid 3Q report reflected a strong year. The company leased 21,600 sqm compared to the trailing 12 months average of 19,400, thereby achieving the company’s 2019 leasing goal of 80,000 sqm. Management reiterated that it expects to equal this performance in 2020, and raised 2019 EBITDA guidance thanks to stronger than expected margins year-to-date.
Adding to the good news, GDS announced it had reached an agreement to acquire all of the equity interests in target companies which own a data center campus in the Shunyi district of Beijing. The campus comprises three data centers with an area of 19,700 sqm. The acquisition is set to close in the first half of 2020.
Synesael notes that while GDS is likely to experience trade driven volatility - the combination of strong secular demand, further margin expansion, and industry leading growth ‘should drive continued stock appreciation.’ The analyst concluded, “We believe GDS continues to be well positioned in what remains a strong demand environment and is taking the right steps to secure more supply in its major markets as it prepares for even stronger demand in 2020.”
Synesael reiterated an Outperform rating on GDS, along with a price target of $65. Should the target be achieved, a handsome increase of over 29% could be in the cards.
The Street is relatively quiet when it comes to GDS right now. Over the last 3 months, the data center provider has had 3 analysts rating its prospects. All, though, conclude GDS is a Buy, therefore designating it with Strong Buy status. The average price target of $60, could provide investors with 19% upside. (See GDS stock-price forecast and analyst ratings)