Let's start with some good news – according to Goldman Sachs’ chief global equity strategist Peter Oppenheimer, 2020 will see a continuation of last year’s surge. Oppenheimer believes 2019’s bull run was down to valuation expansion. If the history books are anything to go by, then 2020 will see a repeat of the trend.
“Years of strong valuation expansion are generally followed by positive returns in the equity market, although typically at a slower pace. Moderate profit growth this year and higher starting multiples point to total returns in the high single digits for the asset class globally in 2020,” Oppenheimer noted.
With this in mind, we decided to have a look at two stocks Goldman Sachs thinks are poised to make headway in 2020. Just to be safe, we run them both through TipRanks Stock Screener tool to ensure that other analysts agree with Sachs. Let's take a closer look.
Linx SA (LINX)
Let’s start off in Brazil, the home of Linx SA, Latin America’s largest retail management software company. LINX boasts over 40% of the retail management software market in Brazil; its cloud-based enterprise software offers retailers a variety of services, including payments solutions and business management tools.
The company has been racking up partnerships recently; one with Rappi, a Latin American unicorn company and creator of an on-demand delivery app, which will enable brands in Linx’s portfolio to sell through the app. The second is with PicPay, one of Brazil’s largest payment apps which boasts more than 13 million users. Consumers will be able to make QR Code payments at more than 100,000 establishments using the Linx system.
Despite disappointing 3Q19 results and Linx Pay’s “slower-than-expected progress,” Goldman Sachs’ Diego M. Aragao believes the company has solid fundamentals. The 4-star analyst said, “LINX has been reinforcing its distinguished ecosystem to become a one-stop-shop for all-size retailers in different verticals, providing a fully integrated platform for brick-and-mortar and digital customers in Brazil. The company has been also investing in capabilities to facilitate the end-to-end sales process with an innovative payment solution that leverages LINX’s deep knowledge of the retail sector and clients, acquired over the past 20 years.”
While Aragao estimates that the financial benefits from new initiatives will take a while to become apparent, he believes the recent setbacks are already factored into the price, which represents a “good entry point.” Therefore, Aragao rates Linx a Buy with a price target of $11. The figure implies possible upside of 25%. (To watch Aragao’s track record, click here)
The Brazilian software company has only one other analyst currently keeping an eye on its prospects. The additional Buy, though, provides Linx with a Moderate Buy consensus rating. Put together, the average price target of $10.50 could see investors take home a 20% gain in 2020. (See LINX stock analysis on TipRanks)
Wynn Resorts (WYNN)
The US-China trade war impacted a number of industries in 2019 - automobiles, semiconductor companies and the agriculture sector all come to mind. With a foothold in both the US and China (specifically Macau), hotel and casino owner, Wynn Resorts has a vested interest in the two superpowers getting along.
Despite the trade headwinds, Wynn’s share price outperformed the market in 2019, rising by 44% over the year. The stock got a significant boost in December following an announcement by the People's Bank of China that it will increase the daily wiring limit from individual’s accounts from 50000 yuan to 80000 yuan ($11400). The figure represents a massive 60% increase and was seen as a boon to the Macau casino industry, as the Chinese are by far the largest visitors of the autonomous region. Almost 68% of Wynn’s operating revenue came from Macau in the last quarter.
According to Goldman Sachs’ Stephen Grambling, improving cyclical trends, both in Las Vegas and Macau, coupled with President Xi’s recent positive policy initiatives for the region are reasons to add Wynn to the to the company’s Conviction List.
Grambling said, “Given our more bullish outlook on Macau, our price targets move higher as we expect earnings revisions to follow positive commentary on the upcoming earnings calls. Our conversations with investors have become more constructive recently from a predominantly bearish tone in late 2019, giving us conﬁdence that positive commentary from management teams could serve as a catalyst to sustain positive momentum.”
Grambling, therefore, thinks the gambling establishment has a lot more fuel in the tank; along with reiterating a Buy on Wynn, the analyst upped his price target from $157 to $181. The new target implies upside potential of ~20%. (To watch Grambling’s track record, click here)
All in all, the current sentiment on the Street towards the casino owner is mixed; 6 Buys and 4 Holds coalesce into a Moderate Buy rating. (See WYNN stock analysis on TipRanks)