Sometimes, the markets remind us that we’re just not in charge. After a four-session run of gains, stocks have stumbled on the latest employment news. With reports in that initial jobless claims have increased for the first time since March, investors got spooked and stock prices tumbled. Major names, including Microsoft, Apple, and Amazon, led the way.
The new jobless claims hit 2.3 million, with 1.4 million of those applying for state unemployment insurance and over 900,000 applying for Federal aid made available the unemployed freelancers and other ineligible for state assistance. The numbers sparked fears that the economic recovery may be derailed by a second wave of COVID-19 infections and the re-imposition of strict lockdown policies.
Against this backdrop, Wall Street pros remind investors not to panic and rush to a sell-off, pointing out that a select group of tickers still represent compelling opportunities.
Using TipRanks’ database, we were able to find 3 stocks that have garnered analyst attention based on variety of strengths; from strong share appreciation to plenty of upside potential to strong niche positions. Let’s see how the details fall out.
We will start with SmartFinancial, a holding company for Tennessee’s SmartBank. The company provides the usual range of consumer and business banking services – bill payment, deposits, debit cards, e-banking, loans, mortgages – for customers in the eastern US. SmartFinancial has been beating earnings expectations in recent quarters, despite the coronavirus.
The earnings start the story. SmartFinancial was forecast to report 29 cents per share in both Q1 and Q2 – but the results came in at 30 cents and 48 cents respectively. These quarters covered the start of the coronavirus crisis in the US, as well as the entirety of the first lockdown period. The company’s online banking services surged as customers were forced to stay home, and more than made up for lost brick-and-mortar business. Revenues in Q2 reached $29.26 million, just over the $29.22 million reported in the year-ago quarter.
At the same time that revenues and earnings were beating the forecasts, SMBK shares were underperforming. The stock has lost 34% in the current market cycle, and failed to gain traction during the general market recovery that has been boosting stocks since March. The result is that SmartFinancial is now considered to be undervalued.
Covering the stock for Raymond James, analyst Ammar M. Samma points out that “margin, operating expenses, and fee income all came in better than expected,” and goes on to say, “[We] believe the company's above-peer reserves, solid capital levels (8% TCE) and strong trends in both core results and COVID-19 related deferrals position it well. With shares trading below peers, we are now constructive on SMBK shares and believe we are at an attractive entry-point…”
In line with his upbeat outlook, Samma upgrades SMBK to a Buy. His $18 price target suggests a 27% upside potential for the coming 12 months.
Overall, SmartFinancial has two recent reviews, and both are Buys, making the analyst consensus view a Moderate Buy. Both analysts give the stock an $18 price target, so the price target matches Samma's. (See SmartFinancial stock analysis on TipRanks)
MKS Instruments (MKSI)
Our modern world depends on a wide range of technologies to keep things running smoothly, but that’s only the tip of the iceberg. Tech runs on machines, and machines need close monitoring to ensure their proper function – and that’s where MSK Instruments steps in. The company develops and manufactures the systems and process controllers the analytical, delivery, measurement, monitoring, and control devices that improve performance and productivity in manufacturing. MKS products are used in a wide range of industries, from semiconductors to health sciences to defense.
This stock has attracted attention from Rosenblatt analyst Scott Graham, who wrote, “We believe the company is well-positioned to benefit from multiple, long-term secular trends in the Semiconductor market, improvements in industrial and consumer demand in its Advanced Markets businesses and leverage its cost acumen into material growth in earnings in 2021-22. We also expect MKSI to use its highly liquid balance sheet to enhance shareholder value with acquisitions.”
Graham initiated his firm’s coverage of this stock with a Buy rating and a price target of $162. His target implies an upside for the coming year of 33%. (To watch Graham’s track record, click here)
Overall, MKSI has a Strong Buy rating from the analyst consensus, based on 6 Buys and 2 Hold reviews. The stock’s average price target of $131.75 suggests a modest upside of nearly 9%. (See MKSI stock analysis on TipRanks)
The second stock on our list, Shutterstock, is a familiar name in online marketing. The company offers customers a library of more than 200 million stock images and photos, and invaluable resource for marketers and designers
The stock’s performance has been choppy over the years, but in recent months Shutterstock has delivered for investors. SSTK has mostly recovered the value lost during February’s market crash, and is now within its pre-crash value. Shutterstock beat the Q1 earnings forecast, and by a wide margin – EPS came in at 13 cents, against the 7 cents expected.
The company was so confident during 1H20 that it even reinstated its dividend, paying out 17 cents per share in both the first and second quarters. This gives a modest yield, of only 1.7%, but the important point here is that company management was comfortable restarting the payments during the pandemic crisis.
Brad Erickson, 5-star analyst with Needham, notes that Shutterstock is both undervalued and well-positioned for growth. He writes, “We anticipate durable growth out of the ~$6 billion stock content industry, expect SSTK to at least maintain share, and foresee a brewing margin expansion narrative over the coming few years that will illuminate the company's underappreciated earnings power and cash generation potential.”
Erickson was impressed enough by Shutterstock to initiate coverage with a Buy rating. He set a $50 price target, implying a one-year upside of 21%. (To watch Erickson’s track record, click here)
The analyst consensus rating here is based on two recent reviews, including both a Hold and Erickson’s Buy. The average price target is $43.50, suggesting an upside of 6%. (See Shutterstock stock analysis on TipRanks)
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