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JP Morgan: 2 stocks to consider buying (and 1 to stay away from)
Marko Kolanovic of JPMorgan sees many reasons for optimism in a report on current market conditions – and the strategic vision for the future. Kolanovic sees that risk has declined in recent weeks and, taking into account the usual daily fluctuations, markets are likely to see a sustained rally. The biggest news, according to Kolanovic, are positive reports about the rapid development and imminent availability of a COVID-19 vaccine. This is a ‘tipping point’, allowing investors to “look through the recent wave of COVID-19 cases to the imminent end of the pandemic and the broader reopening of the economy.” In a second moment, as regards the importance of the market, it is the split result of the national elections. Kolanovic describes a Biden presidency combined with greater Republican strength in the House and a Republican majority in the Senate as “the best of both worlds”. A divided government is unlikely to dismantle the pro-business moves undertaken by the Trump administration, while Biden will likely ease the trade war. The result, according to Kolanovic’s team, will be “lower market volatility, which could drive inflows into risk assets.” To this end, JPM equity analysts have made a commitment to scan the tickers, looking for those that could win or lose. – in the next months. Of particular interest, we pulled TipRanks data on two stocks that the company expects will show double-digit growth and one that JPM says it avoids. Vroom, Inc. (VRM) We will start with Vroom, an online dealer in the used vehicle industry. In addition to cars, the company also sells parts and accessories and offers insurance, car rental, and purchase financing, for US customers only. Vroom is a newcomer to the markets; was IPO in June and rose rapidly, peaking on September 1. Since then, the shares have slipped and are now down 22% since the close on day one. The rise and fall are the result of headwinds and headwinds pushing against the stock. On the bright side, Vroom made money during the overall shift to online retail. Additionally, the company’s focus on used vehicles was beneficial during the pandemic, when customers were nervous or short of money, but in both cases reluctant to allocate large sums to a new car. On the downside of the ledger, that reluctance to spend has slipped into the used car market as well. Vroom had to contend with low margins as he slashed prices to attract sales. Covering the stock for JPM, analyst Rajat Gupta sees the stock’s current status as an opportunity for investors. Bad times are likely temporary, he believes, and this company is set to take off. “Net-to-net, with short-term expectations now reset and the potential for acceleration of both unit growth and gross profit in 2021, we believe the configuration is favorable in the short to medium term for the stock with few incremental negative catalysts. .. we believe that execution will be critical given the strong third party reliance on key operational aspects such as refurbishment and logistics, ”Gupta wrote. In line with this assessment, Gupta views the stock as overweight (i.e. buying) and its $ 70 price target implies a 91% rise for the following year. (To see Gupta’s track record, click here) Even after its share value has fallen, Vroom maintains a strong buy from analyst consensus. The rating is based on 11 reviews, including 10 purchases and 1 sale. VRM is selling for $ 36.81 and its average price target of $ 59.40 suggests it has room for ~ 61% growth over the one-year horizon. (See VRM inventory analysis on TipRanks) Colfax Corporation (CFX) Next up is Colfax, a niche manufacturing company. Colfax manufactures a range of equipment for the welding, medical device and air and gas handling markets, ranging from medical equipment for joint reconstruction to welding helmets and cutting torches. While it may seem incongruous, the combination works for Colfax and the company is experiencing a turnaround from losses from the 2Q20 crown crisis. Earnings for the third quarter, at 41 cents per share, were positive and negative. It fell 32% year-on-year, but more than quadrupled in sequence and surpassed estimates. Revenues increased 29% sequentially to $ 805 million. Management expects to see continued sequential improvements for the remainder of 2020 and expects full-year earnings of between 45 cents and 50 cents per share. Representing JPM, 5-star analyst Stephen Tusa commented: “[We] see the stock as relatively cheap compared to its close competitors within the Fab Tech and Med Tech space with a significant post COVID-19 upside that does not yet appear to be fully realized in valuation against peer FY2 expectations. CFX has strong brands and franchises … and an undervalued productivity opportunity with a primary-end market rebound in Fab Tech and spikes in demand in Med Tech. “Tusa backs up his upbeat comments with an overweight (i.e. Buy) rating and a $ 52 price target indicating his confidence in a year to rise by 38%. (To see Tusa’s track record, click here. ) Overall, Colfax has an analyst consensus moderate buy rating, based on 8 reviews split into 5 buy, 2 take and 1 sell. However, the majority expect stocks to remain limited for now, as the current indicates $ 38.63 average price target. (See CFX stock analysis on TipRanks) Beyond Meat (BYND) Last on today’s list of JPM calls is Beyond Meat, a company that has made a lot of noise last year when it raised over $ 3.8 billion in its IPO. The company offers a vegetarian-based meat substitute and markets it as more nutritious, better tasting, and more meat-like than competing products. was founded in 2009 and has expanded its range of products to include simulated beef, pork and chicken. Overall, BYND stocks still have a positive facade. Shares have risen 88% year to date and the company posted a net profit in 1Q20, right at the start of the krona crisis. Since then, however, earnings have turned negative and, even worse, revenue showed a sharp sequential decline in the third quarter. The latest quarterly data showed $ 94 million in the top row, down 16% from the second quarter and well below the forecast of $ 133 million, and an EPS loss of 28 cents – far worse than the 3 cent loss. expected. Beyond Meat’s biggest success came from the drop in restaurant business that was only partially redeemed by a 40% increase in food sales. The company announced a partnership with McDonald’s to provide the meat substitute for the fast food giant’s new McPlant menu, but even that announcement was confusing. BYND’s stock fell sharply as word got out that McD’s had developed the meat substitute in-house. While this misconception has been corrected, BYND has only partially rebounded. In short, this company is facing severe headwinds in the near term and JPM advises caution due to “such low visibility and surprisingly weak most recent quarter”. Ken Goldman, rated 5 stars by TipRanks, writes of BYND: “We are now trying to model a company for which (a) we are not exactly clear why 3Q was so negative (the company’s explanation does not seem to be supported by significant data), and (b) the partnership with McDonald’s could be a game changer or a disaster. “Goldman’s caution is clear from its underweight rating (i.e. a sale), and its $ 104 price target suggests a decline of 26% compared to the share. (To see Goldman’s track record, click here) JPM isn’t the only company advising caution here. The Beyond Meat analyst consensus rating is a moderate sell, based on 2 buys, 7 takes and 7 sales set in the last few weeks. The stock is selling for $ 141.91 and its average price target of $ 110.71 points to a likely 22% downside over the next year. (See BYND Stock Analysis on TipRanks) To find good ideas for trading stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buys, a newly launched tool that combines all of TipRanks’ equity insights. Disclaimer: The views expressed in this article are solely those of the analysts present. The content is to be used for informational purposes only. It is very important to do your own analysis before making any investments.
