Is the bull market about to take a long breath? Not according to Goldman Sachs. In fact, the company believes the bull market has a long way to go; Peter Oppenheimer, chief global equities strategist, recently noted that the market is moving from a "Hope" to a longer "Growth" phase.
The company's economists expect the economy to increase by 6.8% in 2021 and believe that the unemployment rate could fall to 4.1% by the end of the year.
And there is enough evidence to suggest that the economy is on the mend. While unemployment rates remain high, claims have fallen since the beginning of January and retail sales have recovered strongly. The decrease in the number of Covid-19 cases and a growing vaccinated population are an additional boost. Just like the massive federal stimulus.
"It is very likely that we will achieve very high growth," added Goldmans chief economist Jan Hatzius. "Whether it's a boom or not, I think it's a V-shaped recovery."
With this in mind, the company's analysts have identified three stocks that they believe are ready to roar ahead. And in a better sign for investors, these three stocks are rated "Perfect 10" by the Investing Insights platform.
The platform gives each stock a one-digit score, based on the sum of 6 separate factors. The factors used are known to correlate with future over-performance; when they line up, this is a strong indicator for buyers to take into account. Let's take a closer look.
Constellation Brands ( STZ )
Some companies need an extensive introduction, others we know. Constellation Brands (NYSE 🙂 falls into the latter category. The company is the largest beer importer in the US by sales and consistently ranks in the top three by market share. Constellation's portfolio includes more than 100 beer, wine and spirits brands and is best known as the US owner of the Mexican Corona and Modelo beers.
In its last reported quarter, 3Q20, STZ posted solid annual gains. Specifically, the company posted $ 2.44 billion at the top, up 22% year-on-year. Non-GAAP earnings per share also increased by $ 3.09 per share, which was ahead of consensus estimates of $ 2.39. It was the fourth quarter in a row that STZ exceeded expectations.
However, the company has run into trouble around Corona: the beer, not the virus. Grupo Modelo, the Mexican arm of international beverage giant AB InBev, has filed a lawsuit against Constellation for violating an agreement to use the Corona brand name. Constellation bought the US rights to that name in 2013, when AB InBev acquired Grupo Modelo, maker of Corona beer. In 2020, STZ launched Corona Hard Seltzer and ABI now claims that STZ & # 39; s ownership of the name only applies to beer. Constellation has hit back with filings claiming it owns all exclusive rights to the Corona brand in the US.
Bonnie Herzog, Goldman & # 39; s beverage industry expert, notes that Constellation has already won an arbitration session on the Corona issue (after all, the Corona Hard Seltzer was launched in February 2020).
"While we have no opinion on the outcome of this lawsuit, we believe that the STZ stock sell-off is exaggerated and has provided a nice entry point, especially given the small Corona Hard Seltzer currently in the overall portfolio. of STZ, ”Herzog noted. "We continue to expect the stock to rise again in the long term, driven by faster and more profitable growth."
Herzog continues to view STZ as a solid portfolio addition, maintaining its Buy rating and its $ 275 price target. At current levels, this represents a ~ 23% increase over the one-year timeframe.
Wall Street generally likes STZ, as evidenced by the 10 Buy-side ratings compared to just 5 Holds. This gives the stock an average buying analyst consensus rating. The stock is priced at $ 223.93 and their average price target of $ 253.20 suggests room for 13% growth. (See STZ stock analysis)
Kornit Digital ( KRNT )
Kornit Digital (NASDAQ 🙂 occupies an interesting niche in the tech and manufacturing world, producing high-speed, industrial inkjet printers, along with pigmented inks and chemicals. The company's corporate client base comes from the apparel, apparel and textile industries.
Textiles are a big part of the global economy, used in many industries, and appearing pretty much everywhere we go – so Kornit has no shortage of customers, and even the corona crisis couldn't derail his business for long. This was reflected in the company's stock performance and quarterly finances over the past year.
The stock price is up 180% over the past 12 months, while yields, after a dip in Q1: 20, have shown sequential gains in each quarter since and year-over-year gains in Q3 and Q4. Fourth quarter results included $ 72.3 million in revenue, a 45% year-over-year profit. The company beat the bottom line estimates with non-GAAP earnings per share of $ 0.24 that came in at $ 0.02 above Street's forecast.
Goldmans Rod Hall attributes Kornit's strength to "broad outperformance in demand as the company continues to see tailwind following the shift to digital printing and e-commerce."
The analyst then notes that the COVID pandemic has unexpected consequences for Kornit's business: “While we initially thought that current growth might be unsustainable as we leave COVID, we are increasingly convinced that COVID will adoption of technology that enables personalized fashion has actually accelerated. . We also think COVID would have pushed companies to use this technology to reduce physical inventory. "
Everything KRNT has for it convinced Hall to upgrade the stock from Neutral to Buy. In addition to the call, the analyst raised his price target from $ 83 to $ 135, suggesting upside potential of 17%.
Kornit has a unanimous Strong Buy rating from analysts' consensus, having recently received 6 Buy reviews. This stock has risen sharply in value in recent weeks, pushing its stock price close to its average price target of $ 124. This leaves room for ~ 8% upward from the current $ 115 trading price. (See KRNT Stock Analysis)
NRG Energy ( NRG )
We move from manufacturing to the energy sector. NRG Energy (NYSE 🙂 is a $ 10 billion energy supplier with two headquarters in Texas and New Jersey. The company provides electricity to more than 3 million customers in 10 states plus DC power and has a generation capacity of more than 23,000 MW, making it one of the largest power companies in North America. NRG's production includes coal, oil and nuclear power plants, plus wind and solar parks.
In its most recent 3Q20 quarterly report, NRG showed $ 2.8 billion in total revenues, along with $ 1.02 EPS. Although this was down year-over-year, this was still more than enough to maintain the company's strong and reliable dividend payment of NLG 32.5 cents per common share. This comes to $ 1.30 per common share on an annual basis, yielding a yield of 3.1%.
Analyst Michael Lapides, in his report on this share for Goldman Sachs (NYSE :), considers NRG a buy. Its USD 57 price target suggests a ~ 55% rise from the current level.
In view of the recent acquisition of Direct Energy, Lapides says he expects the company to wind down shortly.
“Following NRG's acquisition of Direct Energy, one of the larger US electricity and natural gas retailers, we see NRG's operations as somewhat transformed. The integrated business model – owning wholesale electricity generation that provides electricity used to serve customers provided by NRG's competitive retail arm – reduces exposure to electricity markets and commodity prices, while increasing FCF potential, & # 39; & # 39; Lapides wrote.
The analyst summarized, “We see 2021, from a capital allocation perspective, as a year of deleveraging, but with NRG generating nearly $ 2 billion / year in FCF, we see an increase in share buybacks and a dividend of 8%. growth ahead in 2022-2023. "
We're looking at another stock here that has consensus rating from Strong Buy analysts. It is based on a 3-to-1 split between buy and hold ratings. NRG is trading at $ 41.84 and the average price target of $ 52.75 suggests a 26% increase from that level over a one year period. (See NRG Stock Analysis)
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