We’re heading into the ultimate stretch of 2021, the annus horribilus of 2020 is firmly within the rear-view mirror, and we are able to see the checkered flag up forward. It’s a fantastic sight, made higher as a result of, like several checkered flag, it comes with prizes behind it.
On this case, these prizes come within the type of earnings boosts and inventory appreciation. In a notice on the months forward, Wells Fargo senior fairness analyst Christopher Harvey writes: “Within the last 4 months of this yr, we count on EPS revisions to assist push equities larger. The SPX has skilled 2021 EPS revisions of 21% YTD (+7.7% per quarter) and the pattern exhibits no signal of abating.”
It’s an optimistic image, and Harvey’s colleagues among the many Wells Fargo inventory analysts have been busy choosing out the equities they see benefitting from a attainable rally. We’ve used the TipRanks platform to search for three of these Wells Fargo picks. These are Robust Purchase shares with stable upside potential. We’re speaking returns of not less than 40% over the subsequent 12 months.
Victoria’s Secret (VSCO)
First up is Victoria’s Secret, one of many best-known names in lingerie. Victoria’s Secret was a subsidiary of L Manufacturers, however was spun off as an unbiased firm this summer season, and the VSCO ticker began buying and selling on August 3 of this yr.
Victoria’s Secret has gained some notoriety this yr, because it made a radical change in its advertising technique. The corporate has put aside its well-known ‘angels,’ and turned to soccer star Megan Rapinoe as a spokesperson. The transfer prompted a spherical of ridicule on social media, however early outcomes bode effectively for the lingerie maker.
The 2Q21 report, the primary as an unbiased firm, confirmed an EPS of $1.71, beating the $1.59 estimate by 7.5%. On the prime line, income got here in at $1.61 billion. In comparison with pre-pandemic ranges, the Q2 gross sales numbers are down by 9.6% from 2Q19, due primarily to the closure of 240 shops. The closures, nevertheless, supply long-term advantages in streamlining the enterprise and bettering effectivity. Comp retailer gross sales improved by 16% since 2Q19.
Analyst Ike Boruchow covers this outdated firm/new inventory for Wells Fargo, and sees loads of potential for the corporate in coming months.
“Whereas our prior bull thesis on LB had been predicated on hidden worth for the strong BBW idea, at present ranges we now view VSCO because the underappreciated asset with the extra compelling story. The model has momentum, strategic initiatives have been made, and the market has not but found out what the best a number of on the enterprise is but (VSCO is buying and selling at < 8.0x P/E on our 2022 numbers). As such, we exchange LB with VSCO as certainly one of our 5 “Prime Picks” within the area as we speak,” Boruchow opined.
These feedback again up Boruchow’s Chubby (i.e. Purchase) ranking on VSCO shares. His $100 worth goal implies a sturdy upside of ~51% within the subsequent 12 months. (To look at Boruchow’s observe document, click on right here)
For probably the most half, Wall Avenue agrees with the Wells Fargo outlook right here. VSCO has picked up 11 evaluations in its quick time buying and selling publicly, they usually break all the way down to a 9 to 2 break up in favor of Purchase over Maintain. The inventory has a mean worth goal of $88.45, indicating ~33% upside from the $66.30 present buying and selling worth. (See VSCO inventory evaluation on TipRanks)
For the subsequent inventory, we’ll shift our focus to the published trade. ViacomCBS is the daughter of the 2019 merger settlement between Viacom and CBS, and the joint entity controls the in depth content material libraries of each mother and father, together with CBS Leisure Group and Paramount Photos. Drilling down, VIAC owns MTV, BET, and Comedy Central, in addition to the favored Star Trek franchise. The corporate’s library has attracted over 42 million world streaming subscribers.
The massive information for ViacomCBS this yr, nevertheless, was the inventory collapse again in March. An ill-timed public providing triggered a fall costs, and an sadly contemporaneous selloff by a serious hedge fund accelerated that slide. VIAC shares misplaced greater than half of their peak worth, and stay depressed as we speak.
On the identical time, the corporate’s latest quarterly efficiency exhibits that the underlying enterprise is sound. The 2Q21 report, along with exhibiting over 42 million streaming subscribers globally, additionally confirmed a 92% year-over-year enhance in world streaming income. Complete income was $6.56 billion, up a extra modest 4.4% yoy – whereas the web earnings per share doubled from 2Q20, to $1.78.
These sound monetary outcomes supported a dependable dividend, which at 24 cents per frequent share annualizes to 96 cents and provides an above-average yield of two.37%. The declared dividend is the eighth in a row on the present stage.
ViacomCBS’s success in including subscribers and rising revenues and earnings mirror the fundamental proven fact that streaming is fashionable – and that the corporate has an enormous library of examined content material. That is famous additionally by Wells Fargo analyst Steven Cahall.
“VIAC’s streaming efforts are bearing fruit and have impressed us, so we transfer from historic bears to constructive bulls… A stronger steadiness sheet and distinctive mixture of content material (e.g., sports activities, actuality, movie, originals), mixed with a robust begin to Paramount+, underly our confidence within the story. Like friends, success in streaming comes on the expense of the normal enterprise, so our valuations framework reduces the “core” worth, but it surely’s being greater than offset by the streaming successes. We additionally consider VIAC to be one of many higher takeout candidates in Media given its studio dimension, library, and streaming positioning,” Cahall wrote.
To this finish, Cahall charges VIAC shares an Chubby (i.e. Purchase), and units a $60 worth goal that implies a one-year upside of ~45%. (To look at Cahall’s observe document, click on right here)
So, that’s Wells Fargo’s view, let’s flip our consideration now to remainder of the Avenue: VIAC’s 6 Buys and a couple of Holds coalesce right into a Robust Purchase consensus ranking. Going by the $62.75 common worth goal, shares are anticipated to be altering arms at ~51% premium over the subsequent 12 months. (See VIAC inventory evaluation on TipRanks)
Shift Applied sciences (SFT)
The final Wells Fargo decide we’re taking a look at is Shift Applied sciences, an organization that brings an e-commerce purchasing mannequin to the world of second-hand vehicles. The corporate has a web-based purchasing platform and provides a hassle-free gross sales mannequin based mostly on end-to-end service, designed to personalize the client’s expertise, even down to check drives and residential supply. Shift connects automobile patrons and sellers, and boasts it has facilitated over 75,000 it whole to date.
Shift went public via a SPAC merger in October of final yr, and realized over $340 million in new capital from the transaction. Since then, the corporate has launched three quarterly earnings reviews, and proven steadily rising revenues. In the latest report, for 2Q21, income got here in at $154.8 million, up 46% sequentially. Complete gross revenue was reported at $16.3 million, up greater than 350% year-over-year, however EPS confirmed a lack of 41 cents per share. The EPS loss was a bit moderated from the 55-cent loss reported in Q1, and was barely much less extreme than the 43 cents anticipated. These outcomes got here are based mostly on a 240% yoy enhance in items offered for the quarter.
Wanting ahead, the corporate raised its 2021 full yr income steerage to the vary of $575 million to $595 million. On the midpoint, this represents a tripling in income year-over-year.
5-star analyst Zachary Fadem, in his protection for Nicely Fargo, sees Shift on a runway for a share worth rally. He says of the latest quarterly report: “In an exterior surroundings that includes strong used car demand, unprecedented worth will increase, and an accelerating share shift on-line, SFT’s Q2 bonanza shouldn’t come as a complete shock… Execution has been robust in a dynamic surroundings. SFT is setting affordable/achievable expectations. And the corporate’s hyper-regional mannequin with inhouse reconditioning and heavy buyer sourcing is working.”
Attending to the underside line, Fadem provides, “SFT is a excessive development on-line platform with potential to disrupt and acquire share within the giant ($840B+) and extremely fragmented used auto market by way of its differentiated, regional mannequin, test-drive capabilities, and give attention to worth.”
These feedback help the analyst’s Chubby (i.e. Purchase) ranking, and his $14 worth goal implies a powerful upside of 88% on the one-year time-frame. (To look at Fadem’s observe document, click on right here)
Total, Wall Avenue agrees that this inventory is a shopping for proposition. There are 5 latest evaluations, and they’re all constructive, making the Robust Purchase consensus unanimous. The inventory is priced at $7.44 and has a $14 common goal, matching Fadem’s above for an 88% one-year upside potential. (See SFT inventory evaluation on TipRanks)
To search out good concepts for shares buying and selling at enticing valuations, go to TipRanks’ Finest Shares to Purchase, a newly launched software that unites all of TipRanks’ fairness insights.
Disclaimer: The opinions expressed on this article are solely these of the featured analysts. The content material is meant for use for informational functions solely. It is vitally necessary to do your individual evaluation earlier than making any funding.