An employee of the Internet company Facebook walks through the courtyard of the company campus in Menlo Park, California.
Christoph Dernbach | picture alliance | Getty Images
When Wall Street analysts take a more bullish stance on a particular stock, it could mean that the name is undervalued and has room to run.
The stocks mentioned in this article have either received a bullish coverage initiation or a significant price target boost from analysts with a proven track record of success.
TipRanks’ analyst forecasting service works to pinpoint the Street’s best-performing analysts, or the pros with the highest success rate and average return per rating. These metrics factor in the number of ratings published by each analyst.
Wall Street’s best-performing analysts have turned more bullish on these five stocks.
According to Needham analyst Scott Berg, Thryv Holdings is “Thryv-ing in the hot marketing software space.” As such, the top analyst initiated coverage with a Buy rating and set a $42 price target. This implies that shares could gain 31% over the next 12 months.
“Thryv competes in the Marketing Software space, which on its own, can support significant long-term growth, we believe,” Berg said. He added, “Thryv’s long-term product strategy is rooted in the large segment for Marketing Software, which Gartner estimates had over $16 billion of total spend in 2019 growing at 20.7% per year.”
What makes the company an industry stand-out? The analyst points to its legacy Marketing Services segment, which includes the Yellow Pages brand.
“We think the legacy business represents a large, cash-generating, low-cost, customer acquisition channel that assures steady demand from established companies seeking more modern marketing solutions,” Berg said.
Additionally, Thryv recently released ThryvPay, its integrated payment solution that makes it possible for small and medium-sized businesses to accept credit card and ACH payments through its platform or through a dedicated mobile app.
This new product, in Berg’s opinion, is “not fully discounted by the current share price,” with the analyst noting that the “payments opportunity is large and adds model optionality.”
Berg also highlights the fact that the company’s key software as a service metrics have gotten stronger over the past few quarters, which he believes could “translate to accelerated revenue growth from a pandemic trough.” Thryv also started working on new go-to-market channels at the end of last year, and this has already had a positive effect on lead generation and pipeline growth.
Berg is the eighth best-performing analyst on Wall Street, thanks to his stellar 77% success rate and 33.9% average return per rating.
Two monopoly lawsuits filed by the Federal Trade Commission and a coalition of states that sought to break up Facebook have just been dismissed. U.S. District Judge James Boasberg believes that the FTC didn’t “clearly define the market” and argues that its claims about Facebook’s share of the market were “too speculative and conclusory to go forward.”
Boasberg also noted, “Although the court does not agree with all of Facebook’s contentions here, it ultimately concurs that the agency’s complaint is legally insufficient and must therefore be dismissed.”
Following this development, Bank of America Securities analyst Justin Post reiterated a Buy rating on the social media company. In a further bullish signal, the analyst boosted the price target from $390 to $400, putting the upside potential at 14%.
Expounding on his even more optimistic approach, Post said, “While we would expect the FTC/states to refile, given the prep time that undoubtedly went into the original filing, we see this ruling as an important reminder of the challenges the government faces in establishing that Facebook (or its large-cap peers) have illegal monopolies.”
After multiple calls with legal experts, Post thinks the likelihood that Facebook will be broken up is very low, based on not only history but also precedent. “We view this dismissal as a positive step based on: 1) highlights the hurdles U.S. antitrust enforcers face in trying to break up tech companies, and 2) a noticeable change from continued negative regulatory news over the last year,” he commented.
That being said, the court’s decision is “a small win in a long battle,” as laws surrounding the antitrust environment could be changed by both Congress and the EU.
Although the new privacy protections for Apple’s iOS 14 fueled some investor concern as it will require apps to request permission to track users, Post remains unfazed. “Though increasing adoption of iOS 14.5 poses the risk of a bigger revenue impact in 3Q, we continue to think FB has strong ability to capitalize on shopping this year, and the Street will likely stay optimistic on several under-monetized and under-valued FB assets (Messenger, WhatsApp, Watch, Reels, AR/VR) to drive growth post-2021,” the analyst stated.
With a 76% success rate and 30.2% average return per rating, Post scores the #38 spot on TipRanks’ list.
Roper Technologies develops software and engineered products for a range of end-markets including health care, transportation, commercial construction, food, energy, water, education, as well as academic research.
For Oppenheimer’s Christopher Glynn, the company’s long-term growth story appears strong, with the analyst stating that the runway is “still attractive.” Even more optimistic about Roper’s prospects, the five-star analyst bumped up the price target from $505 to $560 (16% upside potential) in addition to reiterating a Buy rating.
Glynn commented, “We see continued headroom for ROP shares, noting: (1) strong +hsd organic outlook Q2–Q4 2021, supported by all four segments and key underlying divisions; (2) rapid debt reduction (post Vertafore/other bolt-ons) yielding to renewed acquisition pipeline execution out of 2021; and (3) overall competitive differentiation and gross margin profiles across the enterprise.”
In the first quarter of 2021, Roper paid down roughly $500 million in debt, which brought net debt/EBITDA down from 4.7x to 4.2x sequentially. So, if ROP allocates all free cash flow for deals in 2022-2023, Glynn estimates approximately 2.5x PF net leverage for YE23. Additionally, the analyst thinks “greater deal flow/3.5x-plus leverage would likely support ~$1.00-plus free cash flow per share.”
It should also be noted that adjusted EPS rose 18% on 20%-plus EBITDA, with organic top-line growth landing at -1%.
“The Q2 2021 organic comparison eases to (3)%/Q2 2020 from +4%/Q1 2020, and, coupled with various markets positioned to improve sequentially (at stages during 2021; TransCore, Neptune, Deltek, CBORD, iTradeNetwork, Process & Industrial), should afford a high quality path relative to guidance for $14.75–15.00 adjusted EPS,” Glynn said.
What’s more, along with raw accretion, Glynn believes the deals “work well long-term” for Roper. With this in mind, he forecasts 6% EBITDA [compound annual growth rate] for both Neptune and TransCore, which are two of the company’s larger anchor deals from the early 2000s.
Given Glynn’s 69% success rate and 20.5% average return per rating, he is one of the top 170 analysts tracked by TipRanks.
Cohu just scored a thumbs up from Rosenblatt Securities analyst Scott Graham, thanks to multiple top-line catalysts. In addition to initiating coverage at Buy, the analyst put a $65 price target on the stock, suggesting 88% upside potential.
Graham acknowledges that concerns related to mix have “restrained the stock and reduced its valuation relative to peers.” However, he believes that Cohu will outperform over the next year due to “high quality earnings growth and a building cash balance/acquisition opportunity.”
The firm tells clients that the semiconductor space is in a “Mother of All Cycles” period, as a result of “continuing penetration of AI in major semi sub-sectors.” Based on the firm’s estimates, this cycle could last through 2023 and beyond.
“We believe COHU, with the Auto and Industrial markets having turned up, is now on this train. We expect COHU’s sales to continue to benefit from this backdrop and its targeted strategies which seek to tap faster-growth niches and seculars in its markets,” Graham noted.
The analyst highlights the fact that COHU’s sales are correlated to Wafer Fabrication Equipment capex, which is set to rise 20% to 30% this year. Given current trade estimates, this market is currently valued at $70 billion-plus, with it poised to reach $100 billion in the next five years. On top of this, the company’s SOC test segment is “in a market benefiting from increasing IC content in devices/applications, namely smartphones, autos, industrial and compute,” according to Graham.
When it comes to Cohu’s strategy, the company is taking a “targeted” approach, in Graham’s opinion. Not only is Cohu scaling its semi test sales, but it is also increasing its penetration of the auto space and boosting its contractor attachment rates, which the analyst believes could fuel an improvement in margins.
As for recurring revenues, Graham sees this as an “undervalued aspect of the stock’s valuation” because although they might grow at a slower pace than systems sales, they are “more resilient in down cycles and have higher margins than systems sales.”
Currently, Graham is tracking a 69% success rate and 14.9% average return per rating.
Advanced Micro Devices
Even with 50% sales growth for CY21E “in some of the most desirable, duopolistic large total addressable market ($70 billion-plus) markets in semis,” Bank of America Securities analyst Vivek Arya points out that Advanced Micro Devices has lagged its peers in the space year-to-date. That being said, the analyst still has high hopes for the company’s growth prospects.
To this end, Arya not only kept a Buy rating on the semiconductor player but also gave the price target a lift, with the figure moving from $110 to $120 (33% upside potential).
Arya points to three catalysts that could propel shares higher including a possible product push-out from Intel (INTC) as well as the recent Google endorsement, which could lead to a breakout for AMD’s data center segment.
When comparing AMD’s Milan and Intel’s Ice Lake, Arya tells investors that the former’s offering is superior in terms of both single and multi-thread workloads and “Arm-based cloud instances in scale-out workloads where Arm historically had an edge.”
Expounding on this, Arya stated, “This clear outperformance should allay competitive fears, especially as AMD next-gen 5nm products ramp in 2022 while media reports now suggest INTC 10nm Sapphire Rapids is not expected until Q2 2022 with TSMC (Taiwan Semiconductor) 5nm equivalent products (INTC 7nm) not until at least 2023. AMD is already seeing results with accelerated server share in Q1 2021.”
Additionally, AMD’s share of the supercomputing market has increased by more than 2x in the last six months, and 5x in the last year, which shows “AMD’s improved competitiveness in HPC, a strong leading indicator for future cloud/enterprise momentum,” in Arya’s opinion.
He added, “Even more notable, AMD now powers three of the top ten supercomputers, the same number as INTC for first time ever.”
Looking at the valuation, Arya calls it “compelling” at “just 6x CY22 EV/sales for 25%-plus sales growth from 2020- 2023E.” This reflects a significant discount to other infotech companies.
Arya’s 70% success rate and 28.1% average return per rating support his #83 ranking on TipRanks’ list of best-performing analysts.