While most of Wall Street focuses on large and mega cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Often the biggest public companies, especially the technology giants, trade in the low-to-mid hundreds, all the way up to over $1,000 per share. At those steep prices, it’s pretty hard to get any decent share count leverage.
Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.
Every week, we screen our 24/7 Wall St. research database looking for stocks with Buy equivalent ratings at major firms and priced under the $10 level (last week’s picks included Nokia and other Raymond James favorites), and this week was no exception. We found five new stocks that could provide investors with some solid upside potential. While more suited for aggressive accounts, they could prove to be exciting additions to portfolios looking for solid alpha potential.
This stock has been battered and holds solid upside potential for those with somewhat lower risk tolerance. Archrock Inc. (NYSE: AROC) is a natural gas contract operations services company. It also provides natural gas compression services to customers in the oil and natural gas industry throughout the United States and supplies aftermarket services to customers that own compression equipment in the United States.
The company operates through two segments. The Contract Operations segment primarily provides natural gas compression services to meet specific customer requirements. It provides contract operations services, including the personnel, equipment, tools, materials and supplies to meet its customers’ natural gas compression needs.
The Aftermarket Services segment provides a range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets.
RBC has a massive $14 price target on the shares, while the Wall Street consensus target is $14.30. The stock traded at $9.68 per share on Friday’s close.[GEICO]
This under-the-radar stock holds huge potential upside for aggressive accounts. BrainsWay Ltd. (NASDAQ: BWAY) is a commercial-stage medical device company focused on the development and sale of non-invasive neuromodulation products using the company’s proprietary Deep Transcranial Magnetic Stimulation (Deep TMS) technology for the treatment of major depressive disorder and obsessive-compulsive disorder. BrainsWay received marketing authorization from the U.S. Food and Drug Administration (FDA) for the former disorder in 2013 and for the latter in August 2018.
BrainsWay is currently conducting clinical trials of Deep TMS in other psychiatric, neurological and addiction disorders, including smoking cessation and post-traumatic stress disorder, and it is planning trials for opioid addiction, fatigue in multiple sclerosis and post-stroke rehabilitation.
The Oppenheimer price objective is a gigantic $17 price target, and the posted consensus target price is $16.69. The stock ended the week trading at $8.84.
This stock has been pounded and offers a massive distribution for accounts looking for income. EnLink Midstream LLC (NYSE: ENLC) is a Texas-based energy midstream company that owns limited partner interest and the general partnership interest in EnLink Midstream Partners, which is a master limited partnership primarily engaged in the gathering, transmission, processing and marketing of natural gas and natural gas liquids (NGLs).
EnLink Midstream operates a differentiated midstream platform that is built for long-term, sustainable value creation. EnLink’s best-in-class services span the midstream value chain, providing natural gas, crude oil, condensate and NGL capabilities. The company’s integrated asset platforms are in premier production basins and core demand centers, including the Permian Basin, Oklahoma, North Texas and the Gulf Coast.
EnLink’s strong financial foundation and commitment to execution excellence has driven competitive returns, and the shares look very reasonable at current trading levels.
Shareholders receive a gigantic 16.29% dividend. The huge $12 RBC price objective compares to the $9.46 consensus target price. Shares closed trading at $6.98 on Friday.
Extraction Oil and Gas
The SunTrust team is very positive on this smaller cap company. Extraction Oil and Gas LLC (NYSE: XOG) is focused on the acquisition, development and production of oil, natural gas and NGL reserves in the Rocky Mountains, primarily in the Wattenberg Field of the Denver-Julesburg Basin (DJ Basin) of Colorado.
The company offers its exploration and production processes in various steps, such as seismic, site preparation, drilling the well, completing the well, monitoring the well and reclaiming the site. Extraction utilizes sound walls to mute or redirect noise caused by its operations, and uses an electric rig to manage its drilling operations. It uses vapor recovery units to capture emissions from storage facilities. Lastly, the company uses lease automatic custody transfer units to collect oil from tanks in a closed-loop system that manages air emissions associated with the oil gathering and transportation process.
SunTrust has set its price target at $8. The consensus target was last seen at $5.08, and the stock closed at $2.11 per share.24/7 Wall St.
Jefferies Top Growth Stock Picks Have Huge Upside and Earnings Potential
This micro-cap biotech could be a huge home run for aggressive accounts. MEI Pharma Inc. (NASDAQ: MEIP) engages in the clinical development of therapies for cancer. Its drug candidates include pracinostat, an oral HDAC inhibitor that is being developed in combination with azacitidine for the treatment of acute myeloid leukemia and myelodysplastic syndrome. Its pipeline also consists of ME-401 (an oral PI3K delta inhibitor), voruciclib (an oral CDK inhibitor) and ME-344 (a mitochondrial inhibitor).
MEI has a strong foundation to build value through advancing the company’s pipeline, evaluating drug combination opportunities across the B-cell malignancy landscape and continuing to create and explore strategic opportunities to most effectively leverage the potential of the pipeline. Top management feels that each of the company’s four clinical-stage oncology candidates is well positioned for continued clinical development.
Oppenheimer has a strong $7 target price. But the consensus target is even higher at $8.50. Share were last trading hands at $1.78 apiece.
OCTOBER NEWSLETTER 2
For the most part, analysts seemed to be sidelined on International Business Machines Corp. (NYSE: IBM) after it released its third-quarter financial results after the markets closed on Wednesday. But they see a light at the end of the tunnel.
24/7 Wall St. has included some highlights from the earnings report, as well as what analysts are saying after the fact.
IBM did manage to exceed analyst expectations with a third-quarter profit of $2.68 per share, outside of items. The results beat the Refinitiv consensus estimate of $2.67 per share. Its net income fell to $1.87 per share ($1.67 billion) from $2.94 per share ($2.69 billion) a year ago.
IBM’s total revenue fell by almost 4% to $18.03 billion in the third quarter, short of the consensus estimate of $18.22 billion. The company did indicate that revenues would have dropped by only 0.6%, excluding the impact from currencies and business divestitures. Unfortunately, IBM’s new businesses and strategic imperatives just are not able to offset the old core businesses fast enough to move the needle for IBM to be considered attractive to investors who want growth.
In a post-acquisition world with Red Hat under the IBM umbrella, the company hopes to (and needs to) grow its subscription and recurring revenues. IBM’s technology services unit showed a 5.6% drop to $6.70 billion in the quarter. Here is how its growth segments performed after adjusting for currencies: Revenue for Red Hat was up 20%, Cloud & Cognitive Software was up 8% and Cloud revenue was up 14%.
Credit Suisse reiterated an Outperform rating with a $173 price target. The firm said that IBM is continuing to center on the return to sustained revenue growth. Credit Suisse thinks that inflection starts in the fourth quarter, with an early boost from mainframe before passing the baton to Red Hat and the related pull-through of “core” IBM in 2020. Indeed, early progress on Red Hat is encouraging and Credit Suisse continues to believe the acquisition significantly improves IBM’s standing in the rapid push toward hybrid cloud.
Merrill Lynch reiterated a Buy rating with a $170 price target. The firm offered this investment rationale:
We view IBM as a defensive investment given its high exposure to recurring sales, cost cutting levers, solid balance sheet, potential share gains, and relatively stable margins. We believe IBM will embark on further cost cutting, and enhance its services and software offerings through acquisitions. Longer term, we expect IBM to take share in IT spending with its Cloud and AI initiatives.
Here’s what a few other analysts had to say:
Wells Fargo reiterated a Market Perform rating and lowered its price target to $140 from $147.
BMO reiterated a Market Perform rating and lowered its price target from $157 to $152.
Wedbush reiterated a Neutral rating and cut its target price to $155 from $165.
CFRA reiterated a Buy rating with a $165 price target.
Nomura Instinet reiterated a Buy rating and cut its target to $170 from $175.
Shares of IBM traded down 6% on Thursday to $133.66, in a 52-week range of $105.94 to $152.95. The consensus price target is $153.05.
If any technological advancement has become 100% ubiquitous for most Americans it is the internet. We use it daily for a multitude of tasks, including everything from payments to ordering food, to travel, to checking the weather, to a million other things. Because of the huge adoption of the internet, digital advertising has emerged as the single most innovative breakthrough in the advertising arena since the dawn of TV.
A new Jefferies research report remains very positive overall on the internet and the prospects going forward but also remains selective on the top companies in the sector they like going into the third-quarter earnings prints. The analysts, led by Brent Thill, are very bullish on these four top picks before earnings, and all are rated Buy at Jefferies.
The search giant continues to expand and, while search is king, the cloud presence is growing fast. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
Back in the fall, Google outlined expanding capabilities to facilitate commerce, capitalizing on the “treasure trove” of data provided by seven different properties, each with at least a billion active users (Android, Search, Chrome, Maps, Play, YouTube and Gmail). Smart shopping campaigns leverage machine learning to make sense of touch points along the consumer purchase path, including better offline attribution capabilities (locally oriented searches up 200% over past two years) and improved purchase conversion rates (20% on average).
Advertising remains a huge growth area, and the analysts noted this:
Industry ad spending remains healthy as we noted at the Advertising Week conference in September. The company keeps pushing the envelope with advertising surface on YouTube, Google Maps (including travel planning), and local initiatives. We remain positive on Alphabet thanks to attractive valuation, healthy digital advertising market, and call options such as YouTube, Cloud, hardware (expanded product line heading into the holidays), and Waymo (Long-term value ~$250 billion).
The Jefferies price target for the shares is $1,500, and the Wall Street consensus target is $1,343.80 The shares closed Tuesday at $1,242.24.
This online travel leader could be poised for a potential big third-quarter report. Expedia Inc. (NASDAQ: EXPE) is the leading internet travel pure-play with exposure to online travel in the United States, Europe and Asia. The company’s portfolio of brands includes Expedia, Orbitz, HomeAway, Travelocity, Hotels.com, Trivago, Egencia, Hotwire, Wotif, Venere and Classic Vacations.
Top analysts see it as a story of improving execution, and they also think that the company finally is starting to match Priceline’s growth metrics. The company has raised the dividend and is buying back stock, and both are shareholder-friendly actions.
Jefferies noted this when discussing the outlook for the third-quarter results:
We expect investors to focus on Vrbo and trivago, looking for improving trends, along with potential commentary on expectations beyond fourth quarter 2019 against softening global macro trends. We believe that continued strength in Core OTA, return to growth for trivago and favorable exposure should help top-line growth in the second half while operational streamlining and remaining marketing spend efficiencies should still help margins.
Investors receive a 1% dividend. The $170 Jefferies target price is well above the $149.10 consensus price target. Expedia closed Tuesday at $137.25.
2500 Plaza 5 25th fl Jersey City NJ 07311 phone 732-516-1648 fax 732-516-9778
Copyright © Daniel Cullinane CPA.
Daniel Cullinane CPA
25 Plaza 5 25th fl Jersey City NJ phone 732-516-1648 fax 732-516-9778