The fastest stock market decline in history has been followed up by one of the most rapid recoveries. Rallying on economic re-openings and a better-than-expected jobs report, the S&P 500 has basically recovered all of its losses for the year, while the Nasdaq topped 10,000 for the first time ever.
Yet, investors need to be mindful of the potential risks ahead. US stocks tumbled today due to new concerns that the U.S. may be experiencing a second-wave reinfection of Covid-19 cases in certain states.
So, where does the market go from here? One way to navigate all of the stock market uncertainty is to rely on a more comprehensive stock analysis.
Investing Insights offers a Smart Score metric that incorporates 8 unique market factors including analyst ratings and price targets, hedge fund activity, social media trends and other fundamental and technical factors to gauge a stock’s long-term growth prospects. After analyzing each factor, a single numerical score is generated, with 10 being the best possible result.
Bearing this in mind, we used Investing Insights to find three stocks with a ‘Perfect 10’ Smart Score. We’ll see why these companies scored so highly, and what Wall Street’s analysts have to say about it.
Microchip Technology (MCHP)
The first “perfect 10” name on today’s list is Microchip Technology, a major player in the industry. MCHP is ranked #6 globally by sales share, and boasts a $27 billion market cap. The company is heavily invested in the automotive sector, as its chips are widely used in power management apps and wireless connection devices.
The company’s tech is heavily integrated into electric vehicles, as well as early innovation in Level 4/5 ASAD. Microchip produces SiC MOSFETs and diodes, which are used in electric power-trains and charging systems, while its connectivity chip enable the centralized computing and GPS location systems that will make autonomous vehicles ‘smart.’
Needham’s Rajvindra Gill particularly sees Microchip’s moves to micro-PNT as important for autonomous vehicles. This technology will enable cloud-based real-time mapping updates in the ‘urban canyons’ that resist traditional GPS locators. The company is engaged in test projects in three cities, and pending results will move toward the market.
Gill rates MCHP a Buy, and gives the stock a $130 price target, indicating confidence in a 25% upside potential for the coming year.
Overall, Microchip’s Strong Buy analyst consensus rating is based on 20 reviews, which include no fewer than 18 Buys opposed to just 3 Holds. Shares are trading for $103.78, while the average price target of $115.10 suggests a 11% upside potential. (See Microchip stock analysis)
TreeHouse Foods (THS)
Next up is TreeHouse Foods (NYSE:THS), a $2.6 billion food processing company based in Illinois. The company markets private label brands in a wide range of food products – pasta, baby food, dairy, snacks – to a worldwide customer base. TreeHouse’s niche is secure, and the essential nature of the company’s products allowed it to weather the coronavirus storm.
In the first quarter THS showed positive earnings that beat the forecast. The company reported 37 cents EPS, against estimates of 32 cents. Revenues, too, were above expectations at $1.08 billion. While the Q1 revenues were down sharply from Q4, that was part of the expectation – historically, THS’ lowest-earning quarter is the calendar first.
Robert Moskow covers this stock for Credit SuisseCSGN, and rates it a Buy. His $60 price target suggests a potential upside of 24% in the coming year.
Backing his stance, Moskow writes of fours points that indicate strength for the stock. His first two points are particularly worth noting: “1) Retail tracking data indicates private label food and beverage grew 22% in the 4- weeks ending April 4, which outpaced branded growth of 19%; 2) We estimate at least 80% of TreeHouse’s categories are geared toward stronger at-home food consumption, especially pasta, broth, single-serve coffee, and snacks…”
Overall, THS shares have a Strong Buy rating from the analyst consensus, showing that Wall Street agrees with Moskow’s assessment. The rating is based on 8 Buys and 2 Holds set in the past month. TreeHouse shares are selling for $48.55, and the average price target, at $57.25, implying an upside of 18% this year. (See TreeHouse stock analysis)
NIKE, Inc. (NKE)
Last but definitely not least is Nike (NYSE:NKE). The COVID-19 pandemic has underscored the importance of a healthy lifestyle. This sentiment was recently echoed by Nike CEO John Donahoe who said, “Even more so, consumers around the world are recognising the need for an active and healthy lifestyle and sport is now more meaningful than ever.”
Nike was able to buck the negative sales trend affecting consumer goods companies and deliver positive sales during the COVID-19 crisis. Revenues increased 5% to $10.1 billion in the fiscal third quarter. The results were driven by online sales gains that more than offset sales losses due to store closures.
The company’s share price has almost doubled since March when it hit a 52-week low of $62.80, posting an impressive 24% gain over the last year.
Cowen analyst John Kernan believes Nike’s expanding user base improves the connection with core consumers and offers a meaningful mix benefit to unit economics and gross margins.
To this end, Kernan bumped up the firm’s price target on Nike to $110 from $85 and has an Outperform rating on the shares. His price target on Nike indicates 11% upside potential.
Wall Street agrees with Kernan’s view on Nike. Out of 22 analysts providing recommendations, there were 19 Buys and 3 Holds, so the analyst consensus rating is a Strong Buy. (See Nike stock analysis)
To find more ideas for stocks trading at attractive valuations, visit InvestingInsights.