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All Contents © 2019The Kiplinger Washington Editors
By Harriet Lefton
| August 9, 2018
Just because a stock has performed badly in the past, doesn’t mean it’s game over for the future. As investors, we can jump into stocks that are rising. But another strategy is to find poorly performing stocks on the cusp of rebounding. Obviously, this is a more risky approach. What happens if the poor results continue?
Well, for instance, you can generate seriously lucrative returns. The key is to cherry-pick your stocks wisely by differentiating between stocks unfairly treated by the market, versus the stocks where all hope is truly lost.
Luckily help is at hand. Here, I turned to top analyst ratings to pinpoint stocks that are worth a second look. I used TipRanks to focus on analysts with the sharpest stock picking abilities.
These stocks have all posted losses, but the upside potential remains intact. Let’s take a closer look at these rebounding stock picks now:
Prices and data are from the original InvestorPlace story published on Jul. 27. Click on ticker-symbol links in each slide for current prices and more.
Lockheed Martin (LMT) is the leading defense contractor of global security and aerospace systems, products and services. The stock previously held a hold consensus rating from top analysts. But now five-star Cowen & Co analyst Cai Rumohr (Profile & Recommendations) is changing the tone. He has just upgraded LMT from “hold” to “buy.” This comes with a $370 price target on the stock (15% upside potential).
As a result, the stock’s consensus has shifted to a cautiously optimistic “moderate buy.” And now is the time to jump in before prices seriously take off. This is because the stock (now at $318) is a long way off its 52-week high of $363. But with stellar second-quarter earnings results now in hand, the future looks bright.
“We’re upgrading LMT to Outperform for hiked 2018 prospects & enhanced visibility of ~10% “economic” EPS CGR at least thru 2021. Above-average cash flow/dividend yields & a peer-low 38% net buy rating offer attractive risk-reward; and the stock sets up well going into likely very upbeat Q3.”
LMT posted a Q2 per-share earnings beat of $4.05, alongside a broad-based 5% increase in 2018 sales guide. See what other Top Analysts are saying about LMT.
French company Criteo (CRTO) is a personalized retargeting company. In other words, Criteo is the company behind the online ads that pop up reminding you of previously viewed products. That concept proved incredibly impressive. Indeed, for a while, Criteo was raking in the returns. But Criteo suffered a mighty blow when Apple disabled the solution that Criteo was using to reach Safari browser users. Shares ended 2017 down 36%.
But Criteo is steadily beating its way back. And now is the perfect time to pick up a top-notch stock on the cheap. Already in 2018, prices are back up 32% on a year-to-date basis. And according to top analysts, further upside potential of over 20% lies ahead.
Top Pivotal Research analyst Brian Wieser (Profile & Recommendations) has just initiated coverage of CRTO. He starts with a “buy” rating and $48 price target (40% upside potential). According to Wieser this pure-play ad tech stock “will resume high single-digit growth and gradually improve its margins.”
He calls the stock “undervalued” and adds that “while competition is intense, we note that the market of advertisers CRTO is servicing is still growing rapidly and unlikely to slow any time soon.” See what other Top Analysts are saying about CRTO.
Biotech Regeneron Pharmaceuticals (REGN) sells medicines for eye diseases, high LDL cholesterol and a rare inflammatory condition. It is developing a slew of product candidates for everything from rheumatoid arthritis, asthma and dermatitis to pain, cancer and infectious diseases.
In the last year, prices have plunged 30%. This was due to disappointing clinical data in the face of successful drug trials for rival candidates. Notably, Novartis (NVS) announced that one of its experimental eye disease drugs outperformed Eylea in a late-stage study. This is bad news because Eylea contributes a significant chunk of Regeneron revenue.
Now, however, after over two years waiting on the sidelines, Oppenheimer’s Hartaj Singh (Profile & Recommendations) finally sees a compelling investing opportunity. He has now upgraded his rating, writing, “With the risk/reward now skewed to the upside, we rate REGN Outperform.” He also established a $410 price target.
Singh tells investors: “The company is on the cusp of strong 2019/20 sales growth… [and] with OPEX increases potentially slowing, starting in 2019, we believe REGN could follow up the left jab of accelerating sales with the right hook of operating leverage.” Boom! See what other Top Analysts are saying about REGN.
Auto giant Ford (F) is not the most popular stock in the market right now. Shares have declined over 14% year-to-date. However, this drop is unjustified according to top Jefferies analyst Philippe Houchois (Profile & Recommendations). He recently upgraded Ford from Hold to Buy with a $14 price target (32% upside potential).
“Rarely have we seen an OEM [original equipment manufacturer] generate so little passion,” states Houchois. However, “Despite being perceived a laggard, we think Ford is early among global OEMs in re-evaluating how it allocates capital, a process most OEMs outside North American have yet to address.”
Plus Ford is receiving “no credit for ambitious but credible cost targets and for multiple operating and strategic levers still available to improve market and product exposure.” Houchois notes that Ford’s ‘fortress’ balance sheet will be “a critical factor to implement mobility businesses.” He believes that Ford can slash costs by $25 billion.
Interestingly, 4 out of 4 top analysts rate the stock a “buy,” giving the stock a “strong buy” consensus. These top analysts have an average price target on Ford of $15 (42% upside potential). See what other Top Analysts are saying about F.
Back in February, the FDA refused to accept Celgene’s (CELG) application for approval of MS candidate ozanimod. But don’t give up on Celgene just yet! This struggling biopharma may be down over 35% in the last one year, but the prospects remain promising. So says top Oppenheimer analyst Leah R Cann (Profile & Recommendations). She sees prices rebounding by a whopping 87% to $163. “We believe Celgene has a favorable risk-reward trade-off at its current stock price” says Cann. You don’t say.
Specifically, she notes that CELG has just reported data from its Phase III Augment clinical trial that compared Revlimid and rituximab to placebo in specific types of blood cancer. There was a highly statistically significant improvement in the primary endpoint of progression-free survival (PFS).
It may be way too early to include these results in the stock’s outlook. But nonetheless, Cann notes that “the positive AUGMENT data are very encouraging in this difficult to treat setting, and could provide a new chemotherapy-free option for these patients.” She is now waiting for further updates and planned regulatory submissions in 2019.
Overall, Celgene shows a cautiously optimistic “moderate buy” rating from the Street. This is with a $121 price target (39% upside potential). See what other Top Analysts are saying about CELG.
Norwegian Cruise Line (NCLH) is the world’s third-largest cruise operator (based on fleet size). The stock has suffered recently and it is currently down over 14% on a six-month basis. So is now the time to jump ship? Far from it!
Top Tigress Research analyst Ivan Feinseth (Profile & Recommendations) blames NCLH’s poor performance on fellow cruise operator Carnival Corp’s (CCL) lower-than-expected forward guidance sparked a selloff among its industry peers. However, he writes, “We believe Norwegian is being unjustly penalized and view the current weakness as a significant buying opportunity.”
He is sticking to his bullish thesis on the cruise ship industry. Not only does it offer an attractive all-inclusive travel option, but it also stands to benefit from rising disposable income, an aging population and increased millennial spend on travel. Plus, there is a massive opportunity to develop a significant cruise market in China.
And out of all the cruise stocks, “NCLH continues to be the best value with the most upside potential among the three public cruise operators.” This is because “NCLH currently operates the youngest, most feature-rich, technologically advanced and fuel-efficient ships.”
Notably, the “strong buy” stock has received three buy ratings from top analysts in the last three months. This is with a $65 price target (30% upside potential). See what other Top Analysts are saying about NCLH.
Kraft Heinz (KHC), the food giant behind classics like Heinz ketchup and Philadelphia cream cheese, is a controversial stock pick right now. On a one-year basis, shares are down over 30%. Looking back on a three or five-year basis is hardly any more encouraging. Declining U.S. cheese and dairy sales and the strengthening of the U.S. dollar have hit KHC where it hurts.
But it’s not all doom and gloom. Five-star RBC Capital analyst David Palmer (Profile & Recommendations) is sticking to his KHC “buy” rating. This is with a bullish $74 price target (24% upside potential). In his most recent report, Palmer highlights “the potential for a significant improvement in trends in 2H18.”
He expands on this here: “In our view, a 2H18 sales and profit recovery could drive meaningful stock upside and allow Kraft Heinz to regain its lost premium to the US Food group (16x in line with peers; currently 4% dividend yield). This would fuel the company’s ability to make potential large-scale acquisitions.” And acquisitions, especially an internationally focused acquisition like Mondelez (MDLZ), could easily boost prices. See what other Top Analysts are saying about KHC.
TipRanks.com offers exclusive insights for investors by focusing on the moves of experts: Analysts, Insiders, Bloggers, Hedge Fund Managers and more. See what the experts are saying about your stocks now at TipRanks.com
This article is from Harriet Lefton of InvestorPlace. As of this writing, Moon did not personally hold a position in any of the aforementioned securities.
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