With New Year’s resolutions in hand, market watchers are hitting the Street, searching for the new decade’s showstoppers. However, an impressive 2019 market rally coupled with a general sense of uncertainty as we enter a U.S. presidential election year makes this task increasingly challenging. Luckily, the pros on Wall Street can help an investor out.
Taking a cue from the analysts is one tried and true way to spot the names most poised to outperform. Bearing this in mind, I wanted to take a closer look at seven stocks flagged by the Street for their stellar long-term growth prospects.
TipRanks, a company that tracks and measures the performance of analysts, revealed that these names have all gathered enough support from Wall Street over the last three months to earn a “strong buy” consensus rating.
As the platform evaluates analysts based on both success rate and average return-per-recommendation, investors can take comfort in the fact that “strong buy” status represents the pick of the bunch when it comes to compelling investment opportunities. Let’s dive in.
L3Harris Technologies (LHX)
A product of the L3 Technologies and Harris Corporation merger in June, L3Harris Technologies, Inc. (NYSE:LHX) operates as a defense and aerospace company, providing mission solutions across a variety of domains. With it already notching a 49% gain in 2019, investors want to know if LHX still has more fuel in the tank.
While the bears might cite the recent pullback in the last two months as a cause for concern, others argue that the company still has a lot going for it. The merger has expanded its reach as well as provided new opportunities, specifically in the space segment. In addition, LHX announced last month that it had received a $50 million follow-on delivery order for Falcon III AN/PRC-160 HF radios and other equipment to support the Marine Corps’ High Frequency Radio II modernization program.
Bernstein analyst Douglas Harned has been unfazed by the share price dip, arguing that the pullback actually makes LHX more appealing. He points to possible strong value creation that could come from rationalizing a stacked portfolio. On top of this, it seems likely that LHX can reach its FCF forecast of $3.47 billion by 2022 based on organic growth including revenue synergies, cost synergies and working capital reduction.
All of this prompted Harned to pull the trigger and start coverage with an “outperform” rating. At his $247 price target, shares could climb 23% higher in the twelve months ahead.
Turning to the rest of the Street, it looks like other analysts agree. Out of seven analysts that have reviewed LHX in the last three months, six are bullish. The average price target of $245 puts the upside potential just below Harned’s forecast at 22%. See the LHX stock analysis.
Lennar Corporation (NYSE:LEN) is one of the top homebuilding companies in the U.S., simplifying the process of finding a new home for its customers. Ahead of its Q4 earnings release on Jan. 8, analysts are liking what they’re seeing.
Chris Graja of Argus Research is one such member of the Street, telling investors that he believes that LEN can add to its 42% 2019 rise in the new year. While at the bottom of the homebuilder’s guidance range, the analyst still predicts 16,000 home deliveries at an average price of $385,000 for the fourth quarter. To top it off, he argues that sales should remain strong thanks to “good traffic” and improving housing market conditions. With this in mind, he not only reiterated his “buy” rating but also bumped up the price target from $60 to $65.
Meanwhile, Wedbush’s Jay McCanless notes that LEN trades below its peers, despite the lack of a catalyst to cause the discount. He adds that the company is “undervalued” based on the shift to a more affordable product. As a result, he left his “outperform” rating and $72 price target as is. This target suggests that there’s room for a potential 29% twelve-month gain.
Wall Street appears to echo the analysts’ sentiment. Its “strong buy” consensus rating breaks down into nine “buys” vs a single “hold.” Additionally, the $68 average price target implies 22% upside potential. See the LEN stock analysis.
Used auto retailer CarMax (NYSE:KMX) operates over 195 stores throughout the U.S., with over 8 million cars sold. As it has sped past the S&P 500’s yearly jump, moving 39% higher in 2019, investor focus has locked in on KMX.
While some were taken aback by the EPS miss in its most recent quarter, RBC Capital analyst Scot Ciccarelli has come to the company’s defense. He argues that the miss was caused by temporary pressures in “Other GP,” but that this is actually improving the value proposition. Higher stock-based comp expenses that are often adjusted out by other companies were also a contributing factor.
Additionally, Ciccarelli reminds investors that KMX’s impressive top-line result was fueled by a “healthy used vehicle market (prices have started to fall over the last 4-5 months), the continued rollout of omnichannel capabilities, more advertising spend and, potentially, the recent improvement observed in ‘value perception’ through third party marketplaces like CarGurus.” As a result, he remains an “aggressive buyer.” Along with the Outperform call, he maintained the $108 price target, indicating 24% upside potential.
Judging by the analyst consensus, the rest of the Street also has high hopes for KMX. Six “buy” recommendations and two “holds” add up to “strong buy” status. The average price target of $106 brings the potential twelve-month gain to 21%. See the KMX stock analysis.
Exact Sciences (EXAS)
Exact Sciences Corporation (NASDAQ:EXAS) wants to help patients get in front of cancer by enabling earlier detection as well as offering treatment monitoring and guidance. Even though shares have had a rough going over the last six months, the Street is expecting this to change.
Part of the bullish sentiment surrounding the company is due to its Cologuard test, which is expected to see a significant sales increase. Approved back in 2014, the product can be used to screen adults 45 years or older that have an average risk of developing colorectal cancer by detecting certain DNA markers and blood in the stool. Notably, Cologuard is included as part of the American Cancer Society’s (2018) colorectal cancer screening guidelines.
On top of this, its merger with Genomic Health that was finalized this past November expands the biotech’s potential. “EXAS remains our favorite large-cap, growth stock pick…We expect robust Cologuard growth that exceeds Street expectations, are increasingly positive on how much GHDX can help EXAS commercially and operationally, believe the product pipeline is under-appreciated, and feel concerns are disproportionally captured in current valuation,” Cowen’s Doug Schenkel commented.
Taking this into consideration, Schenkel not only reiterated the “buy” rating but also went so far as to deem EXAS as a Best Idea for 2020. While he did cut the price target from $135 to $130, this still implies there’s room for a 42% gain in the coming twelve months.
Do other Wall Street analysts agree? As it turns out, they do. Out of 10 total analysts covering the biotech, 100% rated the stock a “buy,” making the consensus a unanimous “strong buy.” Given the $124 average price target, shares could surge 35% in the next twelve months. See the EXAS stock analysis.
Noble Energy (NBL)
Noble Energy (NYSE:NBL) is an independent oil and natural gas exploration and production (E&P) company, with operations in the Eagle Ford shale play as well as the DJ and Permian Basins. Looking at the consensus rating, a “strong buy” made up of seven “buys” and one “hold,” it’s clear the analysts believe that even with its 2019 gain of 30%, the stock’s growth story is still heating up.
The excitement related to the energy company is largely thanks to its performance at the DJ and Delaware Basin wells. In its third quarter, total volumes and oil volumes represented quarterly records for both basins. If that wasn’t enough, NBL was able to trim the costs associated with the wells by $500,000 each, with the figure now coming in at more than $2 million per well below year-end 2018 costs.
According to Michael Scialla of Stifel Nicolaus, this result makes the company a stand-out. “Our analysis suggests the company’s DJ and Southern Delaware Basin wells are significantly outperforming nearby peers. Despite an impending Eagle Ford production decline, the NBL’s U.S. assets are poised to generate 2020 oil growth and FCF,” he explained. To this end, the analyst gave his price target a boost while keeping a bullish call on the stock. At the updated target of $37, shares could increase 52% in the twelve months ahead. See the NBL stock analysis.
Cloudflare (NYSE:NET) offers a scalable and easy-to-use cloud-based platform for a number of on-premises, hybrid, cloud and SaaS applications. Since its September market debut in which shares popped 20%, NET has stumbled, with it currently down 4%.
That being said, Evercore ISI analyst Amit Daryanani highlights its server-less product lineup as a key point of strength. As this segment is still in “the early innings of market/product development” and the total addressable market (TAM) for server-less was left out of NET’s TAM estimate, he argues that the products could drive as much as $10.6 billion in upside in 2023. “We think NET’s server-less offering remains an underappreciated asset and could be crucial in driving revenue acceleration and customer loyalty moving forward,” he commented.
The five-star analyst adds that acquiring new enterprise customers will be important for the tech company, with it already having made significant progress in this area. Currently, the number of customers with annualized billings of over $100,000 is growing at a faster rate than the overall average. Additionally, the amount of customers with more than $100,000 in billings per year is up 83% over the last twelve months.
Using the above reasoning as justification, Daryanani decided to stay with the bulls, maintaining the “outperform” rating and $22 price target. At this target, shares could climb 28% higher over the next year.
With seven “buys” and two “holds” being assigned in the last three months, it appears that the rest of the Street is on the same page. Not to mention the $21 average price target indicates a possible twelve-month gain of 23%. See the NET stock analysis.
Global Blood Therapeutics (GBT)
Global Blood Therapeutics (NASDAQ:GBT) is a biopharma company developing innovative treatments for sickle cell disease (SCD), with one therapy for the disease having already been approved by the FDA. Even with shares skyrocketing 93% this past year, some members of the Street see plenty more upside in store.
In the U.S. alone, there are approximately 100,000 people living with SCD, many of whom have had to rely on expensive blood transfusions to replace sickled red blood cells with new ones. Oxbryta (Voxelotor), GBT’s first drug, is an alternative treatment for the disease that addresses the root cause by preventing hemoglobin from sticking together.
Just a few weeks after its launch, Piper Jaffray’s Danielle Brill tells investors that the demand has been better than previously expected. The five-star analyst stated that her survey of 40 doctors specializing in SCD treatment demonstrated that initial demand for Oxbryta is “even more robust” than she had thought. 211 prescriptions have already been written in the two weeks following the launch, with all of the doctors in the survey planning on prescribing the drug over the next three months.
It’s no wonder, then, that Brill stayed with the “overweight” call and $120 price target. This conveys her confidence in GBT’s ability to post a 52% gain in the next twelve-month period.
Like Brill, Wall Street has been impressed by this biopharma. With 13 “buys” and three “holds,” the word on the Street is that GBT is a “strong buy.” While lower than Brill’s, the Street’s average price target of $101 implies a respectable 28% upside potential. See the GBT stock analysis.
TipRanks offers investors the latest insight into eight different sectors by tracking the activity of over 5,000 Wall Street analysts. As of this writing, Maya Sasson did not hold a position in any of the aforementioned securities.