What to do about shopping today? While last week ended lower, we are still looking at a general rally trend, with year-to-date losses moderated sharply and the major indices climbing out of bear territory. The bottom line for now, as it has so often been this year, is volatility.
Covering the markets for JPMorgan, global market strategist Marko Kolanovic tells investors to take advantage of down days and buy the dips. “The bearish market has so far delivered positive returns and outperformed e.g. suggestions to stay out of the market and start nibbling at 3500 or 3300, levels that have not been reached,” Kolanovic explained.
As for the market in general, Kolanovic describes last month’s inflation data as “quite encouraging” and goes on to say: “The decline in July’s CPI may likely repeat itself in August, given the lower energy prices in August so far (data release Sep. 13) and provide room for a market-friendly Fed.”
Looking ahead, Kolanovic has predicted that the S&P 500 will reach 4,800 by the end of the year, a 13.5% gain from current levels. His peers among JPM’s equity analysts have picked two bearish stocks for investors to consider, predicting a 60% or better upside over the next year. Running the tickers through the TipRanks database, we learned that each has earned a consensus “Strong Buy” rating from the rest of the Street.
IHS Holdings (IHS)
We’ll start in the technology sector, where IHS Holding is a telecommunications infrastructure company that works to develop and expand wireless communications network towers in Sub-Saharan Africa, the Middle East and Latin America. In total, IHS has more than 39,000 towers in its real estate portfolio, in 11 countries.
IHS is the leading tower operator and provider in its area of operation and offers solutions for a variety of telecommunications needs, including small cell operations, fiber optic connectivity, rural telephone networks. The company is working to realize value and reduce costs, for itself and its customers, as part of an agile network operation.
In its most recent fiscal quarter, 2Q12, IHS reported a top line of $467.7 million. That was down from $763.5 million reported in the previous quarter. Earnings were negative in Q2, posting a loss of $177 million. That translated to a reduced EPS loss of 53 cents, a 60% higher loss than the year-ago quarter. Despite the loss of earnings, IHS’s cash position has improved modestly over the past 12 months. The company reported $191 million in cash from operations in the second quarter, compared with $174 million in the year-ago quarter, and year-over-year, cash and liquid assets rose from $541 million to $567 million.
Shares of this telco have been on a tear over the past few months, and year-to-date the stock is down 48%.
Analyst Philip Cusick, in his coverage of this stock for JPMorgan, sees the falling share price as an opportunity for investors.
“We believe that at the current 6.5x 2022E EV/EBITDA, IHS shares are significantly undervalued and expect valuation improvement
over time… We like the strong growth profile in the regions where IHS operates, fueled by high population growth, expanding economic activity, higher penetration and increased usage, and the transition to 4G and ultimately 5G. The company has a strong operating track record led by its long-standing and experienced management team to deliver results in challenging markets,” said Cusick.
This adds up, in the analyst’s view, to an Overweight (i.e. Buy) rating – and the $16 price target indicates scope for substantial growth of ~119% over the next year. (To follow Cusick’s history, Click here)
Overall, while stocks are falling, Street sentiment for IHS remains solid. The stock has 7 recent analyst reviews on file and all are positive – for a strong buy consensus. The stock is selling for $7.32 and the average price target of $19 suggests a one-year upside potential of ~160%. (See IHS stock forecast on TipRanks)
Snap One Holdings (SNPO)
With the second JPM option, we will turn to the field of smart homes. Snap One is a leading distributor of smart home technology, offering customers solutions for entertainment and networking, home audio, home security and networking, and even remote energy management. Smart solutions put all this in the hands of the property owner. Snap One’s product lines and installations are available in both the residential and commercial markets. The company operates as a holding company, delivering its products through a network of subsidiaries and brands.
Smart home technology has been growing in popularity in recent years, and Snap One reported quarterly revenue growth last year, but shares of SNPO are down 47% so far this year. Various factors have affected the share price. The company’s revenue growth has slowed, while its net loss is widening.
That’s not to say the current numbers are bad – just not as good as investors would like to see. In 2Q12, the company reported $296.9 million, a 17% year-over-year gain. At the same time, the net loss increased by 27% annually, reaching $1.3 million. The company’s cash decreased from $40.6 million as of December 31, 2021 to $31.3 million as of June 30, 2022. Looking ahead, the company expects full year 2022 net sales to be between 1.16 and 1. $18 billion, 15% to 17% annual profit.
JPMorgan analyst Paul Chung reminds us that Snap One’s Q2 results beat forecasts and continues: “FY22 guidance was reiterated despite the pace, with some conservatism given the macro environment in our view. although it still implies an increase of close to 20% per year. a strong driver in our view when most companies are cutting back on guidance. Pricing actions in June should provide support for gross margins, combined with a more measured pace of opex spending to build solid profitability and cash flow. The integrator demand feedback remains strong and the higher end consumer appears relatively more resilient in the current environment.”
To that end, Chung sets a price target of $18, implying a one-year upside of 62%, which supports an Overweight (i.e. Buy) rating on the stock. (To follow Chung’s history, Click here)
Overall, this interesting smart home company has 6 recent Wall Street reviews, and these break 5 to 1 in favor of Buy over Hold, for a strong buy consensus. The stock is selling for $11.09 and the average price target of $19 suggests an impending 12-month gain of 71%. (See SNPO stock forecast on TipRanks)
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Denial of responsibility: The views expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.