Some of these “strong buy” stocks have taken a beating, but they aren’t tapping out just yet
Following the record-breaking market rally, investors are seeking out names that won’t break the bank. Driven by an improved global growth outlook for 2020, accommodating Federal Reserve policy and the possibility that a U.S.-China trade deal will be signed, the S&P 500 has reached all-time highs.
As a result, a renewed sense of optimism has found its way to Wall Street, with Merrill Lynch predicting that cyclical stocks, which typically do well when the economy prospers, will continue to soar. “We think the stage is set for a restocking-driven recovery in Spring 2020 to extend the cyclical rally,” the firm stated.
While all of this bullish sentiment has investors getting excited, it can make it more challenging to find growth stocks with reasonable entry points. Luckily, TipRanks.com offers a host of market data and investing tools that can help. The platform allowed me to zero in on seven tickers set to dish out handsome returns in the coming years. On top of this, each has gathered enough Street support over the last three months to earn a “Strong Buy” consensus rating.
Let’s jump right in and see what makes each of these strong buy stocks tick.
Strong Buy Stocks to Watch: PaySign (PAYS)
Potential 12-Month Gain: 71%
PaySign, Inc. (NASDAQ:PAYS) is a payment services provider specializing in prepaid debit card programs. Despite the fact that shares have stumbled recently, one top analyst believes the pullback represents a unique buying opportunity.
D.A. Davidson’s Peter Heckmann tells investors that further gains are in store on top of its already posted 155% year-to-date climb. The analyst cites the company’s “impressive” growth over the last five years, predicting that top-line trends will stay strong and margins could see an improvement from 2019 to 2021. As a result, he initiated coverage with a Buy and set a $16 price target, indicating 78% upside potential.
Part of this success has been due to the fact that PAYS continues to increase market share, gain traction in existing verticals and expand its reach within the industry. On another encouraging note, it also successfully onboarded all of its scheduled plasma programs — its solutions for plasma collection centers — during its most recent quarter. This increased its footprint in the space by 13%.
Like Heckmann, Wall Street has high hopes for PAYS. With the 3 Buys and 1 Hold it received in the last three months, PAYS stock has a Strong Buy consensus rating. Additionally, its $15 average price target puts the potential twelve-month gain at 71%. See the PAYS stock analysis.
WPX Energy (WPX)
Potential 12-Month Gain: 52%
WPX Energy Inc. (NYSE:WPX) is an oil and gas exploration and production company specializing in hydrocarbon exploration. Even though shares have dropped year to date, several members of the Street suggest buying the dip. With Guggenheim’s Subash Chandra seeing 64% upside potential in store, investors are thinking about doing just that.
The company is well-positioned in both the Permian and Williston Basins, with about 100,000 net acres and 85,000 net acres, respectively, in the regions. As management bumped up its guidance for full year 2019, it’s no wonder investors are giddy about this energy name. Management now expects oil production to reach 103,000 boe/d, up 5% from the previous forecast.
Not to mention WPX has been able to substantially reduce the costs of its wells. The company’s two-mile well spending totaled $9.5 million for drilling facilities and completion, with costs expected to decrease further in the 50 to 55 West Texas intermediate world.
Based on all the above factors, Wall Street analysts are thoroughly impressed with WPX. It boasts 100% Street support, or 9 Buy ratings in the last three months, making the consensus a Strong Buy. If this wasn’t enough, the $15 average price target implies that shares could surge 52% in the next twelve months. See the WPX stock analysis.
Potential 12-Month Gain: 39%
Formerly known as Forgent Networks, Asure Software Inc. (NASDAQ:ASUR) offers Software-as-a-Service cloud-based solutions that make it easier to get work done. While shares took a hit last week following an update from the company, several analysts note that the situation is brighter than some might think.
Shares fell in reaction to management’s fiscal 2020 guidance that came in lower than previously expected, caused by the cost of overhead associated with the Workspace segment. Back in October, ASUR agreed to sell this portion of the business to FM: System for $120 million so it could focus on delivering its human capital management (HCM) products. This was combined with the expected incremental investment to fuel organic growth.
Nonetheless, Needham analyst Ryan MacDonald is still backing ASUR. “We view the shared overhead burden as temporary in nature and believe the company’s human capital management business can support 20%-plus EBITDA margins,” he explained. As a result, the five-star analyst reiterated his bullish call while slightly lowering the price target from $12 to $11. This still suggests a 29% potential twelve-month gain.
The rest of the Street appears to echo MacDonald’s sentiment. As it has racked up 5 Buys and no Holds or Sells, the consensus is unanimous: ASUR is a Strong Buy stock. Adding to the good news, the upside potential lands at 39% based on the $11.80 average price target. See the ASUR stock analysis.
Nexstar Media (NXST)
Potential 12-Month Gain: 39%
Nexstar Media Group, Inc. (NASDAQ:NXST) is the largest TV station operator in the U.S., reaching almost 39% of households. Given that shares have certainly had a rough going over the last week, some are wondering if NXST is worth buying on weakness.
Part of the buzz surrounding the company is related to its successful completion of its merger with Tribune Media, which contributed to it becoming the largest U.S. operator. Additionally, the announcement also featured other exciting updates. These included hiked up first-year synergy guidance, the introduction of 2019/2020 PF FCF guidance and a disclosure regarding the financial impact from the two-month retransmission dispute with AT&T (NYSE:T).
All of this played into B.Riley FBR analyst Zachary Silver’s decision to stay with the bulls. On top of keeping his Buy rating, the four-star analyst raised the price target from $139 to $140. This means that shares could climb 38% higher in the next twelve months.
In general, the rest of the Street has an optimistic view of NXST. The stock’s Strong Buy status comes from the 5 Buys and 1 Hold issued over the previous three months. The upside potential lands at 39%, slightly above Silver’s forecast. See the NXST stock analysis.
World Wrestling (WWE)
Potential 12-Month Gain: 40%
The wrestling media and entertainment company isn’t looking like a knockout right now as shares have sunken 19% lower YTD. That said, some analysts say not to count World Wrestling Entertainment Inc. (NYSE:WWE) out just yet.
The alarming headlines have had to do with WWE’s lackluster third quarter. This in conjunction with management’s statement that content spending will rise during the fourth quarter has left investors underwhelmed. However, Morgan Stanley analyst Benjamin Swinburne reminds investors that these headwinds are temporary. He believes that the selloff following these results was an “overreaction to an already undervalued stock.”
Swinburne also points out that U.S. rights revenues could amount to 40% of 2020 revenue and the media business overall makes up 90% of the consolidated segment EBITDA. Even if international rights don’t grow as much as the analyst hopes, adjusted EBITDA could double in the next year.
Also consider that 2020 will be an important year for the company as it represents year one of WWE’s new TV revenue profile. This means that adjusted EBITDA growth is expected to land at a high-single digit rate through 2024, after which it should reset higher. Swinburne commented, “That growth, at now 12 times EV/20E EBITDA, presents a compelling risk reward.” With this in mind, the five-star analyst kept his Buy recommendation while decreasing the price target from $85 to $80. This target still puts the upside potential at 33%.
It looks like other analysts aren’t ready to tap out either. Out of 13 ratings published in the last three months, 12 are bullish. On top of this, WWE’s $84 average price target lends itself to 40% upside from the current share price. See the WWE stock analysis.
Viper Energy (VNOM)
Potential 12-Month Gain: 52%
With 100% of the 11 analysts covering Viper Energy Partners LP (NASDAQ:VNOM) in the last the months assigning bullish calls, it’s worth giving this name a look. Even though shares are down 13% year to date, VNOM could see a twelve-month gain of 52%.
In its third quarter, production reached 21,266 boe/d (64% oil). This represents a 9% increase from Q2 and a 16% year-over-year gain. Not to mention 445 gross horizontal wells are in the process of active development on Viper’s pro forma acreage, which should help it meet its average production guidance of 25,000 to 27,000 boe/d (65% – 68% oil) for Q4 2019.
Some are counting on the company’s M&A activity to help paint a more attractive picture. The Diamondback Energy (NASDAQ:FANG) subsidiary announced in its most recent quarter that it was set to acquire royalty acres in the Permian basin from Santa Elena Minerals, LP. As a result, its new pro forma asset base comes in at 23,999 net royalty acres. Stifel Nicolaus analyst Timothy Howard sees this purchase as demonstrating VNOM’s unique strategy, adding the partnership’s valuation is a point of strength. To this end, the analyst reiterated his Buy rating. See the VNOM stock analysis.
Health Catalyst (HCAT)
Potential 12-Month Gain: 32%
The leading provider of data and analytics solutions for healthcare organizations has definitely struggled since its market debut back in July. That being said, with 5 Buy ratings compared to no Holds or Sells assigned over the previous three months and 32% upside potential, investors are watching out for Health Catalyst Inc. (NASDAQ:HCAT).
Both J.P. Morgan analyst Anne McCormick and SunTrust Robinson’s Sandy Draper highlight HCAT for its “significant runway for growth.” According to McCormick, the company has less than 5% penetration of an $8 billion addressable market. This prompted her to start coverage by publishing a bullish call. Alongside the call, the analyst attached a $50 price target to covey her confidence in HCAT’s ability to jump 33% over the next twelve months.
Meanwhile, the SunTrust Robinson analyst believes that HCAT’s strong long-term growth narrative is supported by an attractive revenue mix shift that could drive a gross margin improvement as revenue continues to increase. While also starting coverage, the five-star analyst sees even more upside potential in store for the Strong Buy stock — 23% to be exact. See the HCAT stock analysis.
Author: Maya Sasson
Source: Investor Place: 7 Strong Buy Stocks That Are Bargains Right Now