Over the past few weeks we have seen the markets retreat after a prolonged uptrend. The reasons are varied, and include rising inflation, a weak labor market and the spread of the COVID Delta variant. At the same time, despite the increasing number of cases in this COVID wave, we are not seeing a jump to lockdown policy – and while the number of cases is rising, severe cases are not.
As the danger of COVID begins to recede, economies are starting to pick up again. JPMorgan’s global equity strategist, Dubravko Lakos-Bujas, commented: “While many argue that we are entering a late cyclical dynamic with increasing weakness, we believe the recent slowdown is temporary and mainly driven by the Delta variant. “
Looking ahead, however, Lakos-Bujas believes the economic path will smooth out: “As long as Covid continues to ease, strong momentum should continue into 2022 as companies begin rebuilding depleted inventories and ramping up capital spending from historically low levels. At the same time, cross-border activity has the potential to recover in a more meaningful way for the first time since the start of the pandemic.”
If this vision comes true, we can expect plenty of inventory opportunities in the coming months. The habits TipRanks Database, we found two stocks that JPMorgan’s analysts picked for gains of 70% or better. Here are the details.
Camping World Holdings (CWH)
We start with a company that is well positioned to make a profit in a COVID or post-COVID world. Camping World Holdings is a retailer specializing in motorhomes and related outdoor and – you guessed it – camping gear. The company is a leader in its niche, has the largest market share and operates through a network of brick and mortar stores as well as online.
CWH has shown its usual pattern in terms of quarterly earnings – with seasonal declines in Q4 and Q1 followed by gains in Q2 and Q3. The most recent report, for 2Q21, showed a corporate record of $2.06 billion on the upside, up 28% year-over-year, along with earnings per share of $2.33. Earnings per share compared favorably with the $1.53 reported in the same quarter last year.
Due to the strong financial performance, the company’s management announced measures to return profits to shareholders, through share buybacks and an increase in the dividend. In early August, the company announced it would increase its buyback program by $125 million, and at the end of that month it announced a dividend increase from 25 cents per share to 50 cents. The doubled dividend comes in at $2 per common share year-over-year, yielding a solid 5%.
For JPMorgans Ryan Brinkman, this all comes down to a buy recommendation. “CWH stocks are very attractive in valuation,” Brinkman noted. The analyst gives CWH a price target of $66, indicating an impressive 72% year-on-year gain. (To view Brinkman’s track record, click here)
“Margin has only grown higher since the record reached in the second quarter last year – even if the margin were to fall from these levels (which we model), it is now clearly falling from a higher than previously expected level and with the Most likely lower margin catalyst improving supply, suggesting higher volume could be a major offset, dampening overall earnings dollars from the impact of margin normalization being by far the second strongest year on record, for the second-highest 18.3% of 2020 and 14.1% of 2017,” said Brinkman.
Do other analysts agree? They are. Only buy ratings, in fact 3, have been issued in the past three months. The message is therefore clear: CWH is a Strong Buy. Given the average price target of $51, stocks could rise by 37% over the next year. (See CWH stock analysis on TipRanks)
Berkeley lamps (TURN INTO)
The second choice from JPM that we’ll look at is Berkeley Lights, a biotech company that develops and uses microdroplet optofluidic technology to locate and culture individual cells for biomedical research. The company’s technology and services promise to revolutionize the way researchers study cells by providing faster, more accurate isolation, analysis and culture of single cells.
While this promising technology appears to be an asset to researchers and investors alike, Berkeley Lights stock has fallen in recent days. The company has been the subject of short selling allegations in connection with its IPO last summer. In that case, BLI sold 8.1 million shares — which opened at $51.05, much higher than its projected initial price of $22. Berkeley Lights has raised more than $178 million in its IPO.
The allegations against BLI amount to a type of fraud, accusing the company of defrauding both investors and customers by going public, even though the flagship tech product is likely to flop. It’s important to note that although shares have sold 30% following the allegations, several market analysts who have followed Berkeley Lights over the past year have made sure to reiterate their optimistic view of the company.
Among them is JPMorgan’s 5-star analyst Tycho Peterson, who wrote: “…we see little value in most of the allegations made in the brief report, and we believe the underlying value proposition of BLI’s Beacon platform remains intact. BLI even had customers on site yesterday who expressed no concern in response to the [accusations]. Management remains confident in the future and will continue to focus on execution. While some visibility questions remain about the newer commercialization models (subscription and partnerships), this will improve over time as the company gains more operational experience with these models. We believe the stock’s drastic reaction… is much overblown and creates an attractive opportunity to rethink the story.
In line with these comments, Peterson places an Overweight (ie Buy) for BLI, and his $100 price target gives confidence in an impressive 294% upside potential over the next 12 months. (To view Peterson’s track record, click here)
Looking at the breakdown of the consensus, opinions on BLI are more divided. The bulls are slightly ahead, with 3 buys compared to 2 holds received in the last three months. The upside potential comes in at 149% due to the average price target of $64. (See BLI stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.