Wall Street’s top analysts say they’re buying Shopify and General Dynamics

Harley Finkelstein, COO, Shopify

Scott Mlyn | CNBC

Investors should take note when an analyst becomes bullish on a stock after stepping aside. This could indicate that the name is undervalued and ready for long term growth.

The actions highlighted below have just been upgraded to Buy. As for the analysts who distribute these upgrades, they boast a proven track record of success.

TipRanks’ analyst forecasting service strives to identify the Top Performing Wall Street Analysts, or analysts with the highest pass rate and average return per rating. These measures take into account the number of ratings published by each analyst.

Here are five stocks that were recently upgraded by top performing Wall Street analysts:

ON Semiconductor

Based on the operating margin catalysts as well as its valuation, ON Semiconductor just marked an upgrade from analyst Baird Tristan Gerra. Now, noting the stock a buy, the top analyst also raised the price target from $ 38 to $ 48 (upside potential 29%).

While management has guided for below-seasonal earnings, Gerra remains unfazed.

Explaining this, the analyst said, “The company’s aggressive inventory shift… along with a very strong rebound in utilization rates has allowed them to gain 2Q shares out ahead of the competition, in our opinion. We do not consider the preliminary 3rd quarter revenue to be lower than the season. outlook as a sign of an impending slowdown, but rather a limitation in capacity with the potential for the company to exceed second half expectations on improved availability of supply. “

In addition, the semiconductor company is working to improve its mix. These efforts will be bolstered by the current “tight supply environment”, according to Gerra, rather than if ON were operating in an environment of over-supply.

All of this prompted the analyst to note: “Medium-term investors should be rewarded with a significant rise from both an ongoing rise and possibly the biggest turnaround in the company’s history. Cost, mix and pricing initiatives are expected to catalyze further expansion in gross margin. in 2 hours and in 2022, as product repositioning initiatives gain momentum. “

Gerra currently tracks a 62% pass rate and an average return of 20.4% per note, according to recent data provided by TipRanks.

Shopify

In a research report titled “The Retail ‘Shift’ Seems Here to Stay,” Roth Capital analyst Darren Aftahi argues for Shopify e-commerce name. In addition to the stock upgrade to buy, it also set a price target of $ 1,530, suggesting upside potential of 37%.

Looking at the company’s first quarter results, the numbers “once again” exceeded the high and higher expectations of the Aftahi consensus “as growth accelerated across all segments and key indicators.” Total revenue growth reached 110% and the total gross value of goods, or GMV, amounted to $ 37.3 billion, reflecting 114% year-over-year growth and exceeding 11 % the analyst’s call.

According to management, the strong result was driven by increasing traction and integration on social media platforms, as well as further international expansion. The growth of the international GMV has exceeded that of North America, which implies “SHOP growth was more than just an American stimulus control dynamic, ”Aftahi said.

“While SHOP may not be able to surpass its upcoming growth rates of ~ 90% +, it seems clear that the company continues to gain market share and expand on the outskirts of the pandemic … international expansion is acting as one of the main upward catalysts for SHOP where it will begin to invest more directly, and its portfolio of merchant solutions, internationally, has barely scratched the surface, beyond payments ”, commented Aftahi.

With that in mind, the analyst has increased his FY21 revenue forecast by around 3%.

“When we look at multiple catalysts through international expansion and organically upscaled upgrades to Plus, alongside comments from Avril GMV has been on par with 1Q trends, we see growth remains pretty healthy for this name. of top-notch e-commerce / technology, “Aftahi says.

Landing among the top 66 analysts tracked by TipRanks, Aftahi has an impressive average return of 44.5% per rating.

Cogent Communications

After the publication of his 1Q21 results, Timothy Horan of Oppenheimer sees Cogent Communications as a must-have game in the Internet, Ethernet and colocation services space. As such, the five star the analyst improved the stock from Hold to Buy. Additionally, he put a price target of $ 90 on CCOI, bringing the upside potential to 16%.

In the first quarter, the company posted total revenue of $ 146.8 million, reflecting a slight beat. In addition, the gross margin increased by 200 basis points compared to the previous year quarter.

Going forward, management has set long-term, multi-year targets of 10% annualized revenue growth and 200 basis points of annual adjusted EBITDA margin expansion. As a result, after the results, Horan is “progressively more positive about growth.”

As regards the netcentric activity, it returned to growth thanks to international expansion and the decline of customers. Additionally, according to the Oppenheimer analyst, corporate clients have been forced to close branches due to the pandemic. However, after peaking in the middle of the fourth quarter, the churn rate improved significantly, with an acceleration in business purchasing activity (DIA). To that end, the analyst estimates that corporate revenues will grow 2% to 3% quarter over quarter once stabilized.

It should also be noted that this stock is trading at a free cash flow yield of 3.6%, which is “attractive” according to Horan, for a name “growing free cash flow in the 20% range. over the next two years “. The company is also striving to reduce its costs and increase its unit growth, “supported by its low-cost positioning”.

Summing up, Horan said, “The fundamentals are improving as we come out of the pandemic and CCOI is trading at an attractive valuation which has created a buying opportunity. In the long term, we believe the company is positioned to take stakes in both companies (~ 20% market share today) and netcentric (~ 25% market share today) as a supplier of low cost internet services in a commoditized market. ”

Supporting his position on the TipRanks ranking of top performing analysts, Horan achieved a 67% pass rate and an average return of 17.5% per rating.

Cirrus Logic

Cirrus Logic’s high valuation and Apple’s revenue concentration had previously kept Needham’s Rajvindra Gill on the sidelines. That said, given that stocks have fallen sharply since mid-January and its price-earnings multiple squeezed by 40%, the analyst reconsidered his stance.

On May 4, Gill upgraded Hold to Buy’s factory-less semiconductor supplier and put $ 100 share price target. This target suggests that stocks could gain 31% in the coming year.

While Gill acknowledges that recent results and earnings forecasts were “disappointing,” he points out that “the numbers were attributed at the time of revenue recognition, where the company sells camera controllers for use in camera modules. camera, where lead times are shorter than other components, and are therefore shipped earlier. “

Explaining further on his bullish thesis, Gill noted, “New opportunities are emerging, including potential content gains at Apple with a new Power IC (with an ASP of $ 1). Net, we expect revenue growth to accelerate in FY22 and believe the stocks are convincing here. “

Looking at the analyst’s current iPhone dollar content estimates, they land at around $ 4.20 ($ 5.20 with an additional $ 1 ASP for the Power IC). This is expected to be incorporated into iPhones in the fall of 2021.

In addition, CRUS strives to expand beyond the audio realm with its high performance mixed signal chips. According to Gill, “22nm chips could result in either a digital processing closer to analog, or a radically smaller or more energy efficient chip.”

In addition, the company is making a significant effort to capture market share with Android phones that have haptic controllers. It also expands the smart codec portfolio, striving to improve size and power.

A senior analyst covering names in the tech industry, Gill’s calls are averaging 15.5% returns, with her success rate reaching 67%.

General dynamics

Operating as an aerospace and defense company, General dynamics offers products such as combat vehicles, weapons systems, ammunition, shipbuilding services, as well as communication and information technology systems and solutions.

For Baird analyst Peter Arment, the company’s long-term outlook looks even stronger. As “order growth has returned to Gulfstream, giving a cyclical boost to a defense company that continues to stifle budget concerns,” Arment GD updated from Hold to Buy and gave the target price a boost, with the figure going from $ 180 to $ 243 (upside potential of 27%).

Specifically, Arment argues that a “flat” budget demand and an “increased threat environment” in important regions have helped allay investor fears. Emphasizing in particular combat systems, it saw a 6% gain in the quarter. He added, “In addition to the Navy’s long-term visibility on platforms such as the Virginia and Columbia-class submarines, the defense activity becomes a story of medium-term execution.”

On top of that, the defense backlog currently stands at over $ 77 billion, which equates to about 2.6 years of related sector revenue. According to Arment, this will be supported by recurring underwater awards as well as a “growing pipeline” in technologies, which closed the quarter with $ 30 billion in submissions.

While the recovery in demand for commercial aerospace has been slower, bizjets are a whole different story, with spikes in flight activity. “As international travel restrictions ease, we expect business to pick up further and contribute to off-year results,” commented Arment.

It’s also worth noting that while aerospace profitability will be under pressure this year, Arment believes this will reverse in 2022, with higher volume expected.

“Coupled with improved revenue and results at Aerospace, we see the potential for GD to return to its premium position among premiums,” said the Baird analyst.

Overall, Arment had a 64% pass rate and an average return of 13.8% per rating.

About Myra R.

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