Investing

Goldman Sachs Newest Favorite Stocks for Serious Upside in 2019

Goldman Sachs called ConocoPhillips a free cash flow winner that has ample dividend coverage in its earnings and cash flow, as well as covering its capital spending even if Brent crude goes as low as $40 per barrel. The analyst also believes that the market is underappreciating the long-term growth opportunities from a number of projects in Alaska, Australia and Qatar.

ConocoPhillips has a 52-week range of $52.78 to $80.24, with a consensus price target of $77.47. The dividend yield is 1.8%.

Covanta Holding Corp. (NYSE: CVA) was raised to Buy from Neutral and the price target was raised to $19.00 from $16.50 by Goldman Sachs on February 5. Its shares were trading at $16.35 ahead of this call, but they were more recently seen at $16.75, and they have a 52-week trading range of $13.14 to $17.81. The consensus target price is $18.00, and the street-high price target is up at $20.

Covanta provides waste and energy services to municipalities and converts waste to energy, and it also engages in related waste transport and disposal and other renewable energy production businesses. Its market cap is only $2.2 billion. The 52-week trading range is $13.14 to $17.81, and the consensus price target is $18.00. The stock has a dividend yield of 5.9%.

Evoqua Water Technologies Corp. (NYSE: AQUA) was raised to Buy from Neutral and the price target was raised to $16 from $12 by Goldman Sachs on February 26. It has a 52-week range of $7.92 to $25.36 and a consensus price target of $14.00.

Farfetch Ltd. (NYSE: FTCH) was raised to Buy from Neutral with a $40 price target at Goldman Sachs on March 1. The call came after earnings, so the prior $24.50 closing price would not matter in this case. The stock closed up over 17% at $28.82 a share, and now the market cap is $8.4 billion.

Farfetch claims to be a leading global technology platform for the luxury fashion industry. The company grew its gross merchandise value by 55% in 2018. Its Farfetch Marketplace has increased its share in the online personal luxury market and all three geographic regions (Americas, EMEA and APAC) grew by 50%. The company also has entered into an agreement to acquire and integrate JD.com’s Toplife into Farfetch’s China platform, and it recently completed the acquisition of a sneaker and streetwear marketplace called Stadium Goods.

Farfetch has a 52-week trading range of $15.99 to $32.40, and its prior consensus target price was $27.00.

Guidewire Software Inc. (NYSE: GWRE) was started in new coverage on the prized Conviction Buy list with a price target of $106 on February 1. It previously closed at $86.68 ahead of the call, and the stock was last seen trading at $93.00. The driving force here was Guidewire’s focus and early stages of being positioned for the cloud on the $14 billion software solutions for the property and casualty insurance industry.

Please note: Conservative investors who want to avoid “event risk” should pay attention that Guidewire is set to report earnings on March 6.

While this call from Goldman Sachs represents close to 15% upside from the current levels, investors should consider that Guidewire also has a 52-week range of $73.82 to $107.79. The consensus target price is about $102, but the street-high analyst target price is up at $118. Guidewire pays no dividend.

Spirit Airlines Inc. (NYSE: SAVE) was raised to Buy from Neutral and the price target was raised to $85 from $78 by Goldman Sachs on February 7. Its shares closed at $60.90 ahead of the call, and the weakness in some airlines more recently had its shares trading down at $56.50.

The firm considers Spirit to have better growth in routes ahead than more established peers, and the airline is expected to keep posting double-digit revenue growth for at least the next two years.

Spirit Airlines has a 52-week range of $34.36 to $65.35, with a consensus price target of $76.69. The company is still in growth mode for an airline, so it pays no dividend yet. If Goldman Sachs is correct here, that implies an upside opportunity of 50%.