After a rocky 2018, the markets have gone back to a rock ‘n’ roll bull market posturing at the start of 2019. There are hopes for China trade and tariffs issues being resolved, the Federal Reserve has figured out that it was being far too hawkish and a solid earnings season and less inflation-threatening economic reports have all helped the Dow Jones industrial average and the S&P 500 to be up roughly 11% so far in 2019.
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After such strong gains and a classic V-bottom recovery, investors need to consider how they want their assets and portfolios positioned for the rest of 2019 and beyond. 24/7 Wall St. reviews dozens of analyst calls and research reports each day of the week, and this ends up being hundreds and hundreds of analyst calls over a multi-week period. One firm’s research that captures the attention of the investing community is Goldman Sachs. After all, the firm caters exclusively to wealthy individuals and institutional clients.
After seeing that Goldman Sachs made several key changes to its prized Conviction Buy List in January, it turns out that the firm issued even more new Buy ratings in February and at the start of March. These are fresh picks over the past month, some ahead of and some after earnings, in which the Goldman Sachs analysts see big upside for investors in 2019.
24/7 Wall St. has tracked the positive analyst calls, with newly issued Buy ratings or when the firm upgraded the rating to Buy or added it to its prized Conviction Buy list. We did not count the calls when the firm reiterated its Buy ratings that only came with updated price targets.
It is the responsibility of each investor to decide if these stocks are appropriate for their own portfolios. The year 2019 seems to be, at least for now, on slightly more stable ground than just two months ago. As a reminder, most Buy and Outperform ratings in large-cap stocks are issued with roughly 8% to 12% in implied total returns (capital gains plus dividends) at this stage in the bull market.
We have provided consensus estimates and targets from Thomson Reuters (now Refinitiv) and trading and performance history on each for a reference. Additional color on each call has been added as well. Here are 12 stocks in which Goldman Sachs has issued stellar upside calls in the past three weeks that still have not hit their implied price targets.
Aptiv PLC (NYSE: APTV), which investors previously knew as Delphi Automotive, was already rated as Buy but Goldman Sachs added it to its prized Conviction Buy list with a $102 target price on February 13. Its shares had traded at $77.16 ahead of the call, representing a well-above-average implied upside of 32% at the time. Aptiv was last seen trading at $84.00, with a $22 billion market cap.
The stock has a 52-week trading range of $58.80 to $103.23 and a consensus analyst price target of $90.46. It has a dividend yield of 1.1%. The top analyst target on Wall Street is $110. While this is above-average upside in the call, the 52-week range indicates that this call might not be out of the realm of expectations for this electronics parts-maker for the auto and transportation markets.
Box Inc. (NYSE: BOX) is a call that has so far not lived up to Goldman Sachs’ expectations after earnings. The firm started coverage with a Buy rating and issued a $31 price target on February 5. The shares were trading at $21.57 ahead of the call, implying that Goldman saw close to 50% upside at the time.
Shares had risen to almost $25, but the earnings report at the end of February came with guidance that was softer for the first quarter of 2019. Box recently traded back down to $20.10. Whether Goldman Sachs will keep its strong bullish views remains to be seen, and it is not uncommon for analysts to keep a positive rating while dialing down some price targets after unexpected earnings or guidance disappointments.
Box has traded in a 52-week range of $15.64 to $29.79, and it has a consensus price target of $24.57.
ConocoPhillips (NYSE: COP) was raised to Buy from Neutral and the target price was raised to $82 from $76 at Goldman Sachs on February 4. Its shares were trading at $69.61 ahead of the call, adjusting for the dividend paid after that date. More recently its shares were trading at $68.60, still implying about 20% upside before considering the dividend.
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.
24/7 Wall St.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%.
Synchrony Financial (NYSE: SYF) was raised to Buy from Neutral with a $38 price target back on February 14. The stock closed at $31.21 ahead of that call, and the shares more recently traded at $32.50. This still represents about 17% upside, before factoring in the dividend yield for the total return.
Synchrony Financial has a 52-week range of $21.77 to $37.57, with a consensus analyst target of $36.74. The dividend yield is 2.6%. It’s a total implied upside projection of 20% if the analyst call pans out here.
Yelp Inc. (NYSE: YELP) was an early February call, with the firm initiating coverage with a Buy rating and a $42 price target. The prior close was $37.17. Yelp’s shares did trade as high as $40.78 by February 15, but there were last seen trading back around the $37.15 level on Friday, March 1. This call represents about 14% in implied upside from the current level.
Yelp has a 52-week range of $29.33 to $52.50 and a consensus price target of $39.74. It pays no dividend at this time.
24/7 Wall St. has seen four additional analyst calls that would have fit the bill here as top Goldman Sachs picks for 2019, but the problem is that these stocks already managed to reach their objectives in a very short time.
Avalara Inc. (NYSE: AVLR) is proof that Goldman Sachs can see its targets get hit. The firm issued a new Buy rating and assigned a $50 price target on February 1, 2019. Its shares traded at $39.87 ahead of the call, but the price this past Friday was $51.89, and that was even after a small drop for the day.
Avis Budget Group Inc. (NASDAQ: CAR) was given a rare two-notch analyst upgrade from Sell to Buy, and the price target was raised to $35 from $30 on February 11. Its shares had traded at $25.68 at the time, implying a Goldman Sachs upside of 36%, but the stock was last seen trading up at $36.00 after earnings.
In a world dominated by Uber and Lyft, Goldman Sachs still sees a strong rent car scenario here, considering that rental car companies have even gotten into the game of renting to part-time drivers rather than them having to buy their own cars and allowing the ride-captains to avoid having any vehicle maintenance costs. Avis has a 52-week range of $21.63 to $50.88 and a consensus price target of $43.00.
24/7 Wall St.MercadoLibre Inc. (NASDAQ: MELI) is another call that already has come and gone. Goldman Sachs started coverage as Buy with a $438 price target on February 5, compared to a previous close at $368.08. After earnings, the shares skyrocketed up to $462.00, before pulling back down to $448.50 late on Friday.
MercadoLibre has a 52-week range of $257.52 to $474.84. The consensus price target is $413.25.
Zynga Inc. (NASDAQ: ZNGA) was also an example of Goldman Sachs nailing its call in February. On January 30, the firm issued a new Buy rating and initiated the stock with a $5.30 share price. That represented some 16% upside at the time, and Zynga shares were trading at exactly $5.30 on Friday, March 1.
Rio Tinto PLC (NYSE: RIO) is an example of Goldman Sachs deciding to make a change in its coverage rather quickly. The firm raised the metals and mining giant to Buy from Neutral on February 12, and it was then reportedly downgraded back to Neutral on February 27.
The precall price was $55.78 before the Buy rating, and shares traded at $58.25 late on Friday. Rio Tinto has a 52-week range of $44.62 to $60.72 and a consensus price target of $62.12. The stock has a dividend yield of 4.4%.
As a reminder, investors should consider that not all analyst calls play out as the baseline scenario would have implied. Sometimes analysts have no better information or knowledge on a company than the rest of us, and sometimes they just end up being wrong.
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