The market has been running strong in 2019, after the late-2018 selling panic turned out to be too extreme and based on overblown fears. As of Friday, April 5, the major index gains were strong with the Nasdaq-100 up 19%, the S&P 500 up about 15% and the Dow Jones industrial average up about 13%. It’s important to realize that the stock market is really a market full of individual stocks, and those stocks see many gyrations in performance regardless of the overall direction of the broader indexes.
There are some serious laggards in the stock market, many with well-known names. In some cases, the performance is so low that it’s as if the companies had no idea that there was a bull market at all.
24/7 Wall St. reviews dozens of analyst calls each day of the week. This ends up being hundreds of calls per week. Our goal is to find new ideas for traders and investors alike. Some calls have Buy or Outperform ratings, but some are more cautious at Hold or Neutral. Some even come with dreaded Sell or Underperform ratings.
Investors always seem to enjoy finding the gold nuggets by digging in the mud. The practical application in research and investing is looking for stocks that are getting new coverage or in which the stocks are being upgraded after extended periods of weakness. This is often where value investors pay the most attention. Some companies already may be in a turnaround, and some may have been oversold for myriad reasons: making a bad acquisition, sector weakness, missed opportunity, changes in earnings guidance, customer delays and so on.
For the week of April 5, 2019, we noticed eight analyst calls in which a firm was upgrading or issuing a new Buy (equivalent) rating on stocks that had been weak in 2019 or that have been very weak over recent months. Investors should understand that analysts sometimes do not get their calls right, and there is always the lesson to consider that companies that execute poorly tend to keep executing poorly.
Here are eight stocks that have been weak either in 2019 or are still way off their highs but in which at least some Wall Street analysts are becoming more positive for long-term upside ahead.
Bed Bath & Beyond Inc. (NASDAQ: BBBY) may get talked up as a great placement destination on the Shark Tank series on TV, but this stock has been gutted over the years. Still, maybe nothing lasts forever. Now that an activist investment group is targeting the entire board of directors for termination, analysts are getting behind the notion that perhaps Bed Bath & Beyond’s worst days will soon be in the past.
Merrill Lynch was among the first to upgrade Bed Bath & Beyond shares based on the potential changes, raising its rating to Buy from Underperform with a $21 price objective (from $11) on March 26.
More recently, Citigroup raised its rating to Neutral from Sell and raised its target price to $18 from $10 on April 1, and Morgan Stanley raised its rating to Equal Weight from Underweight and its target to $20 from $13 on April 5.
Bed Bath & Beyond shares closed up over 4% at $18.35 on Friday, for a total gain of 8% in the past week, with a 52-week range of $10.46 to $21.63.
Carbon Black Inc. (NASDAQ: CBLK) is in the red-hot cybersecurity field, but things have been sketchy for post-IPO investors. The 2018 initial public offering priced at $19 per share, and the stock ended up going as high as $35 in the weeks after its IPO. But by the end of 2018, its shares were down to $13.42.
A week earlier it was at $13.95 a share, and Carbon Black closed out the week of April 5 at $14.00, after most IT-security players saw their shares get crunched down handily on Thursday. This call would likely have been better received had it happened a day earlier or a day later due to the sector woes. On April 4, Robert W. Baird initiated coverage with an Outperform rating and assigned a $20 price target.
Energizer Holdings Inc. (NYSE: ENR) may have had a strong week with a 6% gain, but that appears to all be attributable to a Goldman Sachs upgrade on Monday. Otherwise, this had been a range-bound, do-nothing stock in 2019, and the recent close of $47.80 is still in a 52-week range of $42.74 to $65.57.
Goldman Sachs raised its rating to Buy from Neutral and its target to $60 form $48 in the call on Energizer. The firm is optimistic enough that it even included the battery maker on the prized Conviction Buy List. The analyst sees Energizer’s core business on its firmest footing in a decade and that the recent deal to buy Spectrum Brands will help broaden its base and will not mark the end of its would-be deal opportunities.
Grubhub Inc. (NYSE: GRUB) shareholders haven’t felt much love over the past six months, but maybe things have gone too far negative at a time when “new economy” stocks have so much potential upside. BTIG’s Peter Saleh sees better days ahead, potentially with upside of 30% or so. He started Grubhub with a Buy rating and a $95 price target.
Wall Street sort of yawned on Wednesday’s analyst call, as Grubhub shares were up 2% at $72.00 in early trading but were up only 0.8% at $71.13 later in the day. The stock closed the week at $71.18, with a consensus target price still over $100 and a 52-week trading range of $65.51 to $149.35. More details are available on this call.
Nio Inc. (NYSE: NIO) is sometimes considered to be the “Tesla of China” in reference to its Chinese electric vehicle sales. Its shares lost more than half of their value after an unlucky IPO timing late in 2018. Despite the woes, two analysts upgraded Nio this week.
Merrill Lynch lifted its Underperform rating to Neutral and assigned a $6.20 price objective, up from a prior $6.80. Citigroup raised Nio’s rating to Buy from Neutral, but the firm’s official price target was lowered to $6.80 from $7.20. More detailed coverage is available on both calls.
Nio shares closed the week at $5.36, for a gain of only about 1% from the initial analyst calls, but the gain for the week was better than 5%. Its post-IPO trading range is $4.90 to $13.80.
Renewable Energy Group Inc. (NASDAQ: REGI) was started with an Overweight rating and assigned a $35 price target mid-week at Piper Jaffray. This call represented an implied upside of more than 50%, and the call noted that recent weakness in the stock price has created an attractive entry point for investors. The call is based on environmental pressures being pushed very hard for environmental conservation and to use cleaner fuels and energy.
This is the largest standalone biodiesel producer in the United States. Renewable Energy shares closed up another 3.4% at $23.27 on Friday, for a weekly gain of 6%. That said, its shares closed out 2018 at $25.70, and this was a $29 stock briefly in early February. The 52-week range is $12.50 to $32.52, and the market cap is still under $900 million.
UGI Corp. (NYSE: UGI) lost nearly 10% of its value at one point early in the week on news that it was acquiring the rest of AmeriGas Partners L.P. (NYSE: APU) that it did not already own. Investors have learned over time that shares of an acquirer drop when it announces a large acquisition, but in some instances they rise based on the improvements.
Jefferies raised UGI to Buy from Hold and raised its target to $60 from $54 on Friday. On Wednesday, Merrill Lynch upgraded the stock to Buy from Neutral and reaffirmed its $58 price target, after noting that UGI expects the UGI/APU transaction to be accretive to adjusted EPS beginning in 2020.
UGI shares closed up 1% at $53.03 on Friday, after seeing a low of $50.40 during the week. Its shares were at $55.39 prior to the deal announcement, and they have a 52-week range of $44.15 to $59.31.
Urban Outfitters Inc. (NASDAQ: URBN) shares may have been in major rally mode the past two weeks, but its stock remains off by about 40% from last year’s highs above $50. After a 1.6% gain to $33.95 a share on Friday, the 52-week range is $27.60 to $52.50, and the consensus target price was $36.19.
D.A. Davidson’s John Morris raised his rating to Buy from Neutral with a $36 price target calling a forest of opportunity for the next few years. The stock’s long-term weakness is still represented, as the 200-day moving average was last seen up at $37.97.