Credit Suisse's 7 New Top Stock Picks Have Tremendous Upside Potential

Change Healthcare

Change Healthcare Inc. (NASDAQ: CHNG) is another new Credit Suisse top pick with an Outperform rating, and its $16 target price implies upside of 11.5% from the $14.35 latest price. There is no dividend here, and it has only been public about a year.

Change Healthcare was said to have a diversified mix of revenue streams, where 75% to 80% of revenue is based on software as a service (SaaS), and the rest of its revenues are indexed to health care utilization. Its SaaS revenue provides a solid base with visibility even in a COVID-19 climate like today.

One headwind that was pointed out was that Change Healthcare’s volume-based revenue has been an issue since COVID-19 started and the deferrals or cancellations of elective surgeries were seen. Early trends in medical network activity reflect a quicker comeback than what was contemplated in the company’s guidance for the third quarter.

Change Healthcare’s 52-week trading range is $6.18 to $17.57. It has a consensus analyst target of $17.32 and a $4.4 billion market cap.

Concho Resources

Concho Resources Inc. (NYSE: CXO) is an energy pick that was added to the Top Picks list at Credit Suisse and its $70 price target implies more than 53% upside from the most recent price of $45.50. Coming out of the downturn, Concho is deemed to be in the right focus in exploration and production with low-leverage, no near-term debt maturities, and low costs that can still fund capital spending and dividends with oil at $40 to 45 per barrel.

Credit Suisse’s notes also point out that Concho is one of the best positioned to generate attractive returns and free cash flow yields when oil prices eventually recover to mid-cycle levels. On top of the November election and the 2021 guidance, the firm points out that Concho’s large resource size and inexpensive valuation should have investors viewing it as being among the most likely takeover candidates.

Concho Resources has a 52-week range of $33.13 to $93.34, and a consensus target price of $73.27 and $8.9 billion market cap.

Mondelez

Mondelez International Inc. (NASDAQ: MDLZ) is a new top pick, with its food offerings, and the $64 price target implies a gain of 12%, before factoring in the 2.2% dividend yield. Credit Suisse sees a broad international footprint with great brands, and it likes that 70% of its sales are in international markets and 40% in developing markets.

The firm sees Mondelez as well positioned to capitalize on economic growth abroad as the pandemic comes under control and being set to adapt to a rapidly changing economic environment. Under its new strategy, Mondelez’s organic growth rate was shown to have accelerated from 0.8% in 2017 to 4.1% in 2019.

Mondelez has traded in a 52-week range of $41.19 to $59.96, and it has an $81.9 billion market cap and a consensus target price of $63.10.

Papa John’s

Papa John’s International Inc. (NASDAQ: PZZA) is a new top pick in pizza takeout and delivery. Its $110 target price implies 22% upside, and it also comes with a 1% dividend yield. The firm called out Papa John’s as having an underappreciated multiyear growth story for same-store sales, and it sees improved unit economics supporting a compelling unit development opportunity. Credit Suisse also argues that Papa John’s is the biggest beneficiary of pandemic-related consumer behavior changes, and that this accelerated the company’s turnaround plans by years while also meaningfully boosting the financial positions of its franchisees.

Now the firm believes that this story narrative is shifting from turnaround to growth. The firm also pointed out that refranchising and divestiture of its commissary business could unlock additional value for shareholders.

Papa John’s has a 52-week trading range of $28.55 to $102.25, a consensus target price of $106.21 and a $3.0 billion market cap.

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