Investing

3 Big Ideas From Wells Fargo With Up to 30% Upside

As markets figure out a direction over the course of this summer, economic headwinds may be holding back some gains. Investors are looking to safe havens to ride out this storm. Considering a potential recession is on the way (or already here), one major Wall Street firm believes it has found a few companies that offer upside.

Wells Fargo issued a few calls recently, and although there is no particular focus in terms of sector or industry, the main idea is upside. Each call is incredibly positive, forecasting massive upside in both the near and long term.

While market headwinds have put a damper on the markets in general over the past few months, Wells Fargo believes that a few of these stocks could provide solid upside in the coming months and years.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Tyler Technologies

Wells Fargo’s Michael Turrin upgraded Tyler Technologies Inc. (NYSE: TYL) to Overweight from Equal Weight and raised the $425 price target to $435. That implies upside of 22% from the most recent closing price of $356.42. He noted in the call that despite the company’s “more defensive profile” relative to others in software, the shares have underperformed year to date.

Turrin further noted that Tyler’s “resilient” market positioning, “value-creating” shift toward cloud and relative valuation support at current levels, the shares are “deserving of a position in any defensive basket/mid-cap value focused portfolio.” He went on to say that Tyler’s financial profile is supported by a mix of organic growth, tuck-in acquisitions and share buybacks, providing the management team “with multiple value-creating levers for supporting shares.”

The stock traded near $361 on Thursday, in a 52-week range of $327.97 to $557.55. Shares are down over 32% year to date.

Lear

Colin Langan upgraded Lear Corp. (NYSE: LEA) to Overweight from Equal Weight and raised the $141 price target to $180, implying upside of 28% from the most recent closing price of $140.81. Langan cites the company’s “compelling” valuation, “strong” earnings growth and electric vehicle “tailwinds and optionality” for the upgrade.

Lear is trading at 4.4 times estimated 2023 EBITDA, a 17% discount to its 10-year average. According to Langan, auto production is expected to recover in second half of 2022 with improved semiconductor and easing input costs, which will result in Lear’s earnings almost doubling from 2022 to 2023. He sees the company benefiting from electric vehicle growth, given that its e-powertrain products have low in-sourcing risk.

Lear stock has a 52-week trading range of $122.67 to $198.38, and it traded near $143 a share early Thursday. The stock is down about 22% year to date. It has a dividend yield of 2.2%.

Avnet

Joseph Quatrochi raised the $40 price target on Avnet Inc. (NASDAQ: AVT) stock to $45, while maintaining an Equal Weight rating. This call implies downside of 7.6% from the most recent closing price of $48.70. According to Quatrochi, Avnet hosted its first Analyst Day since 2018, providing a positive overview of the company’s structural transformation over the last couple of years. The company provided a new medium-term target, including expectations of sustainable EBIT% greater than 5% for total Avnet.

The 52-week trading range is $35.71 to $50.19, and shares traded at around $48 Thursday morning. The stock is up about 19% year to date. It has a dividend yield of 2.1%.

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