Business
These stocks have ‘sizeable upside’ and are poised for a second-half breakout, analysts say
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Analysts highlighted a slew of stocks this week that have plenty of room to run heading into the second half. These companies have major upside, analysts say, and should be bought now. CNBC Pro combed through top Wall Street research to find the top stocks ahead of summer. They include: Amazon , Compass, PowerSchool, elf Beauty and Palantir . Compass Oppenheimer analyst Jason Helfstein is doubling down on shares of the real estate company. Compass has a wide range of positive catalysts ahead, is gaining share rapidly and is a beneficiary of AI, Helfstein said earlier this week. “The company is in the early stages of building out its high-margin adjacent services offering, which presents an untapped $183B TAM opportunity,” he said. Helfstein sees AI being used to develop an “agent tool” which he thinks could improve efficiency. Compass also has a mortgage business it’s testing out in key markets and new products like an agent dashboard should roll out in 2024, he wrote. In addition, Helfstein said volume growth remains robust despite inventory challenges. And if rates ease in any meaningful way, the firm said Compass is extremely well positioned. “Therefore, we think COMP represents one of the best margin upside stories in our coverage,” he said. Shares are up more than 43% year to date elf Beauty Elf is a “timeless beauty,” according to Morgan Stanley. The firm took a close look earlier this week as to whether the stock still had substantial room to run. It turns out it does, analyst Dara Mohsenian wrote. “Our conclusion is there is solid upside left both fundamentally in terms of upside vs consensus and subsequent stock upside for a few reasons,” he said. Sales remain strong, Mohsenian noted, with forward consensus estimates still too low. “Importantly, underlying ELF organic sales growth momentum is accelerating,” Mohsenian said. Consensus margin estimates are also too low, he added. Additionally, Mohsenian took the opportunity to raise his price target on the stock to $118 per share from $110. “Reiterate OW- Still sizeable topline (and stock) upside left at elf,” he said. Shares have rallied more than 88% in 2023. Palantir The AI train is “rolling along,” and that’s a big deal for Palantir investors, Bank of America analyst Mariana Perez Mora said in a recent note. The banking giant thinks Palantir is very well positioned to be one of the “dominant” providers of AI. It said that, while many companies and industries are scrambling to come up with a legal infrastructure for AI use, Palantir is already ahead in that regard. “From its experience working with the government and highly regulated industries, PLTR has already developed and implemented the architectural design that supports generative AI in a compliant and private world,” Perez Mora said. Palantir also recently launched its AIP which stands for Artificial Intelligence Platform. “We think AIP solutions could help PLTR further penetrate within existing customers and open up partnership opportunities to develop easily scalable AI solutions,” the analyst wrote. Perez Mora recently her price target to $18 per share from $11 with the stock up a whopping 153% this year. “In the generative AI Arms Race, Palantir comes out on top,” Perez Mora said. Compass- Oppenheimer, outperform rating “Therefore, we think COMP represents one of the best margin upside stories in our coverage. … Stands to benefit from Generative AI. … An example would be an agent tool that could drive materially better efficiency. … Therefore, we think COMP represents one of the best margin upside stories in our coverage. … The company is in the early stages of building out its high-margin adjacent services offering, which presents an untapped $183B TAM opportunity.” Amazon- Bank of America, buy rating “Still a lot of room for growth (and upside) ahead. … We were encouraged by CEO commentary that retail margins could improve beyond pre-pandemic levels. Growing 2024 N.A. retail margins 2-3pts y/y could drive $4-8bn in operating profit upside vs. Street, and estimate trends seem to drive the stock. … Since the February bottom, 2024E Op Income is up just 3%, and while expectations have moved higher (stock +47% YTD), we think margin upside can still drive outperformance.” elf Beauty- Morgan Stanley, overweight rating “Timeless Beauty; Reiterate OW- Still Sizeable Topline (and Stock) Upside Left at ELF. … Our conclusion is there is solid upside left both fundamentally in terms of upside vs consensus and subsequent stock upside for a few reasons. … Importantly, underlying ELF organic sales growth momentum is accelerating, with a 30% 4-yr revenue CAGR vs a pre COVID 2019 in the recently reported FQ4, well above an already very strong 22% in FQ3/FQ2 and the last twelve months.” Palantir- Bank of America, buy rating “The trAIn is rolling along. … From its experience working with the government and highly regulated industries, PLTR has already developed and implemented the architectural design that supports generative AI in a compliant and private world. … We think AIP solutions could help PLTR further penetrate within existing customers and open up partnership opportunities to develop easily scalable AI solutions. … In the generative AI Arms Race, Palantir comes out on top.” PowerSchool Holdings- Baird, outperform rating “The average PowerSchool customer is using only two of the company’s 19 available products, presenting sizeable upside over time as existing customers undertake greater digitization. PowerSchool is achieving success in driving higher cross-sell activity, with 80% of bookings from existing customers. At yearend 2022, PowerSchool generated $630 million in ARR across 50 million plus students, whereas there is an estimated $3 billion in addressable opportunity by growing within existing accounts across currently-available products.”
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