When a sell-side research firm initiates coverage of a stock it can really set the tone for how it performs. Bulls and insiders hope for a buy rating while bears and shorts root for the opposite.
Analyst initiations occur when a firm expands its research universe which can coincide with the addition of new analysts. Sometimes coverage begins simply because a new company has come to the public market.
As most stock rating changes involve upgrades or downgrades of existing positions, investors give special attention to initiations. Last week new coverage began for several names ahead of the new year. Here are three of the most intriguing.
Is Lucid Group Stock a Buy?
Citigroup started covering Lucid Group (NASDAQ:LCID) with a buy rating. The analyst gave the California-based electric vehicle manufacturer a $57 price target which equates to 50% upside based on Friday’s close. The bullish sentiment from the well-regarded research group had a high impact on Lucid’s share price rose 4.8% on the day of the initiation. The fresh coverage could spark a rally for a stock that went in reverse last month after climbing as high as $57.75 in November.
Lucid is trying to make a name for itself among an increasingly crowded field of traditional and upstart EV players. The company got a major boost when its first entrant, Lucid Air, was named 2022 MotorTrend Car of the Year beating out 24 competitors. The award coincided with a third quarter update that showed customer reservations grew to over 13,000 units which translates to an impressive $1.3 billion order book.
A few weeks later market enthusiasm towards Lucid Group was dampened by news of a new $1.75 billion debt offering. This was a natural reaction but an overdone one considering Lucid exited Q3 with a solid balance sheet that included $4.8 billion in cash. Once it starts booking revenue and bringing other vehicles to market, the debt concern should long be forgotten. With the Lucid Air starting at around $77,400, cash flow could pile up fast and send the stock into overdrive.
Is Grab Stock a Good Investment?
Last week Jeffries Financial Group became the latest sell-sider to call Grab (NASDAQ: GRAB) stock a buy. It marked a perfect five out of five analysts that have taken a bullish stance on the Southeast Asian superapp following its December 2nd IPO. Grab’s software platform includes delivery, mobility, and financial services for millions of people in Singapore, Thailand, the Philippines and several neighboring countries.
Grab has quickly become a staple across the region where people depend on the app for food and grocery delivery, scooter and ride-share transportation, and for payments and investments. Analysts think the company itself is a good investment because of the growth expected across Southeast Asia and consumers’ increasing adoption of convenient tech-enabled services.
While lockdown conditions have held the company back since last year, vaccination rates are improving, and economies are gradually reopening in the region leading to increased interest in the Grab app. In the mobility segment, volumes recovered strongly in the back half of 2021 giving the businesses much-needed momentum heading into the new year.
Jeffries’ $10.50 price target suggests more than 40% upside and is one of the more conservative targets on the Street. Grab has penetrated only a small portion of Southeast Asia’s online food delivery market and has its sights on the offline space through dine-in and takeaway order technology. With restaurants and businesses starting to come to life there, it may be a good time to grab some shares.
Is Granite Construction Stock a Good Infrastructure Play?
Coverage of Granite Construction (NYSE: GVA) was initiated at Sidoti last week. The sell-side analyst’s buy rating and $50 price target had a high impact on a stock that hadn’t received an analyst opinion since Goldman Sachs reiterated its sell rating (but raised its target to $37) back in early August.
Granite Construction is one of the biggest construction and materials companies in the country. It may also be one of the most undervalued plays on U.S. infrastructure spending given its diverse exposure to road construction, water projects, and alternative energy initiatives in the western U.S.. Analysts expect the company to more than double its earnings per share (EPS) to $2.04 in 2022 which makes its 19x forward P/E ratio well worth the price.
Besides the infrastructure exposure and valuation, Granite Construction’s quarterly dividend makes it appealing. The 1.3% yield is modest but with approximately one-fourth of earnings distributed as dividends the road for dividend hikes remains long. With new bullish analyst coverage, building a position in Granite Construction may be a good move for small cap growth and income investors.
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