The research department was active last week at sell-side investment firm Raymond James. Amid one of the busiest weeks of the third quarter earnings season, dozens of price target changes were made.
Raymond James is one of the more valuable equity research groups for investors to follow. It covers more than 1,000 stocks across all sectors placing it among the top five North American research providers—top three in the small-mid cap space.
Another reason investors find Raymond James research helpful is its unique rating system. Whereas most firms use a three-tiered ‘buy, hold, or sell’ scale, Raymond James labels stocks as ‘strong buy’, ‘outperform’, ‘market perform’, or ‘underperform’. The added granularity creates two bullish categories separated by conviction level.
The firm’s strong buy stocks are defined as those that are expected to not only outperform the S&P 500 but return at least 15% over the next 6 to 12 months. On Friday, Raymond James analysts boosted price targets on the following strong buy U.S. stocks:
Bloom Energy (NYSE: BE) had its price target increased from $29 to $34. A couple weeks prior, shares of the green energy company had dipped below $20. Then a bullish October 25th press release about South Korean power company SK ecoplant’s investment in Bloom sparked a run above $30.
Incorporating this development along with a selloff prompted by Bloom’s disappointing third-quarter earnings report of November 4th, Raymond James opted to maintain a bullish stance. Despite the wider than expected Q3 loss, the analyst’s vote of confidence on Bloom Energy helped the stock recover 5.8% on Friday.
Microchip Technology (NASDAQ: MCHP) received the biggest price target boost of the day in percentage terms to $110. Raymond James had a $90 target but now feels the stock is worth much more after the semiconductor company’s second-quarter result. Microchip beat the Street’s revenue and earnings expectations despite the ongoing manufacturing constraints impacting the industry. The strong quarter gave management the confidence to raise its quarterly dividend to 23.2 cents which makes the forward dividend yield 1.1%.
Raymond James revised price target implies 28% upside from Friday’s close. Last month Microchip enacted its first stock split since 2002 that cut the share price in half. The Street is predominantly optimistic about Microchip’s ability to perform well in the current environment. Surging customer demand and a healthy order backlog should turn into solid revenue growth as capacity issues wane.
NGM Biopharmaceuticals (NASDAQ: NGM) got a modest price target hike on Friday but the potential upside is far from modest. Raymond James shifted its crosshairs to $42 from $39 which suggests the strong buy stock could double over the next 12 months.
Lofty expectations aren’t uncommon in the biotechnology space, where unexpected drug development news can send stocks flying up or down. NGM Biopharmaceuticals reported a third-quarter loss as expected last week but offered a bright outlook on its portfolio.
NGM has multiple drug development programs that are in early-stage clinical trials. Its focus areas include oncology, retinal disease, and liver and metabolic diseases. Sell-side firms are unanimously bullish about the company’s growth prospects. Raymond James’ above peer price target reflects the firm’s high conviction level on the stock.
Targa Resources (NYSE: TRGP) now has a $67 target at Raymond James, $2 more than the previous target. This midstream energy play remains a strong buy despite its 115% year-to-date surge.
Improving energy sector fundamentals have had analysts playing catch up this year when it comes to price targets. Targa Resources has been one of the biggest beneficiaries of rising commodity prices with its transport services suddenly in heavy demand. Targa is one of the largest midstream infrastructure companies in North America. Its network moves natural gas and natural gas liquids (NGLs) around the U.S. and Canada, and lately, to customers all over the world.
The impetus for the price target adjustment was the company’s third quarter report which showed a 163% jump in profits. Analysts expect strong volume growth to continue into next year as natural gas production rises to meet the world’s clean energy needs. Raymond James latest price target points to 18% upside over the next 6 to 12 months.
WESCO International (NYSE: WCC) shareholders have enjoyed a steady climb off the March 2020 market bottom. The stock has increased tenfold since then and Raymond James thinks it still has plenty of room to run.
On Friday, it raised its target on the industrial distributor from $145 to a Street-high $165 which equates to 21% upside. Three other research firms reiterated their ‘buy’ ratings on WESCO in the wake of yet another impressive quarterly result. Third quarter sales and profits were both records at $4.7 billion and $105.2 million, respectively. Better yet, after exiting the quarter with a record order backlog, WESCO management raised its full year EPS outlook to $9.30 at the midpoint.
This means that WESCO shares are still inexpensive at less than 15x this year’s earnings compared to 23x for the S&P 500. They are an even better value based on the consensus earnings forecast for 2022 at 13x. Its not surprising then that Raymond James and others are raising their price targets.
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