‘Trade With Caution,’ Says Oppenheimer; Here Are 2 Stocks to Consider
Aug 28th, 2022 7:15 EST
Fed Chair Jerome Powell’s comments regarding the central bank's intention to curb inflation even if it causes "some pain" spooked the markets on Friday. And according to Ari Wald, Head of Technical Analysis at Oppenheimer, there are other worrying indicators.
“The S&P 500’s rejection from its 200-day average is a bearish warning because September seasonals are especially poor when the index’s trend is down,” Wald explained.
With September at the gate, then, Wald’s advice is to heed caution, although promisingly, he thinks that things bode well for further down the line. “Against near-term trading concerns,” the analyst explained, “we still believe June’s reset suggests a longer-term bottom is forming.”
With this in mind, let’s take a look at 2 stocks Wald’s analyst colleagues at the investment firm think are ripe for the picking even in an environment which requires investors to be especially discerning. We ran the pair through the TipRanks database to see what the rest of Wall Street has in mind for these names. Here are the details.
The Pennant Group (PNTG)
Let’s start with home health care services provider The Pennant Group. This holding company has several subsidiaries operating under its umbrella, all providing healthcare solutions to 89 home health and hospice agencies and 48 senior living communities. These are spread out across the U.S. in various states, including California, Wisconsin, Arizona, Washington, Oregon, Texas and Colorado, amongst others. Each Pennant business operates independently, boasting its own management, employees and assets.
Earlier this month, Pennant released its 2Q22 report, in which it met Street expectations; the company delivered revenue of $116.3 million, amounting to a 5.4% year-over-year increase and coming ahead of the Street’s forecast by $4.02 million. Adj. EPS of $0.14 hit the analysts’ target. Promisingly, the company also stuck to its 2022 annual guidance for total revenue between $450 million and $460 million.
Elsewhere, Pennant has been regularly busy on the M&A front; after acquiring 15 companies in 2020, it purchased 11 home health and hospice agencies last year. There has been some activity in recent times too; during mid-August, the company announced it had acquired Central Valley, Palm Springs, and San Diego, California-based hospice care and palliative service provider Ardent Hospice and Palliative Care.
The M&A aspect partly informs Oppenheimer’s Michael Wiederhorn’s bullish take.
In his initiation note, the 5-star analyst said, “Overall, we believe PNTG has an attractive opportunity for growth due to the favorable industry dynamics, enhanced by its decentralized organization, local-leader model, and M&A opportunity. Furthermore, given some of the shorter-term industry concerns, we believe the stock is particularly compelling at current prices. As a result, we would be long-term buyers of PNTG.”
Accordingly, Wiederhorn rates the stock as Outperform (i.e., Buy) while his $22 price target suggests shares will climb 36% higher over the one-year timeframe. (To watch Wiederhorn’s track record, click here)
Looking at the consensus breakdown, 2 other analysts join Wiederhorn in the bull camp while two others remain on the sidelines, all providing this name with a Moderate Buy consensus rating. Going by the $19.4 average target, the shares will see 20% growth in the months ahead. (See Pennant Group stock forecast on TipRanks)
Microvast Holdings (MVST)
Let’s pivot away from healthcare now and enter the realm of energy storage. Microvast is a designer and manufacturer of batteries, and these are intended to power electric vehicles and stationary systems. With the aim of improving battery performance and reducing material use, the company touts it “cutting-edge” cell technology and its vertical integration abilities; Microvast develops modules and packs and also offers battery components (cathode, anode, electrolyte, and separator).
The growing need for eco-friendly energy solutions is a real plus for companies such as Microvast and this was reflected in its latest quarterly statement – for 2Q22.
Even with its main export hub in Shanghai in lock down mode during Q2’s first half, the company put in a strong showing; revenue rose by 93% from the same period last year to reach $64.41 million. The company also reiterated its 2022 outlook for 35% to 45% year-over-year revenue growth.
Margins are also on the up again following a drop in 2021; Gross profit reached $4.8 million in Q2 vs. the gross loss of $6.8 million in the same period a year ago, amounting to a 27.8 percentage point uptick in gross margin from -20.3% in 2Q21 to 7.5% in 2Q22.
For Oppenheimer’s Colin Rusch it is the potential of Microvast to be a “pure play” on battery material optimization.
“We believe a crucial challenge of increased electrification and emissions reduction in the power, heat, and transportation sectors is availability of battery materials,” the 5-star analyst explained. “We believe MVST addresses this challenge in key ways: its gradient cathode technology optimizes cost/total material used; cell and pack expertise helps extend cycle life; and the safety profile of its platform helps derisk downstream applications.”
All the above forms the basis for Rusch’s Outperform (i.e., Buy) rating while his $8 price target makes room for one-year gains of an impressive 225%. (To watch Rusch’s track record, click here)
Rusch has some big expectations but elsewhere on Wall Street, it’s all rather quiet on the MVST front; over the past 3 months no other analysts have chimed in with reviews of this stock. (See Microvast stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.