As the third quarter winds down and the final quarter of the year approaches, it’s time to review the stock markets. Where are we headed in the next few months, and what are the forces likely to affect the business? In some recent comments on CNBC, Citi strategist Scott Kroenert laid out his own belief that we’ll see some more upside.
Cronert said fears of a severe recession had faded at first, or as he put it, “We’ve been paying for a soft landing since the first part of June.” In support of this, Kronert noted that the Fed’s rate cycle is nearing its peak and corporate earnings will remain strong. On the bottom line, Kronert added, “I think all the balance has been told through the end of the year, and we’re going back on our continued view that the underlying support for the S&P is very positive.” This point”
Riding on this positive sentiment, Citi analysts have identified three names they see as poised to post gains of over 40%. These three CT-recommended names are: TipRanks database To find out what the rest of the street has to say about them. All three are rated Buy by analyst consensus. Let’s find out why.
Camp World Holdings (CWH)
We start in the entertainment sector with Camping World Holdings, one of the largest companies in the outdoor recreation space. Camp World is primarily a dealer in new and used recreational vehicles and RV rentals, but the company also makes RV accessories, both inside and outside the vehicle, including boats and other watercraft, portable generators and camping equipment. and accessories.
The company is a proprietary company and primarily operates under two brands: the Camp World brand and the Good Sam brand. Through these subsidiaries, Camp World Holdings has become the US recreational market’s largest distributor of RV and related outdoor and camping products. The company helps its customers to know and adjust their product lines to meet their needs. It has been in business since 1966.
Turning to the company’s results, we find that CWH reported record vehicle unit sales in 2Q23, the most recent quarter reported. However, the company’s top-line revenue of $1.9 billion fell more than 13 percent year over year and missed forecasts by $70 million. On the bottom line, Camping World Holdings had non-GAAP EPS of 73 cents, 3 cents below expectations.
Camp World Holdings offers regular stock dividends to investors and has a history of adjusting its payout to match current conditions. The latest 3Q23 statement puts the common share payout at $0.125 per share, or 50 cents annualized, giving a yield of 2.3%. The charge is scheduled for September 29. The current dividend represents an 80% decline from the previous quarter.
Shares in the veteran entertainment company tumbled after earnings and a dividend cut. The stock is down 31% from pre-release levels. For Citi 5-Star analyst James Hardiman, however, this decline in stock prices presents an opportunity for investors to buy.
“CWH is our top pick in the RV space and we believe the company is the best way to play the RV industry recovery whenever it arrives, as the company has a long history of M&A-driven and macro independent market share in a fragmented industry. The industry is showing early signs of stabilization and recovery, which we think will play out in 2024 and beyond. We expect price/margin pressure to remain under pressure from RV manufacturers in 2024, which will help spur demand from RV dealers. Meanwhile, stocks have recently sold off. , providing what we think is an attractive entry point from a valuation perspective,” commented Hardiman.
Based on that bullish stance, Hardiman has assigned CWH a Buy and a $32 price target, indicating a one-year upside potential of ~48%. (To check Hardiman’s track record, Click here)
Overall, the path remains bullish on CWH. The stock’s 9 recent analyst ratings suggest 8 to 1 favorable buys to holds, a consensus rating of strong buy, and an average price target of $34.57, suggesting a 60% one-year gain from the current trading price of $21.55. (look out CWH stock forecast)
Chemical and Mineral Society of Chile (SQM)
Next under the CT microscope is SQM, a Chilean mining company with a powerful presence in the lithium industry. SQM is the world’s largest producer of lithium and is also known for its work in the chemical industry, producing iodine and potassium used in plant fertilizers and industrial chemicals. The company stated that lithium sales are at record levels, due to increased demand – especially in the electric vehicle market.
In addition to production, SQM also distributes lithium. This year, the company signed a new deal with Ford Motor Company and LG Energy Solutions for long-term lithium supply. Low spot prices in China’s lithium markets, however, are having an unfortunate impact on SQM’s bottom line.
This is reflected in the company’s last reported results in both revenues and earnings losses. Notably, SQM’s second quarter was down 21% year over year to $2.05 billion and missed estimates by $74.5 million. On earnings, Q2 EPS of $2.03 was 61 cents below expectations.
SQM shares are down more than 21% so far this year. That decline doesn’t worry Citi analyst Carolina Cruzat, but she believes SQM is selling well below what it ‘should’ be.
“Given that SQM is an underperformer in the local market and the current valuation appears to be low, we believe the share discount is overstated due to: (i) strong medium-term fundamentals in the lithium market; and (ii) the stock is currently below its cash flow value.” “It is sold until 2030, with a relevant increase if they get fair renewal terms on their lease with Corfu. We believe investors will internalize a very negative view of the potential outcomes of the proposed new lithium regulatory framework, even if they lose the deal on Saler de Atacama.” Cruzat explained.
Adding that the major risks here are already priced in, Crouzat calls the stock a buy. Her price target of $85 indicates a potential upside of 42% over a one-year horizon.
What does the rest of the street think? Looking at the consensus breakdown, the opinions of other analysts are even more expansive. 5 Buys, 3 Holds and 1 Sell adds up to a medium buy consensus. Additionally, the average price target of $82.21 indicates a downside potential of ~38% from current levels. (look out SQM stock forecast)
Sunrun, Inc. (Run)
Last but not least is Sunrun, a leader in the field of residential solar installations. Sunrun is known as a full-service provider in the home solar space, designing, building and installing package solar deals and custom installations for single-family homes. Their packages include everything needed for a specific installation, from rooftop photovoltaic panels to local grid connections as well as smart control systems and energy storage batteries.
In addition to home solar installations, Sunrun also offers financing services. Customers can pay in full upfront or offset the full cost of installation by leasing the equipment over long-term or month-to-month payment options. Sunrun bills itself as the #1 company in the US residential solar market with over 800,000 customers in 22 states and $1.1 billion in annual recurring revenue.
This strong base is the result of continuous efforts to expand Surun’s presence in the market. In 2Q23, the last reported revenue, it increased just 1% year-over-year to $590.2 million. Sales outside the state of California, where the company has its largest footprint, grew 25 percent year-over-year. In addition, the total installed storage capacity increased by 35% year-on-year, reaching 103 megawatt hours. The company’s most surprising achievement, however, was posting a net profit of 25 cents in Q2, beating the expected net loss of 64 cents.
The company’s non-California growth has caught the eye of Citi analyst Vikram Bagrin, who sees it as an important factor supporting the stock going forward.
“Higher rates and NEM effects appear to be mostly priced, but RUN for 1) market share shift from TPO, 2) path to FCF generation, 3) no increase in corporate level equity, 4) planned component cost reduction, 5) ITC additional benefits, and 6) demonstrated success in selling battery storage (>80% in new sales in CA and >30% nationally). CA faces headwinds in ’24 but RUN leader >60% TPO market share and A financing ramp-up means an expected ~6%MW installation growth in FY24 as consumers look to solar + storage to save on utility bills. Also, we believe there is upside to Net Subscriber Value estimates,” opined Bagri.
“We’ve received a lot of inquiries on the valuation for RUN and we believe the stock is a conservative ~$21/sh at LT,” Bagri added, pointing to a firmer bottom line.
Overall, the analyst’s buy rating and $21 price target indicate confidence in a 48% gain over the next year. (To see Bagri’s story, Click here)
CT’s view may be a conservative view on Sunrun – the stock’s consensus rating of Strong Buy is based on 17 analyst ratings, with 14 Buys and 3 Holds. The stock is priced at $14.16, with an average price target of $34, indicating a 140% upside. (look out RUN stock forecast)
Visit TipRanks for great tips on trading at great prices Best stocks to buyA tool that unifies all TipRanks equity insights.
Disclaimer: The opinions expressed in this article are those of the featured analysts only. The content is intended for informational purposes only. It is very important to do your own analysis before making any investment.
