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Morgan Stanley: these two stocks could rise by at least 30%
The markets are trying to sort out a series of conflicting forces. There is the bull trend, which has caused stocks to rise higher since last summer, which has been partially derailed in recent weeks for fear of inflation. There is the enormous fiscal stimulus of the legislative COVID relief packages, which help fuel inflationary pressures, but there is also the ongoing vaccination program that guarantees the promise of a return to more normal conditions. Morgan Stanley’s chief US stock strategist Mike Wilson has been following the recent up and down stock markets and shares the benefit of his experience. ‘We see two potential risks to think about … First, the risk associated with interest rates is rising sharply as the bond markets only catch up with what other asset prices already reflect. Secondly, there is a risk that some of the positive operating tree financing we saw in the company’s earnings reports will start to turn upside down, ”Wilson noted. From the general picture to a closer look, Wilson adds: “With this macro background, we continue to advance areas in the market that are cheap …” Considering Wilson’s prospects, Morgan Stanley analysts beat the table on two stocks, with these benefits envisioning at least 30% upside potential. By passing the tickers through TipRanks’ database, we wanted to find out exactly what makes them so fascinating. TPI Composites (TPIC) We start in the green energy sector, where it is linked to manufacturing. TPI Composites is a manufacturer of composite materials and has been applying the specialized knowledge in the manufacture of wind turbine blades since 2001. In 2019, the last year with full data available, TPI has 18% of all wind blades in the country on a megawatt base. The company saw net sales of $ 1.4 billion in 2020, selling more than 9,500 blades. In its recent 4Q20 revenue statement, TPI reported results for the quarter and for last year as a whole. The results were strong and beat the forecasts by a wide margin, but the share still fell sharply. A look at the data sheds light. In the first quarter, TPI reported $ 465.6 million in revenue and 14 cents per share, compared to the expectation of $ 450 million at the top line and 12 cents per share. Quarterly sales were up 10% year-on-year. At the same time, the strong sales growth for the year was not enough to compensate for losses suffered during the corona crisis in Q1 and Q2. The company ended the year with a GAAP loss of 52 cents per share. Also on the downside, the forecast for 2021 sales will be between $ 1.75 billion and $ 1.85 billion – this will see the annual growth of 2021 at about half of what analysts had hoped. Laura Sanchez, analyst at Morgan Stanley, sees the company as fundamentally sound and writes: ‘We see a risk reward facing the upside driven by robust wind installations worldwide, market dominance given TPI’s global footprint, growth in the transport sector and’ a path to margin expansion … We also note that TPIC offers investors a unique way to play secular growth in the global wind and EV markets without taking exposure to other, usually industrial sectors. For this purpose, Sanchez rates TPIC as overweight (ie buy), and its $ 77 price target implies an increase of ~ 54% in the coming year. (To see Sanchez’s record, click here.) Wall Street analysts generally agree that this is a stock to buy. Of the ten recent reviews here, 7 are Buys and 3 Holds, making the consensus rating a moderate buy. The average price target of $ 63.10 indicates an upward one percent of 28% of the current trading price of $ 49.60. (See TPIC stock analysis on TipRanks) Carvana Company (CVNA) From industry and green energy we move to global online sales, where Carvana has become a major seller of used vehicles, making a new turn to online shopping of vehicles. The company operates from a chain of 23 offices and semi-automated motorhome locations across the continental US, from where it enables customers to test vehicles and make purchases. In the fourth quarter of 2020, Carvana sold 72,172 vehicles, an increase of 43% year-on-year. The sales brought in more than $ 1.8 billion in total revenue, which was a 65% increase. The company’s gross profit for the quarter, $ 243.9 million, increased by 71% compared to the previous year. These strong statistics were also seen at the full-year level. The 244,111 cars sold in 2020 represent an increase of 37% per year, while the annual revenue of $ 5.587 billion increased by 42% per year and the gross profit of $ 793.8 million increased by 57% from 2019. The profit results are reflected in the company’s share performance, which has shown steady growth over the past twelve months. During the period, CVNA increased by 290%. This is an impressive profit that caught the attention of Adam Jonas, analyst at Morgan Stanley. “In our opinion, the CVNA channel consists of the following: 1) advantage of the first car, 2) brand awareness, 3) robust nationwide logistics network, 4) complete online transaction capabilities to buy cars, sell cars, and offer also online financing and guarantee options to customers, 5) a less fixed cost and a capital intensive business model, 6) strong customer service and, 7) the ability to leverage its platform in additional business lines, offering great upside option. Jonas considers CVNA to be his ‘top seller in the car dealership’ and considers the share to be overweight (ie buy). Furthermore, the analyst gives CVNA a price target of $ 420, which implies a 31% increase from current levels. (To view Jonas’ record, click here.) The recent valuation of Carvana raised the share price to $ 321.25, slightly above the average price target of $ 314. This did not stop Wall Street analysts from keeping the stock high to rate because analysts’ consensus rating is a strong buy, based on 16 recent reviews that include 13 Buys and 3 Holds. (See CVNA stock analysis on TipRanks) To find great ideas for stocks that trade at attractive valuations, visit TipRanks’ best stocks to buy, a newly launched tool that unites all TipRanks stocks. Disclaimer: The opinions expressed in this article are solely those of the proposed analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.