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Goldman Sachs: These two “strong buy” stocks could increase by at least 30%
We are now well into the first quarter of 2021 and this is a good time to take a look at what lies behind us, and how it will affect what lies ahead. Goldman Sachs strategist Jan Hatzius believes we are on an upward trajectory, with better times ahead. Hatzius sees that the developed economies expand as the corona crisis subsides. Especially for the US, he is under the impression of the ‘very substantial fiscal support’ implied in the latest COVID relief package. Even with that, however, Hatzius believes that Q4 was a weaker period, and we are still not quite out there. He sets Q1 growth at 5% and says we will see further expansion ‘concentrated in the spring’, and an acceleration to 10% in Q2. And by acceleration, Hatzius means that investors should expect the second quarter of GDP in the region of 6.6%. Hatzius attributes the prediction to the ongoing vaccination programs and the ongoing development of COVID vaccines. The Moderna and Pfizer vaccines are already in production and in circulation. In connection with these programs, Hatzius said: “That we are developing more options and that governments around the world will have more options to choose between different vaccines. [means] production is likely to increase quite sharply in the coming months … This is certainly an important reason for our optimistic growth forecast. In addition to Hatzius’ look at the macro situation, analysts at Goldman Sachs also dived into specific stocks. Using TipRanks’ database, we have identified two stocks that the company predicts will grow solidly in 2021. The rest of the street also supports both the tickets, each with a consensus rating of ‘Strong Buy’. Stellantis (STLA) We’ve talked before about the Detroit automakers, and rightly so – they are important players in the American economic scene. But the US does not have a monopoly on the car sector, as evidenced by the Dutch Stellantis. This international conglomerate is the result of a merger between France’s Groupe PSA and the Italian-American Fiat-Chrysler. The deal was a 50-50 stock deal, and Stellantis boasts a market capitalization of more than $ 50 billion, and a portfolio of almost legendary nameplates, including Alpha Romeo, Dodge Ram, Jeep and Maserati. The deal that formed Stellantis, now the world’s fourth largest carmaker in the world, took 16 months before it was first announced in October 2019. Now that this is the reality – the merger was completed in January this year – the joint venture promises cost savings of almost 5 billion euros in the operations of both Fiat-Chrysler and PSA. These savings want to be realized through greater efficiency, and not through the closure and reduction of plants. Stellantis is new to the market, and the STLA card has supplanted Fiat-Chrysler’s FCAU on the New York Stock Exchange, giving the new company a history. The company’s share value has almost tripled since its low point, in March last year during the ‘coronary recession’, and has remained strong since the merger. George Galliers, analyst at Goldman Sachs, is excited about the future of Stellantis and writes: ‘We see four drivers that we believe Stellantis is capable of delivering. 1) PSA’s and FCA’s product portfolios in Europe cover similar segment sizes at similar price points … 2) Economic economies of scale could potentially have a material impact on both companies … 3) Both companies are in a relatively emerging stage. [in] programs for electric vehicles. The merger will prevent duplication and provide synergies. 4) Finally, we see some opportunities around central staff where existing functions can probably be consolidated … ‘In line with these prospects, Galliers STLA is rating a buy and its price target of $ 22 indicates room for 37% growth in the coming year. (Click here to see the performance of Galliers.) Overall, this merger has generated a lot of excitement, and on Wall Street there is great agreement that the combined company will deliver returns. STLA has a strong buy consensus rating, based on unanimous 7 reviews on the buy side. The stock is $ 16.04, and the average target of $ 21.59 is consistent with Galliers, indicating an upside potential of one year by 34.5%. (See STLA stock analysis on TipRanks) NRG Energy (NRG) From the car we move to the energy sector. NRG is a $ 10 billion utility with dual headquarters in Texas and New Jersey. The company supplies electricity to more than 3 million customers in ten states plus DC, and boasts a production capacity of more than 23,000 MW, making it one of the largest power suppliers in North America. NRG’s production includes coal, oil and nuclear power plants, plus wind and solar farms. In its most recent quarterly report, for 3Q20, NRG showed $ 2.8 billion in total revenue, along with $ 1.02 EPS. While lower year-on-year, it was still more than enough to maintain the strong and reliable dividend payout of 32.5 cents per ordinary share. It is up to $ 1.30 per ordinary share annually and yields a return of 3.1%. Analyst Michael Lapides reviews NRG’s buy in its Goldman Sachs coverage on the stock. Its $ 57 price target indicates a 36% increase from current levels. (To see the record of Lapides, click here.) Lapides says he expects the company to reduce itself in the short term, to see the recent acquisition of Direct Energy. “After NRG’s acquisition of Direct Energy, one of the largest retailers of electricity and natural gas in the United States, we consider NRG’s business to be somewhat transformed. The integrated business model – the ownership of wholesale power generation generating electricity used to supply customers supplied by NRG’s competitive retail arm – reduces exposure to trading power markets and commodity prices, while increasing FCF’s potential, “Lapides wrote. summed up, “We view 2021 from a capital allocation perspective as a redemption year, but with NRG creating nearly $ 2 billion a year in FCF, we see an increase in share buybacks and an 8% dividend growth in 2022 -23. ‘We’re looking at another stock here with a consensus rating from the strong buy analyst. This is based on a 3 to 1 split between Buy and Hold reviews. NRG trades at $ 41.84 and its average price target of $ 52.75 indicates an upward 26% of the level on the one-year time frame (see NRG 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 of TipRanks’ stock insights. verdict: 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.