What to do with the markets today? Although last week ended on the downside, we are still looking at an overall uptrend, with year-to-date losses being heavily moderated and major indexes moving out of bearish territory. The key point for now, as it has been so many times this year, is volatility.
Covering JPMorgan markets, global market strategist Marko Kolanovic tells investors to take advantage of bearish days and buy on dips. “Buying on weakness so far has yielded positive returns and has worked best, for example suggestions to stay out of the market and start ‘nibbling’ at 3500 or 3300, levels that have not been reached,” explained Kolanovic.
As for the market in general, Kolanovic describes last month’s inflation data as ‘quite encouraging’ and goes on to say: 13) and makes room for a market-friendly Fed.”
Going forward, Kolanovic predicts the S&P 500 will reach 4,800 by the end of the year, a 13.5% gain from current levels. His peers among JPM stock analysts have picked two downed stocks for investors to consider, predicting 60% or more up next year. Running the tickers through the TipRanks database, we found that each gained a consensus rating of “Strong Buy” from the rest of the Street.
IHS Holding (IHS)
We will start in the technology sector, where IHS Holding is a telecommunications infrastructure company working on the development and expansion of wireless communications network towers in Sub-Saharan Africa, the Middle East and Latin America. Overall, IHS has more than 39,000 towers in its property portfolio in 11 countries.
IHS is the leading tower operator and provider in its field of operation and offers solutions for a variety of telecommunications needs, including small cell operations, fiber connectivity and rural telephone networks. The company works to achieve value and reduce costs, for itself and its customers, as part of a versatile network operation.
In the most recent financial quarter, 2Q22, IHS reported revenue of US$467.7 million. This was down from the $763.5 million reported in the year-ago quarter. Earnings were negative in the second quarter, with a loss of $177 million. This translated into a diluted EPS loss of 53 cents, a loss 60% higher than the year-ago quarter. Despite the loss of earnings, IHS’s cash position has improved modestly over the past 12 months. The company reported $191 million in cash from operations in the second quarter, compared with $174 million in the same quarter last year, and year-over-year, cash and liquid assets increased from $541 million to $567 million.
The shares of this telecommunications company have fallen in recent months and, year-to-date, are down 48%.
Analyst Philip Cusick, in his coverage of this action for JPMorgan, sees the stock price drop as an opportunity for investors.
“We believe that at the current 2022E 6.5x EV/EBITDA, IHS shares are significantly undervalued and we expect the valuation to improve
over time… We like the strong growth profile in the regions where IHS operates, which is driven by high population growth, expanding economic activity, greater penetration and increased usage and transition to 4G and eventually 5G. The company has a strong operating history driven by its long-standing and experienced management team to deliver results in challenging markets,” said Cusick.
This adds up, in the analyst’s opinion, to an overweight rating (ie, buy) – and its $16 price target indicates room for substantial ~119% growth next year. (To watch Cusick’s history, Click here)
Overall, while stocks are down, Street sentiment on the IHS remains solid. The stock has 7 recent analyst reviews on record and all are positive – for a strong buy consensus rating. The stock is selling at $7.32 and its average price target of $19 suggests a one-year upside potential of ~160%. (See IHS inventory forecast at TipRanks)
Snap One Holdings (SNPO)
With JPM’s second pick, we will turn to the smart home sector. Snap One is a leading distributor of smart home technology, providing customers with solutions for entertainment and networking, home audio, home security and networking, and even remote power management. Smart solutions put it all at the homeowner’s fingertips. Snap One’s product lines and installations are available in both the residential and commercial markets. The company acts as a holding company, delivering its products through a network of subsidiaries and brands.
Smart home technology has been growing in popularity in recent years, and Snap One has reported quarter-on-quarter revenue growth last year, but SNPO shares are down 47% so far this year. Several factors affected the stock price. The company’s revenue growth has slowed, while the net loss is increasing.
That doesn’t mean the current numbers are bad – just not as good as investors would like to see. In 2Q22, the company recorded US$ 296.9 million, a gain of 17% over the previous year. At the same time, net loss grew 27% y/y to $1.3 million. The company’s cash reserves have declined from $40.6 million as of December 31, 2021 to $31.3 million as of June 30, 2022. Looking ahead, the company expects full-year net sales of 2022 are between US$1.16 billion and US$1.18 billion, an annual gain of 15% to 17%.
JPMorgan analyst Paul Chung reminds us that Snap One’s second-quarter results beat forecasts, and goes on to say, “Fiscal 22 guidance was reiterated despite the hit, prompting some conservatism against the backdrop macro in our opinion; although it still implies a growth close to 20% y/y; a strong guide in our opinion when most companies are cutting guidance. Pricing actions in June should provide support for gross margins, along with a more measured pace of opex spending to drive solid profitability and cash flow. Feedback from integrator demand remains strong and the end consumer seems relatively more resilient in the current environment.”
To that end, Chung sets a price target of $18, which implies a 62% increase in one year, which bolsters his overweight (i.e., buy) rating on the stock. (To watch Chung’s history, Click here)
All in all, this interesting smart home company has received 6 recent Wall Street reviews, and they split 5 to 1 in favor of Buy over Hold, for a strong buy consensus rating. The stock is selling at $11.09 and its average price target of $19 suggests a 12-month gain of 71% ahead. (See SNPO stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.