It’s official: the selling panic set of by the coronavirus spread has pushed the US stock exchanges into bear market territory. The Dow Jones has slipped nearly 27% from its pre-selloff high, and the S&P 500 and NASDAQ are down almost as much. Oil is also down to nearly $30 per barrel, and even the price of gold has fallen. The signs are clear, COVID-19 is prompting a panic market.
President Trump spoke to the country from the Oval, outlining Administration policies to combat both the coronavirus pandemic and the market downturn. The President’s address was without his usual bombast, and the policy prescriptions are appropriate to the emergency – but after three years of political in-fighting and gridlock, there was little Trump could say or do to avoid today’s market sell-off. Investors were looking for guaranteed reassurance, and that simply isn’t in the cards.
But with every downturn, there are going to be opportunities. Prices fall, giving investors their chance to buy low – and strong stocks retain their good fundamentals, even in a bear market. Recognizing this, three of Wall Street’s top analysts have delivered upgrades on some interesting stock calls. We’ve used the TipRanks Stock Screener tool to pull up those three stocks – each has consensus upside potential north of 25%.
Semtech Corporation (SMTC)
We will start with a tech name in the semiconductor industry. Hi tech underlies an enormous amount of the modern economy, so it’s no surprise that a tech company should have the potential to weather this storm. Semtech produces semiconductor chips – integrated and discrete circuits – for a wide range of customers in the aerospace, automotive, computer, communications, and defense industries. It’s a small company compared to its peers, with a $2.1 billion market cap, and $617 million in revenue in 2019.
Despite its small size, Semtech showed fine results for Q4. The company’s 40-cent EPS beat the forecast by 14%, and the $138 million quarterly revenue ended the year on a strong note. Looking ahead, Wall Street forecasts SMTC’s Q1 to show similar numbers.
5-star analyst Quinn Bolton, ranked #26 overall in the TipRanks database, sees this company as well-positioned to bounce back from current market conditions. In an extended comment, he writes, “…we believe Semtech’s LoRa business remains well positioned for share gains and revenue growth as an increasing number of industrial, smart home and consumer devices adopt this long-range IoT connectivity standard… With the number of new COVID-19 cases now on the decline in China and Korea, we believe gradual improvements in capacity and demand will continue in these regions… we believe companies with strong secular growth opportunities are solid defensive plays during times of uncertainty.”
Bolton is impressed enough by Semtech to upgrade his stance from Neutral to Buy. Along with this, he gives the stock a $45 price target, implying room for 37% upside growth. (To watch Bolton’s track record, click here)
Overall, Wall Street’s analysts are sanguine about this stock’s ability to gain going forward. Semtech’s Strong Buy consensus rating is based on 9 Buys and 1 Hold. It doesn’t hurt that its $48.30 average price target puts the potential twelve-month rise at 46%.(See Semtech stock analysis on TipRanks)
Lendingtree, Inc. (TREE)
Charlotte-based Lendingtree is a major online marketplace for loans and other financing instruments. The company connects borrowers with lenders in the credit card, deposit account, and insurance segments, among others. Lendingtree was founded in 1996, went public in 1998, and so is a survivor of the original dot.com bubble.
Fourth quarter results were somewhat disappointing. High expenses, including interest, taxes, and depreciation, adversely impacted the bottom line. Quarterly EPS ended up at $1.12, well below the $1.40 forecast, and missing the $1.22 year-ago number as well. For the full year, however, net income was up from 2018. The $82.4 million reported showed a yoy gain of 2.6%.
RBC Capital’s 5-star analyst Mark Mahaney is optimistic about Lendingtree’s prospects going forward. He gives the stock a $332 price target, showing his confidence in 42% upside growth this year. In line with this, he has upgraded his rating from Neutral to Buy. (To watch Mahaney’s track record, click here)
In his comments on the stock, Mahaney writes, “LendingTree has emerged as one of the leading marketplaces for online consumer loans. We believe that TREE … is well positioned to capture greater share as U.S. financial institution advertising spend moves online. It does this with a business model that is seeing accelerating top-line growth from two revenue segments (Mortgage and Non-Mortgage) while maintaining stable, mid-teens EBITDA margin.”
What does the rest of the Street have to say? As it turns out, other analysts are in agreement. 6 Buys and a single Hold add up to a Strong Buy consensus rating. The $359.57 average price target puts the upside potential just above Mahaney’s forecast, and implies about 55% upside from current levels. (See Lendingtree stock analysis on TipRanks)
Dollar Tree (DLTR)
Moving from one tree to another with Dollar Tree. The store competes directly with other low-cost discount retailers like Dollar General and Big Lots. Dollar Tree has more than 15,000 stores across the lower 48 states and Canada.
It’s a crowded niche, but a popular one with customers, and despite a slow holiday season Dollar Tree increased its Q4 revenues. The $6.3 billion reported showed a 1.8% yoy gain, but just missed the Street’s estimates. Earnings showed the opposite, falling 5.8% yoy to $1.79 but beating the forecast by 1.7%. DLTR has a fair balance sheet, with $539.2 million available in cash and cash equivalents, and $800 million still authorized on the current share buyback plan. Looking ahead, the company guides toward 2020 EPS of $4.80 to $5.15, which compares well with the $4.72 estimate.
DLTR received a ratings upgrade, from Neutral to Buy, from Deutsche Bank’s 4-star analyst Paul Trussell. Trussell gives the stock a $91 price target, implying room for 28% upside potential in the coming 12 months. (To watch Trussell’s track record, click here)
In his research note on the stock, Trussell stated, “…we believe a consolidated team under one roof will improve merchandise assortment and reduce expenses while the threat of a return of shareholder activism has aided outlined guidance that is unlikely to be missed. DLTR is a defensive stock trading at its lows due to transitory factors and we believe now is the time to initiate a long position in a historically double-digit earnings growth story.”
This stock’s Moderate Buy analyst consensus rating is based on a mixed set of reviews, including 6 Buys, 8 Holds, and 2 Sells. The average price target is $91.07, in line with Trussell’s, and suggests an upside potential of 29% from the current share price of $70.74. (See Dollar Tree stock analysis at TipRanks)