Everybody likes an upgrade. For a previously unloved stock to be awarded an upgrade from a top analyst, the implications can be far reaching for investors. Often causing an uptick in the share price and setting a snowball effect in motion, the act can signal the turning of a corner in some cases.
With this in mind, we used TipRanks’ Daily Stock Ratings to pinpoint 2 stocks which were reassessed by those in the know. Both were given upgrades to go along with their current “Strong Buy” consensus ratings. Let’s dive right in.
Oxford Industries (OXM)
High-end clothing company Oxford Industries owns several well-known brands including Tommy Bahama, Lilly Pulitzer and Southern Tide. The Atlanta-based company saw a modest gain in 2019, adding 8% to its share price but lagging behind the S&P 500’s impressive 29% increase. The so-so performance, though, sets the company up nicely for 2020, argues Needham’s Rick Patel.
After delivering a solid 3Q earnings report, last year’s shorter holiday shopping window caused a deceleration in sales figures for Oxford across the board. This caused management to lower expectations for its forthcoming 4Q report. Patel believes the lowered expectations are achievable, especially when considering industry results so far, which point to growing demand in the days leading up to Christmas. Furthermore, the analyst thinks the clothing specialist has “compelling growth drivers for each of its major brands in 2020 that can fuel sales.”
Of note to Patel are Tommy Bahama’s Marlin Bars, which following higher comps in 2019’s first three quarters, should be able to build on the momentum with six new store openings in 2020. Patel thinks the label’s strong brand and product affinity are key. Additionally, the stores will add revenue from outdoor space without the associated rent expense. This, according to Patel, “implies very attractive economics for the new locations in the pipeline.”
Lilly’s West Coast expansion is just beginning, too. Patel notes that while the brand has traditionally been an East Coast name, the recent openings on the West Coast have been promising. Given the brand only has 63 owned locations, the analyst sees “significant white space opportunity.” Finally, Southern Tide presents a compelling retail opportunity; historically, the brand’s growth has been dominated by wholesale and e-commerce. The brand now has 14 signature stores which Patel thinks can drive further growth in 2020.
Put together, what does it all mean? Its means Patel upgraded his rating on the clothing company, from Hold to Buy, and set a price target of $79. Should the figure be met, investors will be stuffing their high-end pants pockets with gains of 10% over the next year. (To watch Patel’s track record, click here)
Only two fellow analysts have chimed in with a view on the clothing maker’s prospects. Both are bullish, though, and recommend a Buy, making the Street consensus a Strong Buy. The average price target comes in at $84 and suggests possible upside of 17%. (See OXM stock analysis on TipRanks)
iHeartMedia Inc. (IHRT)
Turning the dial, we tune into iHeartMedia – the largest radio station group owner in the US. The company owns 855 stations and reaches more than 110 million listeners a week. Following a few turbulent years which culminated in filing for bankruptcy in 2018, the company restructured and went public in July of last year.
In contrast to fellow radio broadcasters, B.Riley FBR’s Zachary Silver sees a “compelling setup” for iHeartMedia in 2020. The 4-star analyst points out core revenue trends across the industry will decline slightly for the next couple of years, but argues the company is an outlier for a number of reasons.
The main driver will be the “meaningful restructuring activity” that began in mid-January. The analyst believes IHRT will slash more that $50 million in spending this year, which will drive almost 1% of an incremental AEBITDA margin compared to his previous model. The second catalyst involves Liberty Media’s recent interest in the company.
Silver said, “While our sense is that investors remain skeptical towards the radio broadcasting group, we see reasons to expect both healthy growth and multiple expansion for IHRT over the next year. Additionally, despite our initial skepticism around Liberty Media’s/SIRI’s interest in acquiring IHRT, we now see, in a best-case scenario, Liberty’s interest evolving into a deal announcement sometime this year. Even without a deal, we believe that Liberty’s interest alone provides a sturdier floor for IHRT.”
Silver’s confidence in iHeartMedia’s ability to perform in 2020 has the analyst sticking an upgrade tag on the radio broadcaster. The Neutral rating became a Buy and the price target got a boost, too, from $17 to $23. The implication? Possible gains of 27% over the next year. (To watch Silver’s track record, click here)
The Street is tuned in to the same wavelength as Silver. 4 Buys and 1 Hold dished out over the last three months add up to a Strong Buy consensus rating. At $20.20, the average price target presents potential upside of 11%. (See IHRT stock analysis on TipRanks)