We expect a great singer to hit those beautiful high notes, right? We also count on the greatest basketball players to send the ball swishing through the net almost every single time.
The same logic applies to the pros on Wall Street. We count on the experts to guide us to the right choice with their depth of knowledge, analytical precision and overall mastery of the art of investing.
As is well known by now, 2019 has presented rich offerings to investors. After such an extended run, though, will the market keep soaring higher? Impossible to know, but we can turn to the most seasoned veterans in the field to shine a light on possibilities.
BTIG’s financial sector analyst Mark Palmer is one such expert. The 5-star analyst ranks as one of the Street’s most reliable voices, as his track record can attest to. Recently, Palmer reassessed some of the stocks covered by BTIG and noted 3 names which he thinks are set for more growth ahead.
According to TipRanks, a company that tracks and measures the performance of analysts, the Street seems to be in agreement with Palmer. Let’s dive in.
Paypal Holdings (PYPL)
Paypal hardly needs any introduction. The digital payment processor has been an ever-present feature since the turn of the century, meeting consumers’ online shopping and money transfer needs back in the days when online shopping was just kicking into gear.
The payments giant has been on a shopping spree over the last couple of years. Only last week, Paypal completed the acquisition of a 70% equity interest in Chinese payments provider, GoPay, making it the first foreign online payments platform in China.
This comes hot on the heels of November’s acquisition of Honey Science Corporation. Honey Science is the creator of a browser extension that helps shoppers find the best online deals. It is a profitable company, with 2018 annual revenue of over $100 million alongside enormous growth of more than 100%. Enough reasons, then, for Paypal to pull the trigger on Honey.
Palmer thinks the new addition is an effort by Paypal to “make its platform more robust and differentiated in the face of increasing competition from tech companies such as Facebook Pay.”
“We believe PYPL’s acquisition of Honey will help the company to make significant advances toward two of the goals it has pursued since spinning off from eBay (EBAY) in 2015: ubiquity and increased customer engagement. Honey should help PYPL to capture a consumer’s attention at the front end of the shopping funnel in addition to at its back end where it has become increasingly dominant,” the analyst said.
With this in mind, Palmer reiterated a Buy rating on PYPL, alongside a price target of $130, implying potential upside of 20%. (To watch Palmer’s track record, click here)
And what does the Street think of Paypal’s prospects? The Street is not far behind the 5-star analyst, as it happens. 23 Buys and 3 Hold ratings over the last three months bestow Strong Buy status on the digital payment leader. More that 16% gains could be lining investors’ pockets over the coming year, should the average price target of $126.09 be met. (See Paypal stock analysis on TipRanks)
Q2 Holdings Inc (QTWO)
Digital banking solutions provider Q2 also has not been shy on acquisitions. Following the 2018 purchases of Gro Solutions and Cloud Lending Solutions, QTWO recently completed the acquisition of PrecisionLender, a fast-growing enterprise SaaS provider for financial institutions.
The company’s cloud-based virtual banking solutions for smaller regional and community financial institutions (RCFIs) seem to be working. In November, QTWO released its latest earnings report with an abundance of good news: record breaking registered users and bookings. On top of this, revenue of $80 million marked a 32% year-over-year increase and a fourth quarter in a row of 30%-plus revenue growth.
Palmer views QTWO as “an attractive takeout target,” noting its “increasingly robust platform has become more of a threat to its larger competitors.“ Palmer opined, “Considering the company’s prospects to sustain its growth through winning new accounts, increasing penetration of existing accounts by promoting digital usage, and cross-selling across both the deposit and lending sides of the banks and credit unions it serves… We believe shares of QTWO are inexpensive in light of the company’s growth prospects, particularly given the expansion of the company’s platform beyond digital banking with the additions of Q2 Open, Cloud Lending, Gro and PrecisionLender.”
As a result, the 5-star analyst kept the Buy rating and $95 price target. Palmer, therefore, sees potential for a 15% gain in the coming year.
Q2 currently boasts a full house of only Buy ratings, 6 to be precise, meaning the company has a Strong Buy analyst consensus. The average price target is $93.80, providing upside potential of 14% from the current price. (See Q2 Holdings stock analysis on TipRanks)
Sutter Rock Capital Corporation (SSSS)
Sutter Rock is an investment fund with an interest in late stage high-growth, venture-backed private companies. So, essentially, by investing in SSSS, you are investing in the company’s portfolio.
According to Palmer, the investment firm’s market cap of $130 million is “a reminder of how wide the gap is between the company’s NAV (net asset value) and its deeply discounted valuation.”
The net asset value refers to the amount of shares that make up the company’s holdings. SSSS has a stake in Coursera, Palantir, Ozy Media, and Course Hero amongst others. In Q3, it sold all its shares in Dropbox for $9.2 million in net proceeds and a realized gain of $1.7 million, and in LYFT, for net proceeds of $13.3 million and a realized gain of $9 million.
Additionally, Sutter recently announced a buy-back of $10 million of its common shares, always a promising sign for investors. The sentiment is shared by Palmer, who noted, “We believe the stock is very inexpensive relative to its intrinsic value and that its discount valuation has created an attractive entry point for small-cap investors. The company provides investors with a vehicle through which they can access late-stage venture capital-backed private companies with strong operating fundamentals and the potential for scaled valuation growth in which they might otherwise not be able to invest.”
Palmer, therefore, maintained the bullish recommendation, with a price target of $11.50. This indicates significant upside potential of 68%.
Only one analyst has rated Sutter Rock over the last three months, joining Palmer in the Buy queue. Sutter, therefore, has a Moderate Buy consensus rating. The average price target of $11 is slightly below Palmer’s and implies gains of 61% in the new year. (See Sutter Rock stock-price forecast and analyst ratings)
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