Following last week’s pattern to a T, the market has continued to seesaw. After yet another circuit breaker was triggered on March 16, just three minutes after the session began, stocks followed up the drop by rallying on President Trump’s $1 trillion stimulus package one day later.
Amid the volatility, it makes sense that investors are at a loss when it comes to investing inspiration. However, Wall Street’s seasoned pros can lend a hand. They know the ins and outs of the market, and are often well versed in the industries they cover. So, when investing firm Wedbush added three new names to its Best Ideas for 2020 list, we were intrigued.
Bearing this in mind, we ran three of the firm’s stock picks through TipRanks’ database to get a better sense of the broader analyst community’s opinion. We revealed that the Street is overwhelmingly bullish on all of the names, with each earning a “Strong Buy” consensus rating. Not to mention the stocks sport some impressive upside potential. Here are all the details on Wedbush’s picks.
First up on Wedbush’s list is internet titan Amazon. The company earned the coveted spot based on its ability to deliver earnings over the long run, even given the current economic climate.
Weighing in on Amazon for the firm, analyst Michael Pachter argues that the company is “uniquely-positioned to gain meaningful market share across a number of verticals in a multitude of countries” as a result of the coronavirus outbreak. “Over the near-term, consumers appear to be spending more of their time and money shopping online in order to avoid crowds, to limit the amount of time wasted searching for products that could be sold out at brick-and-mortar outlets, and, in some situations, to adhere to the rules implemented by different governmental bodies,” he explained.
Having said that, this ramp up in demand has created challenges. Over the past weekend, the rush of online shopping caused some supply shortages and delivery delays. Pachter doesn’t dispute the fact that this is disappointing, but believes that any negative impact from the increase in demand is a “high-class” problem.
Pachter expounded on this, noting, “Over the long-term, we expect Amazon to absorb the learnings from this difficult period and adapt its supply chain and delivery network best practices accordingly. In addition, we expect consumers’ increasing reliance on the company at present to result in the acceleration of market share capture that should benefit Amazon and its investors for the next several years.”
As the Wedbush analyst expects Amazon Web Services, Fulfillment by Amazon and ads to fuel margin growth, it’s no wonder he’s staying with the bulls. Along with his Outperform call, he maintained his $2,325 price target, which represents a premium EV/EBITDA multiple compared to its competitors. It also puts the upside potential at 29%. (To watch Pachter’s track record, click here)
All in all, the rest of the Street is on the same page. Out of 39 analysts that have published a recent review, 38 see the stock as a Buy, making the consensus rating a Strong Buy. At $2,425, the average price target is a bit more aggressive than Pachter’s, and brings the upside potential to 34%. (See Amazon stock analysis on TipRanks)
With people relying on constant news coverage to get updates on the pandemic and healthcare officials encouraging the practice of social distancing, Wedbush cites social media giant Facebook as standing to gain amid the ongoing public health crisis.
Analyst Michael Pachter, who also covers this stock, thinks that fears related to the outbreak have driven a substantial increase in user engagement, which in turn has led to impression growth across several properties.
“Given the seemingly unprecedented and unrelenting volume of news related to the global pandemic, the reliance that a large percentage of the world’s population has on Facebook as its primary source of information, and an increasingly-pervasive stay-at-home attitude accentuated in some instances by the government, we believe that many Facebook users have been accessing its properties at meaningfully elevated levels over the last several weeks,” the analyst wrote.
According to Pachter, the “positive momentum” should remain throughout the first quarter of 2020 in several key regions. On top of this, he calls both the high-end of management’s guidance for Q1 top-line growth and the Street’s estimates for full year 2020 “overly conservative.”
Additionally, the company will most likely continue expanding its reach internationally and increase WhatsApp, Messenger and Instagram monetization. Taking all of this into consideration, the deal is sealed for Pachter. As a result, he kept both his Outperform call and $250 price target as is. This conveys his confidence in FB’s ability to climb 67% higher in the next twelve months.
What do other analysts think about FB’s prospects? Its Strong Buy consensus rating, which breaks down into 35 Buys, 2 Holds and 1 Sell assigned in the last three months, suggests that a majority are bullish. Should the $252.79 average price target be met, a 69% twelve-month gain could be in the cards. (See Facebook stock analysis on TipRanks)
Peloton Interactive (PTON)
As for the final spot on Wedbush’s Best Ideas list, it goes to Peloton Interactive. The company uses technology to provide an at-home workout experience through its stationary bikes, treadmills and live fitness classes that can be streamed through its app. With it now offering a free 90-day trial subscription and jumping 29% in the last two days, Wedbush believes PTON is well positioned within the space.
Over the past few days, the governments of several states such as California, New York, New Jersey and Connecticut have called for the closure of gyms, with others expected to follow suit. As a result, more and more consumers will turn to at-home fitness solutions as a way to exercise during this time.
Writing for Wedbush, analyst James Hardiman notes that while the market for traditional gyms isn’t going anywhere, he expects to see a long-term surge in demand for at-home fitness products and services. This conclusion is based on the improvement of technology and the fact that time poverty is getting worse. “Additionally, not only is PTON arguably the company in our coverage best insulated from the current coronavirus pandemic, but increasingly we see PTON as a potential beneficiary of widespread social distancing efforts, accelerating what we believe is already an inevitably shift,” he stated.
Some investors have expressed concern that shares are still down year-to-date despite the coronavirus-driven boost. That being said, Hardiman points out that PTON’s better-than-expected quarterly results, increased full-year guidance and progression past the post-IPO share lockup period indicate that gains could be on the horizon. Additionally, the fitness name settled its lawsuits with FlyWheel, eliminating a significant competitor, and the National Music Publishers’ Association (NMPA). It will now work with the NMPA to “further optimize Peloton’s music licensing systems and processes.”
It should be noted that a recession could hamper the company and that lockdowns of major cities could result in delivery headwinds. However, with regards to the recession risk, Hardiman argues “while a recession certainly won’t help demand for such a premium-priced product, our consumer research suggests that recessionary churn could prove to be comparatively low given a willingness of members to cut back on other subscriptions before cancelling their Peloton membership.”
To this end, Hardiman left both an Outperform rating and $35 price target on the stock. The implication? A return of 45% could be lining investors’ pockets should the target be met in the coming months. (To watch Hardimon’s track record, click here)
All in all, other analysts also have high hopes for PTON. 13 Buys and 2 Holds issued in the last three months add up to a Strong Buy Street consensus. In addition, the $36.20 average price target implies 42% upside potential from current levels. (See Peloton stock analysis on TipRanks)