After breaking 3,200 earlier this month, and dropping back to 3,000, the S&P 500 is testing upper resistance levels again. Against this backdrop, investors will need to crunch the numbers, to find the stocks that are best positioned for current conditions.
The TipRanks Smart Score has already done the footwork, however, collecting data on thousands of stocks and collating it according to 8 separate factors commonly used to predict results. The result of this aggregation? A single-digit score for every stock, on a scale of 1 to 10, that points toward its likely market performance.
We’ve pulled three ‘Perfect 10’ stocks out of the TipRanks database, to find out what factors matter, and what makes these equities compelling in today’s environment.
Super Micro Computer (SMCI)
First on our list is data center server maker Super Micro Computer. The company’s products, in high-efficiency server technology, are used in data centers, enterprise IT, big data apps… anywhere a business needs the power of large-scale servers.
That SMCI’s business niche is vital should be axiomatic in today’s world. Most office workers are dependent on server systems. But to drive the point home, shares in SMCI are up 15% since the market’s bottom fell out in February. The stock did see a drop when market collapsed, but since then, its rebound has been strong and sustained, and has heavily outperformed the S&P 500.
Reviewing Super Micro shares for Northland Securities is 5-star analyst Nehal Chokshi. He sees the stock’s current price as a low-cost entry point, in is impressed by the company’s sequential expansion of gross margins in Q1 from 15.9% to 17.3%. Chokshi writes, “SMCI has a 15-year history of expanding market share in the server market as a result of providing customizable IT solutions at volume priced economics that we expect competitors will continue to not be able to replicate. With better management in place since January 2018, margins have started to expand…”
In line with his upbeat outlook, Chokshi rates SMCI a Buy rating along with a $49 price target. His target implies a 48% one-year upside potential for the shares. (To watch Chokshi’s track record, click here)
Wall Street is in general agreement. There have only been three recent reviews on SMCI, but all are Buy, making the Strong Buy analyst consensus a unanimous one. Shares are selling for $32.83, while the average price target of $39 even suggests the stock will grow 19% this year. (See SMCI stock analysis at TipRanks)
Rada Electronics Industries (RADA)
Next up, Rada Electronics, is a high-tech defense industry contractor specializing in avionics, navigation systems, and tactical radars. There’s an old saw that no one ever went broke selling weapons; while Rada’s defense-industry oriented products are not technically weapons, at the height of the coronavirus pandemic, from March through May, Rada did announce over $35 million worth of new product orders.
New products orders were not the only good news the company saw during the corona crisis. The company also, on March 10, reaffirmed its 2020 full-year guidance, stating that “The coronavirus pandemic has not materially impacted business to date.” More than two-thirds of the new orders came after that announcement. Rada shares made a strong rebound after the market collapse, and are up 14.3% from pre-collapse levels – and are still trending strongly upwards.
The market’s smallest participants, sadly, don’t get as much analyst coverage of the giants – and RADA has a market cap of just $282 million. However, this company has still attracted attention from one Wall Street’s best analysts. Kenneth Herbert, of Canaccord Genuity, rates 5-stars from TipRanks and is ranked in the top 2% of all analysts.
In his comments, Herbert lays out why he believes that RADA is likely to survive potential near- to mid-term defense budget cuts: “RADA is already thinking ahead to a new DoD acquisition cycle roughly 12-18 months in the future, with several more sophisticated tactical radars in development. Management hopes that by getting out in front of the next procurement cycle with a series of next-gen tactical radars, they will be able to maintain their strong incumbent status.”
To this end, Herbert rates RADA a Buy along with an $8 price target, which suggests a 19% upside from current levels. (To watch Herbert’s track record, click here)
Turning to RADA’s Smart Score, we find that three highly positive factors strongly outweigh all the others. First, the analyst consensus is to buy this stock. Second, the financial bloggers agree. They are usually a contentious lot, but on Rada, they 100% unanimous in their bullish sentiment. And finally, the technical factors, among the most traditional of stock indicators, are sending positive signals, including the 88% positive 12-month momentum. (See RADA stock analysis on TipRanks)
Allot, Ltd. (ALLT)
Last on our list, Allot, is a cloud computing company working in a difficult niche. Allot is a SECaaS company, selling Security as a Service, and offering network intelligence and security solutions for DOS protection and traffic management
The grim first quarter this year seemed to pass Allot by. Earnings not only beat a worst-case forecast, they also grew sequentially. Despite recording a net loss, the company showed a sequential EPS gain of 50%, and beat the Q1 estimates by 250%. It was a strong performance. Even with it, however, ALLT shares are down 12.5% since February, underperforming market peers.
Analyst Eric Martinuzzi, of Lake Street Capital, lays out the case why Allot’s current share price is undervalued, and why the company will succeed moving forward: “…the company was able to reiterate its 2020 outlook. This is the benefit of entering the year with a $138M backlog. The company will recognize about 70% of that $138M backlog in FY20. It is the difference between pulling revenue out of the pantry (already won the mandate) vs having to acquire more revenue at the grocery store (competing for the mandate). We view this as a major advantage of the Allot business model and one that separates it from data center and communication equipment peers who have abandoned 2020 guidance.”
Martinuzzi’s Buy rating on ALLT comes with a $15 price target, indicating his confidence in a healthy 42% upside potential to the stock this year. (To watch Martinuzzi’s track record, click here)
Both recent reviewers on ALLT agree – Buy this stock at $15. This makes the consensus rating a Moderate Buy, and the average price target and upside match Martinuzzi’s. (See Allot’s stock-price forecast on TipRanks)
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