The global economy has been going through some turbulent times over the past couple of years. The COVID-19 pandemic wreaked havoc and brought about a medical hazard for the wider world. Consequently, the financial slowdown that emerged out of the panic pummelled the markets. To tackle the same, central banks around the world started to take a dovish tone and unleashed a liquidity storm with some of the lowest interest rates ever seen.
However, the resultant boost to stock markets due to the muted rates has hit somewhat of a hurdle due to cost inflation woes, continued distress to supply chains and the geopolitical crisis due to Russia’s invasion of Ukraine.
As a result of this low-interest rate regime, U.S. consumer inflation skyrocketed to a 40-year high of 7.9%. To tackle this, the Federal Reserve raised its benchmark rates by 0.25%, the first since 2018, with six more hikes planned for the year.
In such an uncertain environment, investing in stocks in the financial sector can be a risky proposition as the cost of credit is high and the path to sustainable profitability for financial institutions remains uncertain.
Yet, some of the Analysts’ Top stocks in this sector can be a prudent investment choice for investors. Let’s have a look at the Top 3 among them.
Hertz Global Holdings (NASDAQ: HTZ)
Based out of Estero, FL, Hertz Global Holdings is a car rental company with operations in 160 countries, having 12,000 corporate and franchisee locations with popular brands like the Thrifty Car Rental and Dollar Rent A Car in its portfolio.
The company reported upbeat results for the fourth quarter ended December 31, 2021. Its revenues grew 57.8% year-over-year to $1.95 billion, in line with the consensus estimate. The earnings per share (EPS) for the quarter stood at $0.91 per share, which compares favorably to a loss of $1.20 reported in the same quarter last year. Moreover, the figure comfortably outpaced the consensus estimate of $0.76 per share.
Recently, Tigress Financial analyst Ivan Feinseth initiated coverage on the stock with a Buy rating and a price target of $32, which implies upside potential of 41.3% from current levels.
The analyst opines that the company is well-poised to benefit from macro trends that involve increased adoption of rideshare features with the same likely to rise by over 50% in the next five years. Further, recovery in global travel and demand for personal mobility remain tailwinds for the company. Further, key partnerships with companies like Tesla and Uber bode well for the company.
Overall, the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on four Buys and two Holds. HTZ average price target of $29.17 implies that the stock has upside potential of 28.8% from current levels. Shares have declined 16.1% over the past year.
Assurant, Inc. (NYSE: AIZ)
New York-based risk management products and services provider Assurant helps in consumer purchases by providing specialty insurance products via its Global Housing and Global Lifestyle segments.
In its recent quarterly results, the company reported muted results as both earnings and revenue missed estimates. Revenues for the quarter came in at $2.57 billion, up 6.5% from the prior year, with net earned premiums growing 3.5% to $2.18 billion. Yet, the figure failed to surpass the consensus estimate of $2.59 billion. Similarly, its EPS witnessed a year-over-year rise of 15% to $2.20 but failed to top the consensus estimate of $2.30 per share.
Recently, Truist Financial analyst Mark Hughes reiterated a Buy rating on the stock. The analyst raised the price target from $210 to $220, which implies upside potential of 19.3% from current levels.
According to the analyst, the stock remains undervalued compared to its peers in the same space.
Overall, Consensus among analysts is a Strong Buy based on five unanimous Buys. Assurant’s average price target of $197.20 implies upside potential of 6.9% from current levels. Shares of the company have grown 18.1% year-to-date and 28.3% over the past year.
SmartRent, Inc. (NYSE: SMRT)
Located in Scottsdale, AZ, the smart home automation company, SmartRent, develops technology-enabled smart solutions for property owners, managers and homebuilders. The company was established in 2017 with the aim of providing fully integrated, brand-agnostic hardware and software solutions to the real estate industry.
In its recent quarterly results, the company posted mixed results for the fourth quarter ended December 31, 2021. While total revenues for the quarter jumped 155% from the previous year to $34.7 million and surpassed the consensus estimate of $31.4 million, its loss per share of $0.13 for the quarter, although narrower than the loss of $1.03 in the prior year, came in wider than the consensus estimate of a loss $0.09 per share.
Recently, Colliers Securities analyst Barry Oxford reiterated a Buy rating on the stock with a price target of $9, which implies upside potential of 63.3% from current levels.
Strong revenue and earnings growth in the recent quarterly results gives the analyst confidence that the stock is well-poised for appreciation in the future.
Overall, Consensus among analysts is a Strong Buy based on four Buys and one Hold. SmartRent’s average price target of $10.56 implies upside potential of 91.7% from current levels. Shares have declined 44.7% over the past year.
Conclusion
The finance sector, like all the other sectors, is not insulated by the volatile situation that remains prevalent in the world right now. However, some of these select stocks provide a probable investment option for investors looking to deploy their investible corpus.
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