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How 2 Strong Stocks Stack Up on Risk Factors
Stock Analysis & Ideas

How 2 Strong Stocks Stack Up on Risk Factors

It is prudent to assess risk associated with a particular stock before investing. However, the evolving economic and business landscape exposes corporations to newer risks making it challenging for investors to keep a constant tab on it.  

Thanks to TipRanks’ new Risk Factors tool, investors can now easily keep up with the companies’ changing risk scenario, in turn, make informed investing.  

Per the TipRanks’ invaluable Risk Analysis tool, the following two Strong Buy stocks have recently added new risk factors.

Etsy

According to TipRanks’ Risk Factors tool, Etsy’s (ETSY) main risk category is Finance & Corporate, accounting for 35.2% of its total risks. However, the category compares favorably to the sector average of 36.6%.

Since September 2021, Etsy has added six new risks factors. Highlighting its recent acquisitions of Depop and Elo7, Etsy added three new risks under its Finance & Corporate category. Etsy stated that these acquisitions might strain its resources, including management and technology. 

Further, Etsy stated that it incurred significant costs related to these acquisitions, and its failure to successfully integrate these companies into its “House of Brands” strategy could hurt its prospects.

Additionally, under its Macro & Political category, Etsy acknowledged that the expansion of its operations in India and Latin America exposes it to additional legal and regulatory risks. 

Nevertheless, Etsy’s CEO Josh Silverman said during the Q3 conference call that the company is making “great progress” in integrating Depop and Elo7 and “aligning their investment priorities” to areas where the company sees “opportunity for significant value creation.”

Further, Anna Andreeva of Needham said that “Depop/Elo7 are following core Etsy playbook.” However, she noted that Q4 margins could remain pressured owing to the lower margins at Depop/Elo7.

Andreeva has a Buy rating on Etsy stock. Meanwhile, On TipRanks, Etsy is a Strong Buy, based on nine Buys and two Holds. The average Etsy price target of $259.80 implies approximately 0.1% downside potential to current levels.

Further, Etsy’s risk distribution profile indicates that its Tech & innovation risks are above the sector benchmark. Meanwhile, other risk categories are well below the sector benchmark.  

Square

Like Etsy, Finance & Corporate is the primary risk category for Square (SQ), accounting for 38% of its total risks. Further, Square has added 12 new risks since September 2021, and the majority of these newly added risks hover around its recent acquisitions of Afterpay and TIDAL. 

In its SEC filing, Square stated that Afterpay exposes it to several regulatory and competitive risks in the BNPL (buy now, pay later) space. Also, the acquisition increases its foreign currency exchange risk. 

While Square cautioned investors, Mizuho Securities analyst Dan Dolev expects “2022 to be a big year for SQ for several reasons” that include Afterpay integration besides the “international expansion” and introduction of Cash App to the “13-17 age group” that expands its TAM (total addressable market). 

Dolev has a Buy rating on Square stock with a price target of $380, implying about 60% upside potential. Meanwhile, on TipRanks, Square is a Strong Buy, based on 16 Buys and three Holds. The average Square price target of $309 implies approximately 30.2% upside potential to current levels.

Coming back to Square’s risk distribution profile, its Legal & Regulatory risks are above the sector benchmark. Meanwhile, other risk categories, including Finance & Corporate, Tech & Innovation, Ability to Sell, Production, and Macro & Political, are well below the sector benchmark. 

 Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

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