The current market conditions are characterized by uncertainty, requiring investors to be mindful of the various cross-currents that can impact stocks and other trading instruments. The recent banking crisis sparked by SVB’s failure has contributed to a climate of uncertainty, with persistently high inflation and interest rates. Additionally, a cooling job market could be an indication of a slowing economy.
What’s needed here is a clear sign market players can use to sort out the sound investments from the ‘noise.’ In uncertain times, the usual markers aren’t fully reliable – but the TipRanks Smart Score tool can cut through the clutter of data and shine a light on solid opportunities.
The tool takes a set of algorithms to collect, collate, and sort the volume of market data, generated by thousands of publicly traded stocks – and then it uses that data to rate the stocks according to a set of 8 factors, all known as accurate predictors of future performance. The 8 factors are then scored together, giving each stock a single-digit rating on a 1 to 10 scale. It’s a simple and intuitive marker, telling investors at a glance how the stock is likely to move.
The ’Perfect 10’ is the highest rating from the Smart Score, and it doesn’t fall on just any stock. These are the equities that deserve a second look from investors, the stocks that hit all the right boxes. We’ve opened up the TipRanks database to pull the details on two of these Perfect 10s; these are top-rated stocks offering investors solid opportunities for gains in the months ahead.
Pure Storage, Inc. (PSTG)
The first ‘perfect 10’ stock we’ll turn to is Pure Storage, a company focused on a vital niche in the digital world, computer memory chips. Pure Storage offers a range of flash-based, cloud-ready memory chips and systems, fit for entry-level through enterprise-grade applications. The company’s memory systems can support large-scale cloud computing, and customers can find everything from solid-state flash drives to the large-scale FlashStack servers that back up data center activities. Pure Storage boasts that its memory systems are 85% more energy efficient than competitor products.
Pure Storage has a customer base more than 15,000 strong, and in recent months has scored some important business wins. Just this past March, Pure Storage announced that its FlashBlade unified fast file and object storage solution, had been chosen by the Australian Genome Research Facility as the key to speeding up data performance on the genomic pipeline. Earlier this year, in January, Pure Storage made an even bigger splash, with the publication of news that it is partnering with Meta on the AI Research SuperCluster (RSC). Meta chose Pure Storage to leverage the FlashArray and FlashBlade memory systems.
These announcements bookended a solid fiscal year. Pure Storage last month reported its financial results for Q4 and fiscal year 2023, which ended in February. The company reported $810.2 million at the top line for the quarter, up 14% year-over-year and in-line with expectations. At the bottom line, the GAAP EPS of 22 cents was 15 cents above the forecast, while the non-GAAP figure of 53 cents came in well ahead of the 39-cent expectation. In an important metric looking forward, the company had $1.1 billion in quarterly subscription services ARR, for a 30% year-over-year gain.
While these results were considered positive, investors were spooked by the company’s forward guidance, which predicted fiscal 2024 revenue to grow by ‘mid to high’ single digits – against a Street expectation of 13%.
The guidance miss did not prevent Wedbush’s 5-star analyst Matt Bryson from coming down with a bullish outlook on the shares.
“PSTG proved us wrong as revenues rather consistently exceeded expectations helped in small part by PSTG’s inclusion in FB/Meta’s build -out of its AI supercomputer. Moreover, more moderate expense growth (with relatively high operating expenses having been a key criticism of PSTG since its inception having been an oft criticized portion of the story) has led to a significantly improved earnings outlook,” Bryson opined.
“With recent results suggesting the good parts of the PSTG story are still intact (with no apparent company specific issues); management having, in our view, largely derisked guidance for FQ1’24/FY2024, with several intermediate term catalysts in place (PSTG’s new FlashBlade//E , lower NAND prices, etc.); and with PSTG trading well below historical valuations, we see an attractive opportunity to invest in PSTG at current levels,” the analyst added.
Quantifying this stance, Bryson gives PSTG shares an Outperform (i.e. Buy) rating, while setting a price target of $34 that implies ~33% upside for the coming year. (To watch Bryson’s track record, click here)
Overall, PSTG shares get a Strong Buy rating from the analyst consensus, based on 15 recent analyst reviews breaking down 14 to 1 in favor of Buys over Holds. The stock’s $34.86 average price target implies a 36% one-year upside from the current trading price of $25.62. (See PSTG stock analysis)
Crocs, Inc. (CROX)
Next up, we have a well-known footwear brand that needs no introduction: Crocs. We all know the foam clogs that brought the company to prominence, but Crocs now offers a much wider array of shoes and styles to augment the iconic (an eponymous) clogs – everything from sandals to sneakers, and even formal footwear.
A look at a few numbers will show how Crocs has grown, from its start at a Florida boat show in 2001, where it sold 200 pairs, to its current incarnation that sees over $3 billion in annual sales. Crocs can be found in 85 countries, and the company sells more than 100 million pairs of shoes – of all types – annually. All of this makes Crocs one of the world’s top-ten non-athletic footwear brands.
Crocs’ strong market position has led to solid quarterly and annual results. The company beat expectations in its Q4 and fiscal year 2022 financial report, with the quarterly results coming in strong. The top line of $945.2 million edged over the forecast by $6 million, while the bottom line non-GAAP EPS of $2.65 came in 42 cents, or 18% ahead of the forecast. The full-year revenue, at $3.6 billion, was up 53% year-over-year and was a company record.
Looking ahead, Crocs’ Q1 and full-year 2023 guidance also beat the consensus estimates. The Q1 guidance for adjusted diluted EPS was set at $2.06 to $2.19 per share – where the Street had been expecting $2.04. For the full year, the EPS guidance, at $11 to $11.31, was well ahead of the consensus figure of $10.90. The company expects strong sales in 1Q23, with year-over-year revenue growth hitting 27% to 30%.
Covering this stock for B. Riley, analyst Jeff Lick lays out a clear case for investor to go long on CROX.
“We view Crocs as a multiyear core holding that should deliver absolute and relative returns in 2023 and beyond. Crocs’ 1Q23 and FY23 guidance appear achievable and beatable. We see numerous potential inflection points and catalysts in 2023 and 2024 that could drive relative multiple expansion and elevate investor perception. Crocs is also becoming a meaningful medium in the area of brand, media property, and celebrity development,” Lick opined.
“Lastly,” the analyst summed up, “we see the current challenged retail and consumer environment as a potential source of opportunity as consumers seek value and affordable luxuries while retailers consolidate their merchandising strategies and rely on proven partners to an even greater extent than usual.”
These bullish comments back up the analyst’s Buy rating on the shares, and his price target, set at $157, suggests that Crocs will see ~29% share appreciation this year.
Zooming out, we find that Crocs gets a Strong Buy consensus rating from the Wall Street analysts, based on 6 recent Buys against 2 Holds. The shares are currently priced at $121.86 and their $157.50 average price target implies an upside of 29% on the one-year time horizon. (See CROX stock analysis)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
