The markets began the week with the best foot forward with all the major indexes charging ahead, but as evidence has shown throughout the year, that is no guarantee a sustained rally is in the cards. Most upticks have been followed by severe pullbacks, although investors will be hoping the latest surge has legs. Those looking for positive signs will be glad to hear Oppenheimer’s Chief Investment Strategist John Stoltzfus’ take on the matter.
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“Our view remains bullish on equities as the stocks of many solid companies look grossly oversold as a result of extreme negativity that is evidenced in polls of investment professionals and private investors and in the day to day volatility in the markets,” Stoltzfus said.
Putting those thoughts to work, Stoltzfus’ analyst colleagues at the banking firm have clocked an opportunity in two such names which have retreated by considerable amounts in recent times. We ran the pair through the TipRanks database to see what the rest of the Street makes of these choices. Let’s get into the details.
Wix.com Ltd. (WIX)
The pandemic provided a huge tailwind for internet stocks, but the tables have turned big time on most of the Covid era’s winners and Wix is a prime example. The web development platform which allows users to build their own websites and comes jam packed with hundreds of easy-to-use tools to fine tune the offerings has seen its stock shed 52% since the turn of the year.
Wix has been a victim of both the pivot away from ecommerce and of the hostile climate for unprofitable growth stocks. While not long ago, companies exhibiting losses were given room to run so long as growth was on tap, in an environment of high inflation and rising interest rates, that is no longer the case. The other problem is that along with a negative bottom-line, the growth is now stunted too.
This has been evident in Wix’s last few quarterly reports, a scenario which also played out in the latest statement – for 2Q22. While revenue increased by 9.4% year-over-year from the same period last year to $345.6 million, the growth was below the 16.21% exhibited in 4Q21 and the 12.32% of 1Q22. The profitability profile remains in negative territory too, as adj. EPS clocked in at -$0.14, although it should be noted that the figure came in much better than the -$0.42 expected on Wall Street. Furthermore, Wix has also put into place a cost reduction plan which is meant to address the ongoing losses and hasten margin expansion.
The shares’ retreat also appears to have left them highly appealing to Starboard Value, an activist investment firm that recently took a 9% stake in the company.
The fall in share price has also not prevented Oppenheimer analyst Kenneth Wong from coming down firmly on the bullish side for this stock. He sees Wix well positioned to move forward, and lays out the reasons why.
“We believe Wix has the potential to operate more efficiently to drive meaningful shareholder value… Management has already pivoted toward balanced growth, projecting to deliver 20% margins by FY25, with LT targets trending to ~30%,” Wong opined.
“Our conversations indicate that investors are generally constructive on Wix’s more balanced approach, but view activist involvement as a positive catalyst to potentially accelerate efforts to streamline operations, and hold management accountable to staying the course (equally important). We believe a combination of these initiatives could deliver meaningful shareholder value,” the analyst added.
To this end, Wong rates WIX shares an Outperform (i.e. Buy), while his $110 price target makes room for 12-month gains of ~45%. (To watch Wong’s track record, click here)
Most agree with Wong’s take; the stock claims a Strong Buy consensus rating based on 6 Buys vs. 2 Holds. Going by the $96.29 average target, the shares will climb ~27% higher over the coming months. (See Wix stock forecast on TipRanks)
Amprius Technologies, Inc. (AMPX)
New entries into 2022’s treacherous stock market have been rather scarce, particularly those going public via the once-popular SPAC route. Some, however, have braved the waters. Once such name is Amprius Technologies, which went public via a SPAC merger with Kensington Capital Acquisition midway through September.
Amprius makes lithium-ion batteries, which the company touts as the “highest energy density lithium-ion batteries in the world.” This is down to Amprius using silicon anodes rather than traditional graphite. There is talk in the battery industry of a potential move from graphite to silicon anodes which offer higher capacity, faster charging, and longer life spans.
Over the past decade, Amprius has been hard at work on turning its patented technology into a commercially viable product and the company has already onboarded some impressive customers such as the U.S. Army and Airbus. The latter put in its first orders in 2018 and became an investor in 2019.
The next step for the company – and its biggest challenge – will be to scale manufacturing and the ~$87 million raised via the SPAC transaction will go toward this endeavor.
Assessing the company’s prospects, Oppenheimer’s Colin Rusch thinks the company will be able to do so successfully.
In his initiation note, the 5-star analyst wrote, “We view Amprius as a process technology-driven company that is pioneering new anode materials to enable next-generation energy storage solutions with industry-leading power and energy density. Given management’s track record of commercializing processes in semiconductors, solar, and battery materials, and Amrpius’s qualification with 30 customers, notably with prominent aerospace companies, we believe the company is well positioned to take outsized share in large and growing markets for lightweight, fast-charging batteries.”
After the public debut, the stock quickly joined the ranks of strugglers — shares are down by 38%. However, Rusch expects those losses to be clawed back and some; along with an Outperform (i.e., Buy) rating, the analyst’s $14 price target suggests shares will surge by ~125% in the year ahead. (To watch Rusch’s track record, click here)
Some stocks fly under Wall Street’s radar and AMPX appears to be one such name right now; currently, Rusch’s review is the sole one on file. (See AMPX stock forecast on TipRanks)
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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.
