Stocks like Shake Shack & Home Depot are buys in this rough market
Wall Street analysts stated this week that investors are anxious, but that they believe there are many stocks with great potential to fight market turmoil. Analysts say these companies are the perfect combination of traits for investors looking to safeguard their portfolio. CNBC Pro reviewed the latest Wall Street research in order to identify the most durable stocks you should buy. These stocks include Shake Shack, Logitech, Shake Shack, Home Depot and ServiceNow. Northcoast Research upgraded Shake Shack to buy from held earlier in the week. Jim Sanderson, analyst, said the recovery is promising, despite cost headwinds. According to Jim Sanderson, traffic trends appear “resilient”, noting that the company has ample pricing power to offset rising food costs and increase store margins for next fall. According to the company, it continues to expand and is highly sought after by real estate developers. Sanderson stated that forward multiples are near the industry average and that they have a growth strategy twice its peers. “We see significant upside due to growth potential and store operations, margins improvement, and unit economics,” Sanderson explained. Additionally, Sanderson said that Shake Shack’s growth remains in its early days. Sanderson stated that the company has substantial capital and can expand in a period when many restaurants are not being reopened. He wrote that Shake Shack’s trading price is appealing and convincing him to invest in upgrading the company. This year, shares have fallen nearly 42%. Michael Turrin, a ServiceNow Wells Fargo analyst, recently began coverage on ServiceNow and gave the cloud computing platform an “buy” rating. Turrin stated that ServiceNow is continuing to perform on all fronts and can benefit from several trends which should be beneficial to businesses around the world. Turrin explained these in his note for clients, “rise of automation”, cloud infrastructure, edge computing and application modernization. Turrin describes ServiceNow as a leader for IT services because of its many new products and in-development offerings. Although the stock may not be cheap, Turrin said that ServiceNow’s balance financial profile and significant cash flow generation are too appealing to ignore. The shares have fallen 33% so far this year. Although there are potential headwinds, Turrin said that the stock will likely prove to be more resilient than most investors think. Turrin stated that “Furthermore,” Turrin explained, “We continue to concentrate on the best franchises, and we are inclined toward businesses with strong platform positionings and balanced growth profiles, due to the wide-based selloff.” RealReal “Ready for wear demand has returned,” Needham analyst Anna Andreeva wrote in a recent letter to clients. Although shares of the company have fallen more than 70% in 2017, she cautioned investors that they shouldn’t be panicked. Andreeva spoke out about the luxurious consignment store online. “Stock has lagged behind the group/market but REAL is executing avec some of our fastest top line growth within our space.” Analysts expect margins to improve as the year goes on, particularly as supply chains become more flexible. We are optimistic about the growth potential of the circular economy, and we consider REAL to be the only luxury marketplace that operates at scale, she said. According to the firm, RealReal is bullish about its “self-help” initiatives like expanded retail stores and better visibility and marketing. Andreeva said that luxury is resilient in spite of the current environment. She added, “We think that REAL is benefiting from higher prices in the primary markets by pricing higher/consumer traders down.” Logitech-UBS, Buy rating. “Yes. After some recession risks during FY 23E impacting sales. We expect Logitech sales will be resilient driven hybrid working trends supporting PC peripherals and new gamers entering the market. Video conferencing trends are expected to replace traditional telephony in the medium term. … We think Logitech has very strong management execution, has built a leading consumer brand recognition supported by marketing spend & good quality products over the past decade, & has a best-in-class FCF ROIC of > 80% & overall cash conversion.” Shake Shack – Northcoast, Buy rating “Assuming traffic trends remain resilient we believe Shake Shack has ample room to increase menu prices by several points later this year, helping to offset rising food costs & improving store margins by next fall. … .With forward multiples near industry averages but a growth strategy that is double peers, we see significant upside driven by growth potential & the opportunity to improve store operations, margins, & unit economics. … .Combined, we believe Shake Shack is trading at an entry point that is attractive & compelling convincing us to upgrade the firm.” Home Depot – Baird, Rating “Resilient Model”, Estimates Seem Higher. … HD’s remaining buyers. Better-than-expected 1Q results and increased FY22 guidance reinforce our view that HD’s P & L will likely prove more durable than the market currently expects. Our FY22 forecast is positive and we believe that normal revenue seasonality favors our higher estimates. Wells Fargo – ServiceNow, “Likely that we will be more resilient.” … Benefiting from a number of secular trends that are transforming businesses globally—the rise of automation, cloud infrastructure, edge computing, application modernization, remote work, among others. … … … Due to the wide-based sale, we are continuing to place emphasis on quality franchises. We will continue to target businesses that have strong platform positioning and balance growth profiles.” RealReal Needham, Buy rating. Ready to wear demand has returned. … Stock has lagged with the group/market, yet REAL is executing with some of the fastest top line growth in our space. …We are optimistic about the potential growth of the circular economy and see REAL as being the only luxury market operating on a large scale. REAL has made significant progress in removing supply friction, and we anticipate self-help initiatives will drive sales higher ….. In spite of the current environment, luxury remains resilient and REAL sees a positive outcome from pricing up in the primary market.