It’s that time of year again, when all the top firms that we cover here at 24/7 Wall St. start to make their stock picks and prognostications for 2018. This not only gives investors a little bit of a head start on year-end portfolio reshuffling, but it also gives them a look at the overall macro thoughts for the coming year at the big brokerages and banks.
The team at Wedbush is out with the firm’s top picks for 2018, and as it s a smaller boutique firm, we always are interested in their selections, as they tend to not follow the path of the big money center banks and brokerages with a slew of mega-cap ideas. The analysts focus on four sectors, and we selected one stock from each with the biggest upside to the Wedbush price target.
Norwegian Cruise Line
This stock has sold off recently and is a top pick at Wedbush in the retail and consumer sector. Norwegian Cruise Line Holdings Ltd. (NASDAQ: NCLH) is the world’s third-largest cruise company, and it owns and operates Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.
The company acquired Prestige Cruise Holdings, the parent company for Oceania and Regent Seven Seas Cruises, in 2014 to diversify into the premium and luxury segments of the market and expand its global footprint. Today, Norwegian has 25 ships across all three brands and offers itineraries to more than 510 destinations.
The company reported strong third-quarter results that beat expectations, given solid underlying bookings strength. For 2018, bookings are up meaningfully on both volume and price, which leads many analysts like Wedbush to bump up net yield forecasts.
The Wedbush price target for the shares is $65, and the Wall Street consensus target is $64.89. Shares were trading early Wednesday at $53.50.
Ares Capital
This is a high-yielding business development company and a top financial sector play for 2018. Ares Capital Corp. (NASDAQ: ARCC) is a leading specialty finance company that provides one-stop debt and equity financing solutions to U.S. middle market companies, venture capital backed businesses and power-generation projects. Ares Capital originates and invests in senior secured loans, mezzanine debt and, to a lesser extent, equity investments through its national direct origination platform. Its investment objective is to generate both current income and capital appreciation through debt and equity investments primarily in private companies.
Top Wall Street analysts believe the strength of company’s origination platform, sizable balance sheet and ample liquidity position the company favorably in a very competitive investing environment. Other Wall Street analysts also believe that with current tight spread environment, Ares Capital has the scale and industry relationships to continue to make competitive, high-credit-quality investments.
The early termination of the senior secured loan fund removes a large overhang and will help improve its overall portfolio yield and shrink its 30% asset bucket allowing it to rapidly expand its senior direct lending program (with 13% to 14% yield). Top analysts believe there is clear upside to earnings and dividends if the company accelerates the pace of its portfolio restructuring and they expect the margin between net interest income and the dividend to widen substantially in 2018, which merits a premium valuation.
Investors receive a 9.25% dividend. Wedbush has an $18 target price, the same as the consensus target. Shares traded at $16.45 Wednesday morning.
CytomX Therapeutics
This off-the-radar name is a top pick for 2018 in health care. CytomX Therapeutics Inc. (NASDAQ: CTMX) is an oncology-focused biotechnology company developing a proprietary “Probody” technology to treat cancer. Probodies are specifically activated in the tumor microenvironment to provide enhanced tumor specificity and safety profile. The company has established multiple partnerships that validate the technology.
The analyst feel that 2018 will be a catalyst-rich year with first-in-human data from wholly owned Probody candidates in the first half of the year. The company ended the third quarter of 2017 with $331.3 million in cash, cash equivalents and short-term investments, sufficient to fund operations into 2020. Partnered products with Bristol Myers and AbbVie should enter the clinic in 2018, and most analysts are encouraged by progress of the partnered assets.
The $37 Wedbush price objective compares with the consensus estimate of $33.33. The shares were last seen at $21.35.
Vantiv
This company has a solid following on Wall Street and is a top technology play for 2018 at Wedbush. Vantiv Inc. (NASDAQ: VNTV) is a payment processor. Its segments include Merchant Services and Financial Institution Services. The company offers a range of payment processing services that enable its clients to meet their payment processing needs through a single provider.
Vantiv’s products enables merchants to accept and process credit, debit and prepaid payments, and they provide them supporting value-added services, such as security solutions and fraud management, information solutions and interchange management.
It also provides payment services to financial institutions, such as card issuer processing, payment network processing, fraud protection, card production, prepaid program management, automated teller machine (ATM) driving and network gateway and switching services that utilize the company’s Jeanie personal identification number (PIN) debit payment network.
The Wedbush price objective is $100. The consensus price target is $81.31, and shares traded at $74.90.
Here are the other top picks at Wedbush for 2018:
Retail and Consumer
- Century Communities Inc. (NYSE: CCS)
- Skechers USA Inc. (NYSE: SXX)
- Floor & Decor Holdings Inc. (NYSE: FND)
- Fiesta Restaurant Group Inc. (NASDAQ: FRGI)
Financial
- Citizens Financial Group Inc. (NYSE: CFG)
- Realogy Holdings Corp. (NYSE: RLGY)
- Webster Financial Corp. (NYSE: WBS)
Health Care
- Ascendis Pharma A/S (NASDAQ: ASND)
- DexCom Inc. (NASDAQ: DXMC)
- G1 Therapeutics Inc. (NASDAQ: GTHX)
Technology, Media and Telecom
- Electronic Arts Inc (NASDAQ: EA)
- Proofpoint Inc. (NASDAQ: PFPT)
- Shopify Inc. (NASDAQ: SHOP)
All the Wedbush picks make good sense for more aggressive growth accounts that have a higher risk tolerance. The mere fact that the analysts don’t chase big momentum stocks or stodgy, snail-like industrials is an advantage for investors looking for alpha opportunities.
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