With just a week left in the third quarter, and most of the second-quarter results long since posted, most on Wall Street are reasonably satisfied with the results. While many investors remain very nervous, especially given the large rally off the market lows, the overall take is one of slow but steady going forward, given the incredible turmoil in the equity markets and the economy due to the COVID-19 crisis.
In a series of new reports, Goldman Sachs raises the price targets on shares of some companies that delivered the goods in a big way and, given the increases in targets, still look to have some very solid upside potential. Here we spotlight four of those stocks.
While all four are rated Buy at Goldman Sachs, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Crown Holdings
This packaging products leader is a great idea for conservative investors and may have even more upside potential. Crown Holdings Inc. (NYSE: CCK | CCK Price Prediction) designs, manufactures and sells packaging for consumer goods in the Americas, Europe and the Asia-Pacific.
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The company offers aluminum beverage cans and ends, and other packaging products to beverage and beer companies; food cans and ends, including two-and three-piece cans in various shapes and sizes for food marketers; and aerosol cans and ends for manufacturers of personal care, food, household and industrial products. It also provides metal and composite closures, and capping systems and services, as well as various specialty containers comprising lid and closure variations.
The Goldman Sachs analysts noted this in a new research report:
Looking past near-term trends, Crown Holdings has visibility into continued solid volume growth in North America through at least 2023 (based on contractual customer commitments) that should at least match the expected 15% increase in industry capacity in the next 18 months while also potentially opening up tactical pricing opportunities.
The Goldman Sachs price target was lifted to $83 from $75, while the Wall Street consensus target is $81.85. Wednesday’s closing print for Crown Holdings stock was $73.15 per share.
HubSpot
This stock has rallied up large, but a recent pullback offers a good entry point for aggressive investors. HubSpot Inc. (NYSE: HUBS) is a cloud-based provider of inbound marketing tools such as website content management, blogging tools, email campaign, search engine optimization, social media monitoring and management, customer relationship management and others for small businesses and midsized companies.
The company’s tools provide a single console for marketing professionals to generate new customer leads, convert leads to customers and customers to repeat customers. Goldman Sachs remains impressed and noted this:
The company is focused on sustaining high growth through increased penetration of its existing market, adding more product Hubs, and further expansion upmarket. We were encouraged to hear that COVID is no longer a headwind and as of June had turned into a tailwind, as businesses are looking to digitally transform their go to market efforts, in many cases choosing HubSpot as a key partner.
Goldman Sachs raised its $290 price objective to $332. The consensus target is $269.76, and Wednesday’s closing price for HubSpot stock was $283.17 a share.
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Nike
This is one of the most recognized and most valuable brands in the world, and a shift in production would be a gigantic move for the company. Nike Inc. (NYSE: NKE) designs, develops, markets and sells athletic footwear, apparel, equipment and accessories worldwide. The company offers Nike brand products in six categories, including running, Nike basketball, the Jordan brand, football, training and sportswear
The company also markets products designed for kids, as well as for other athletic and recreational uses, such as American football, baseball, cricket, golf, lacrosse, skateboarding, tennis, volleyball, walking, wrestling and other outdoor activities. It has apparel with licensed college and professional team and league logos.
Nike also sells a line of performance equipment and accessories comprising bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment and other equipment for sports activities, as well as various plastic products to other manufacturers. Further, it provides athletic and casual footwear, apparel and accessories under the Jumpman trademark; casual sneakers, apparel and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron and Jack Purcell trademarks; and action sports and youth lifestyle apparel and accessories under the Hurley trademark.
The company posted stellar quarterly results, and the analysts said this:
Results in the quarter were significantly ahead of FactSet consensus, driven by stronger global sales and better margin delivery. Nike’s strong brand, ongoing innovation, and increasingly close consumer connection is driving significant momentum, evidenced by a faster recovery in sales and resilient digital growth trends even as stores reopen. Importantly, the effects of Nike’s efforts to accelerate its digital transformation and distribution strategy became increasingly evident this quarter.
Shareholders receive a 0.77% dividend. The $126 Goldman Sachs price target was raised to $140. The posted consensus target is $124.14. Nike stock was last seen trading at $127.11, up almost 9% on Wednesday.
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Philip Morris International
This company has continued to grow global market share and its stock makes good sense for total return investors now. Philip Morris International Inc. (NYSE: PM) is one of the largest international cigarette producers, with a share of 28% of the international cigarette/heated tobacco market. Key combustible brands include Parliament, L&M and Marlboro, also one of the most valuable brands in the world.
The company is commercializing IQOS, a heat not burn product, in over 40 markets, which could drive earnings in the years to come. Most on Wall Street believe Philip Morris International offers superior underlying growth prospects, both near term and long term. The share price has been weak of late as investors have questioned the growth potential of its reduced risk products, and the overall market weakness has contributed. All of its sales are outside of the United States.
Goldman Sachs is very positive on the company and the IQOS initiatives:
We see a strong runway of accelerating revenue/profit growth ahead fueled by the tremendous compounding effect of iQOS based on our deep-dive analysis. Essentially, we expect the company’s base of iQOS users to increase to over 40 million by fiscal 2025 (up from 15.4 million users today, a ~20% CAGR) driven by accelerating conversion and stepped up innovation. Importantly, each 1 million new users consume ~5 billion iQOS heated tobacco units annually, which generate an incremental >$350 million in net revenue & >$200 million in op income annually, incl device sales & cannibalization effects – a very powerful razor/razor blade model.
Holders of Philip Morris stock receive a massive 6.36% dividend. The Goldman Sachs price target rose to $100 from $85 and compares with the $87.80 consensus target. Shares closed below both levels on Wednesday at $75.50.
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These four top companies are executing well and their stocks still look to have very solid upside to the Goldman Sachs price targets. These stocks are better suited for accounts with somewhat higher risk tolerance, as they could be a touch more volatile, given the solid runs they have all made.
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