With 2021 more than half over and the third quarter in full swing, many investors are resetting for what could be a more volatile rest of the year. With all the major indexes closing Friday at all-time highs, we are taking a very close look at the stocks that the top firms are initiating coverage on now, after such a massive market run. It makes sense that choices are being carefully scrutinized, in the search for upside in an expensive and very overbought stock market.
[in-text-ad]
One of Wall Street’s most respected firms is Goldman Sachs. So we are always interested in the stocks that these analysts initiate coverage on, as that is potentially a good indicator for future performance. Four stocks were started with Buy ratings recently, and all look like very good ideas for the rest of the third quarter and the balance of 2021. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

AvePoint

This very off-the-radar company could be a big winner. AvePoint Inc. (NASDAQ: AVPT) provides Microsoft 365 data management solutions worldwide. It offers a suite of software as a service solutions to migrate, manage and protect data. The company provides cloud solutions for Office 365, Salesforce and Dynamics 365, as well as hybrid/on-premises products. It also offers advisory and implementation, maintenance and support, Microsoft Teams surge and advisory, migration as a service and quick-start services.

Earlier this month the company announced the completion of its previously announced business combination with Apex Technology Acquisition Corporation, a publicly traded special purpose acquisition company (SPAC).

The Goldman Sachs team is very positive and said this when they started coverage:

We initiate coverage of AvePoint with a Buy rating. The company delivered total revenue of $151.5mm last year and accelerated annual recurring revenue growth to 33.2% year-over-year this past quarter. The stock has remained relatively undiscovered due to its recent emergence as a public company via SPAC transaction in our view. We believe the pace of digital transformation, accelerated by COVID-19, coupled with growing Office 365 adoption will continue to serve as secular tailwinds for AvePoint.

Goldman Sachs has a strong $17 price target on the shares. There is no Wall Street consensus due to the recent SPAC conversion. Since the deal closed, the stock has traded between $9.32 and $17.90 a share. The shares were closed on Friday at $11.45 apiece.

Bright Health

This recent initial public offering stumbled out of the gate, but it looks poised to bounce back smartly. Bright Health Group Inc. (NYSE: BHG) is an integrated care delivery company, engaged in the delivery and financing of health insurance plans in the United States. It operates in two segments, NeueHealth and Bright HealthCare. The company offers individual and family, Medicare and employer insurance plans. It also operates 28 managed and affiliated risk-bearing primary care clinics.

Goldman Sachs is extremely bullish on the stock and said this when the firm started coverage:

In our view, Bright is a solidly run insurer with ambitious long-term plans, that is well positioned to continue to drive above peer/average growth in the coming years. Broadly, we think BHG’s strategy to combine an MCO business and provider assets will serve the company well as the market continues to shift towards value-based care. While we see some competitive risk in the individual market, and acknowledge that BHG’s NeueHealth business is relatively nascent, broadly we believe these risks are accounted for in the company’s current valuation multiple.

The Goldman Sachs price target is a stunning $36, and since it had a recent initial public offering, there is no consensus target yet. The stock has traded between $11.64 and $17.93 a share since the deal priced, and it closed at $12.55 on Friday.

This athletic shoe retailer has rallied from lows and looks ready to move higher. Foot Locker Inc. (NYSE: FL) is an athletic footwear and apparel retailer in North America, Europe and Asia. The company’s banners include Foot Locker, Champs Sports, FootAction, Kids Foot Locker, Lady Foot Locker, SIX:02 and Eastbay.
[in-text-ad]
Many Wall Street analysts feel that consumers are bearing price increases from the top companies like Nike, Reebok and Adidas. They also say that currently athletic apparel and footwear companies are continuing to see higher gross margins and return on invested capital, which some think will be a source of multiple expansion.

Goldman Sachs noted this when it started coverage on the popular retailer:

We are initiating on Foot Locker (FL) with a Buy rating based on:

1) Foot Lockers strong omni channel presence,

2) A solid pipeline of new fashion and innovation allowing for pricing power and top line growth,

3) Ongoing real estate rationalization driving higher sales per square foot,

4) Likely ongoing share consolidation from undifferentiated competitors,

5) Unique differentiators and drivers like Power Stores and growth investments in emerging companies, and vi) an attractive valuation.

Foot Locker stock investors receive a 1.37% dividend. The $70 Goldman Sachs price target is right in line with the $70.05 consensus target. The stock closed trading on Friday at $58.37 per share.

IronSource

This company is in one of the hottest sector silos now, and the stock has outstanding potential. IronSource Ltd. (NYSE: IS) operates a business platform for app developers and telecom operators.

The company’s platforms include Sonic solution suite that supports developers to launch, monetize and scale their apps and games by providing solutions for app discovery, user growth, content monetization, analytics and publishing. Its Aura solution suite allows telecom operators to enrich the device experience by creating new engagement touchpoints that deliver relevant content for their users across the entire lifecycle of the device.

The analyst said this:

IronSource should benefit from growth in the mobile app market, driving increased spend by existing and new customers. New product innovation in user acquisition, monetization, and publishing should help to drive market share gains. Sonic Publishing (Supersonic), ironSource’s publishing-as-a-service business, helps independent developers publish games and recent successes (e.g., Bridge Race, Going Balls) could provide additional upside risk to estimates.

Goldman Sachs has set an $11 price target. This is another company that recently went public via the SPAC route, so there is no consensus price target yet. Since the conversion, the shares have traded between $7.80 and $11.25. Friday’s final trade was reported at $8.80 a share.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

These are four stocks that recently received a Buy rating from Goldman Sachs analysts and have very promising upside. While they are better suited for aggressive growth investors, buying shares now could offer some outstanding alpha potential going forward.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.