Goldman Sachs analysts collected several companies to “quickly outwit” their pre-Covid profits as Europe recovers from the post-pandemic recovery.
Goldman’s latest “Reopening Scale,” published on Monday, tracks economic activity in Europe and the United Kingdom each week and analyzes data on hotel bookings, online flight searches, and restaurant bookings, as well as vaccination and hospitalization levels.
Here are 10 of Goldman’s top stock picks, two of which have a 45 percent potential upside:
BP is ranked first on Goldman’s list of buy-rated “Reopening Beneficiaries” with “international exposure” and a more than 10% upside to their 12-month price targets.
The potential upside to BP’s 12-month price target is estimated by the investment bank to be 45 percent, while the figure for Italian firm ENI is 27 percent. The bank also chose Total, a French conglomerate with a potential upside of 23%.
Industry of aviation
According to Goldman’s analysis, Rolls Royce has a potential upside of 45 percent, while British airline EasyJet has an upside of 18 percent. The bank also chose Airbus, which has an 18% upside potential, and Flughafen Zurich, which has a 27% upside potential.
Richemont, a Swiss conglomerate, is another of Goldman’s reopening beneficiaries, with a 13 percent upside potential, according to the bank’s analysts. They also chose Swatch Group, which has a 19 percent upside potential, and Adidas, which has a 16 percent upside potential.
The reopening is being referred to as ‘accelerating.’
Goldman described Europe’s reopening as “accelerating,” and said it preferred companies “with the potential to rapidly outgrow the pre-covid earnings level.” The bank’s data shows a significant increase in flight searches in EU countries, coinciding with the bloc’s introduction of a Digital Green Pass, which will allow vaccinated citizens to travel freely to certain countries beginning July 1.
Restaurant bookings, job postings, and retail sales in the United Kingdom are all up from pre-Covid levels, according to the bank, though the British government has delayed a full reopening until July 19 due to an increase in virus cases caused by the delta variant.
Goldman’s “Reopening Beneficiaries” list was compiled by analysts in the bank’s Tactical Research Group, according to the bank. “These are stocks they identify as being most impacted by Covid-related restrictions and likely to benefit significantly from positive, and crucially, sustained, reopening developments,” it added.
According to JPMorgan, investors with large Carvana bets should cut their profits and seek elsewhere for more.
“With CVNA significantly outperforming its peer group YTD… and 12 month period…, and now trading at a 17x FY23 [enterprise value-to-gross profit ratio]…, we believe the stock is receiving appropriate credit for robust multi-year revenue and gross profit growth,” according to the note.
According to JPMorgan, Carvana will also struggle to increase its margins in the short term.
“CVNA has already demonstrated its potential, and meaningful upside from here is unlikely in the near to medium term, particularly as finance [gross profit per unit] approaches its peak and [gross profit per unit] (ex-COVID and temporary depreciation headwinds) already reflects material sourcing improvement benefits,” the note stated.
JPMorgan maintained its price target for Carvana at $325 per share, which is less than 4% higher than the stock’s closing price on Tuesday.