These companies delivered strong quarterly results, and analysts predict that their stock prices will rise.
According to Refinitiv data, more than 85 percent of S&P500 components have reported quarterly results, with 88 percent exceeding earnings estimates.
Analysts scoured the top Wall Street research to uncover some of the most intriguing buying opportunities.
Centene, PayPal, Citi, Accolade, Caesars, and Texas Roadhouse are among them.
PayPal
Continue to buy PayPal stock, according to JMP Securities analyst David Scharf in a client note last week.
PayPal reported second-quarter earnings in late July, which included a revenue miss as well as a 23 percent drop in profit from the previous year.
While the results were not perfect, Scharf believes they are adequate for investors.
“The company delivered record results in almost every metric during 2Q21, except perhaps Street expectations,” he said.
The company attributed the “noise” in second-half guidance to “a quicker-than-planned fall-off in eBay volumes,” as the auction website phased out the PayPal service.
Engagements, on the other hand, are continuing to rise, which is good news for PayPal, according to Scharf.
“By almost every measure, user engagement is increasing,” he added.
Scharf also reiterated his outperform rating and advised investors to buy the dip.
“As we reiterate our call that PayPal remains the most compelling digital payments ecosystem in our opinion, we would be particularly interested in purchasing the shares in the event of a near-term correction,” he wrote.
PayPal’s stock was up nearly 1.4 percent for the week.
Texas Roadhouse is a restaurant in Texas.
According to BTIG’s Peter Saleh, the steak-themed restaurant company is running on all cylinders.
“The dining room traffic has completely recovered,” he said.
Texas Roadhouse reported second-quarter earnings last week that exceeded expectations, despite rising commodity prices.
Shareholders, on the other hand, should not be concerned, according to Saleh.
“While we were surprised by the commodity inflation outlook, we believe investors should pay attention to the restaurant level profit dollars per restaurant, which were 15% higher than the previous peak in 2019,” he said.
Texas Roadhouse has “ample pricing power should they choose to use it,” according to Saleh, but history shows that commodity concerns rarely last.
“We consider Texas Roadhouse to be one of the most compelling casual dining concepts, with consistently industry-leading sales, superior unit economics, and significant long-term unit potential,” Saleh said.
Texas Roadhouse stock is up 17.3 percent this year.
Caesars Entertainment is a company that provides entertainment.
“2Q21 was further evidence of the CZR-specific earnings and margin power story taking hold,” wrote KeyBanc analyst Brett Andress following the casino company’s second-quarter results on Wednesday.
Andress was particularly impressed by the company’s significant revenue growth in Las Vegas.
“In comparison to our model, the beat was primarily led by outsized LV results, with the Regional segment also performing well,” he explained.
After listening to Caesar’s conference call, the firm expressed confidence that coronavirus fears and regulations could be overcome if management executes.
“While delta concerns remain, weighing on sentiment across the group (among other things), mgmt made the point that mask mandates are less onerous compared to what was experienced in 2Q2, maintaining confidence that NT (near-term) occupancy is expected to remain in the low/mid-90s,” he said.
Although obvious challenges remain, investors would be wise to be patient with the stock, according to the firm.
“We believe CZR provides one of the most compelling LT (long term) upside narratives in gaming,” he wrote.
The stock market finished the week up nearly 3.5 percent.
Overweight rating for Centene – Wells Fargo
“On 7/27, CNC reported Q2 results and adjusted guidance components while maintaining the EPS range, despite the fact that the lower end of the range remains the most likely outcome. While EPS exceeded expectations in Q2, MLR (medical loss ratio) fell short for the third quarter in a row. While higher-than-expected exchange costs add near-term uncertainty (which we acknowledge with a slightly lower price target), we continue to see the longer-term opportunity for margin expansion and multiple expansion as quite compelling.”
Stifel Award, Buy Rating
“ACCD outperformed in the first quarter (May) and raised FY22 guidance due to positive momentum in the core business (33 percent organic growth) as well as acquired assets.” We believe ACCD provides one of the most compelling and distinct growth opportunities in the digital health space. While multiple expansion may be limited in the short term, we believe the ACCD platform is poised for share gains and can sustain 25% growth or higher over the next several years.′
KeyBanc – Caesars Entertainment, Overweight rating
“2Q21 saw the CZR-specific earnings and margin power story take hold, with 50 percent Las Vegas margins and an exit rate in excess of $4.5B/$10 per share FCF….” In comparison to our model, the beat was primarily driven by outsized LV results, with the Regional segment also performing well. While Delta concerns remain, weighing on sentiment across the group (among other things), management stated that mask mandates are less onerous than what was seen in 2Q21, maintaining confidence that NT occupancy will remain in the low/mid-90s.”
PayPal – JMP received a Market Outperform rating.
“The company delivered record results in almost every metric during 2Q21, with the exception of Street expectations….” Importantly, the ‘noise’ in the second-half guidance is almost entirely explained by a faster-than-expected decline in eBay volumes, which have higher take rates… As we reiterate our belief that PayPal remains the most compelling digital payments ecosystem in our opinion, we would be particularly interested in purchasing the shares if there is a near-term correction. User engagement continues to rise by almost every metric.”
BTIG, Buy rating for Texas Roadhouse
“While the commodity inflation outlook surprised us, we believe investors should focus on the restaurant level profit dollars per restaurant, which were 15% higher than the previous peak in 2019. Furthermore, given their history of underpricing competitors, we believe Texas Roadhouse has ample pricing power if they choose to use it… Dining Room Traffic Is Completely Recovered… We consider Texas Roadhouse to be one of the most compelling casual dining concepts, with industry-leading sales, superior unit economics, and significant long-term unit potential.”
Citi- Oppenheimer has an outperform rating.
“The most enticing opportunity among large cap banks… Citi reported 2Q21 earnings per share of $2.85, compared to our $1.63 estimate and the consensus’ $1.97E… Citi is still one of the cheapest banks in our coverage universe, trading at 0.88x tangible book value. Based on consensus estimates for the S&P500 and our estimates for Citi, our $116 price target assumes a 70% relative P/E multiple. This is at the lower end of the 70 to 80 percent range that we consider to be fair value for banks.”
