Splunk stock (NASDAQ: SPLK)
Analyst Karl Keirstead raised the stock from neutral to buy in a note to clients on Wednesday, saying that discussions with Splunk’s customers indicated that the company’s market share was stabilizing.
“While the feedback on Datadog in particular was quite strong,” the note said, “most checks argued that the risk of Splunk being displaced by rivals (a key Street concern) is exaggerated.”
The stock has struggled in 2021, falling 16%, and has dropped nearly 28% in the last year. According to UBS, the underperformance means there is room for upside if Splunk can beat estimates in the coming quarter.
“Street sentiment is improving following two roughly in-line quarters in a row, but it remains mixed/cautious due to competitive fears and a lack of confidence stemming from the late-2020 blow-up. Against that backdrop, a third consecutive revs/ARR beat and a return to out-of-period guidance… could signal greater stability and visibility into the business, according to the note.
UBS raised its price target on Splunk from $137 to $175 per share. The new target is approximately 24% higher than the stock’s closing price on Tuesday.
The iShares U.S. Infrastructure ETF (IFRA) gained 1.4 percent, with top bets concentrated in the utilities industry.
The Global X U.S. Infrastructure Development ETF gained 2.2 percent, with Nucor steel as its top holding. Nucor’s stock increased by more than 9.5 percent to an all-time high.
Investing in materials and industrials stocks is perhaps the most obvious way to play government stimulus right now. The Senate bill will aid in the improvement of the nation’s roads, bridges, and broadband.
In a note published last week, Dan Clifton of Strategas told clients that companies with exposure to infrastructure projects have tended to benefit when legislation becomes law, despite a lag between signing and the slower disbursement of grants.
He wrote, “The current legislation essentially doubles the level of infrastructure spending that we have done historically.” “Although the House may not pass this bill until the fall, investors see the recent pullback as a good entry point before the bill is signed into law.”
Clifton stated that historically, a Strategas basket of infrastructure stocks outperformed in the months following the passage of major infrastructure legislation in Congress.
The Senate-approved legislation would direct federal funds to physical infrastructure projects such as roads, bridges, passenger rails, drinking water and waste water systems, as well as expanding high-speed internet and climate-related infrastructure.
This flood of grants could boost sales at companies ranging from cement and steel manufacturers to petroleum refiners and automakers.
In 2021, the Global X U.S. Infrastructure Development ETF is up more than 27 percent.
According to another Wall Street firm, $1 trillion in infrastructure spending should accrue to stocks such as ChargePoint, one of the country’s top electric-vehicle charging station operators.
According to Wolfe Research analysts Rod Lache and Shreyas Patil, the Senate bill includes $5 billion in federal grants to be distributed to states, which will cover 80 percent of charging-station installation costs.
“As that funding is distributed, we anticipate a significant increase in charging installations, with the total public US installed base potentially growing to >800k by 2025 vs 105k in 2020,” the pair wrote earlier this month. “Chargepoint appears to be in a good position to benefit.”
Progress on the infrastructure deal is also good news for steel manufacturers, according to Citi, which advised its clients on Tuesday to consider investing in mill-operating companies.
According to analyst Alexander Hacking, “this incarnation of the bill is mostly physical infrastructure, i.e. good for steel.” “We estimate that steel would account for 2-4 percent of “traditional” transportation infrastructure spending.”
“The main beneficiary, in our opinion, would be long steel, which would capture roughly two-thirds of the incremental tons,” he added. “Based on our calculations, this could push long steel utilization rates above 80%.”
As a proxy for demand, the steel industry closely monitors utilization rates. It is intended to show the percentage of the industry’s production capability that is operational in a given week.
According to Hacking, an increase in steel demand will drive sales at Nucor, Steel Dynamics, and Commercial Metals.
Along with Nucor, Steel Dynamics and Commercial Metals were up 6% and 4.8 percent, respectively, on Tuesday.
According to FactSet, the blended revenue growth rate for the S& 500 in the second quarter is 24.7 percent year over year, combining actual results for companies that have reported and estimated results for those that have yet to report.
If the final growth rate in the second quarter is 24.7 percent, it will be the highest year-over-year revenue growth rate for the index since FactSet began tracking the metric in 2008. In the second quarter of 2011, the current all-time high was 12.7 percent.
However, year-over-year comparisons will become more difficult in the future. The higher growth figures this quarter can be attributed in part to easier comparisons with lower sales figures last year during the height of the pandemic.
According to FactSet’s John Butters, “analysts expect the S&P500 to continue to report double-digit revenue growth for the remainder of 2021, but at lower levels compared to Q2 2021.”
Analysts identified S&P500 stocks in the top quartile of expected sales growth in both 2021 and 2022. These are not only the companies that are recovering from the pandemic this year, but also those that will maintain top-line growth into 2022.
We culled this list to find the stocks that the vast majority of analysts believe should be purchased.
This year and next, a number of stocks closely linked to the economic recovery are expected to lead the market in sales growth. The names of airlines, energy companies, and entertainment companies appear on the screen.
Southwest Airlines and Alaska Airlines are expected to have the highest revenue growth rates in the industry through 2022. Pioneer Natural Resources, Diamondback Energy, and Valero Energy are among the companies on the list. Analysts list also includes backup power generation manufacturer Generac Holdings and solar company Enphase Energy.
Out of the companies on our list, Caesars Entertainment has the highest estimated sales growth in 2021, while Delta Air Lines has the highest expected revenue growth in 2022.
Amazon, Alphabet’s parent company Google, and Facebook all made our list. In 2022, the stocks are expected to rise by 16.5 percent to 19.5 percent.
Other names on our list include Chipotle Mexican Grill, Nvidia, and the online marketplace Etsy.