Zoom Stock (ZM)
Zoom announced earlier this month that it is acquiring cloud contact center stock Five9 in an all-stock transaction valued at slightly less than $15 billion.
Zoom Video was named a top pick by BofA analyst Daniel Bartus, who said in a note to clients Monday that the deal with Five9 combines two complementary businesses in an appealing package and is a “game-changer” for the business communications sector.
“Together, Zoom/Five9 would be the strongest [unified communications and contact center as a service] combination in the market, and the move raises the competitive risks for vendors selling both, such as RingCentral and 8×8,” according to the note.
Zoom stock dropped the day after the announcement, but it has since recovered most of its losses.
Zoom Video has a price target of $480 per share from Bank of America, which is more than 33% higher than where the stock closed on Friday.
Zoom was one of the best-performing stocks in 2020, thanks to a surge in demand for video conference software caused by the Covid pandemic. However, the stock reached a high of around $568 per share in October of last year.
Tesla (TSLA) and electric vehicle stocks
In a July 21 note, Goldman raised its electric vehicle sales forecast for the next 20 years by “around 20%.” It now anticipates that 74 million of the vehicles will be on the road by 2040.
Western Europe is likely to see the fastest adoption of EVs of any region, according to the bank, due to new EU proposals to allow only zero-emission passenger cars to be sold starting in 2035, a target it announced on July 14.
President Joe Biden plans to allocate $174 billion in funding for electric vehicles in the United States, and the Clean Energy for America Act could provide up to $12,500 in tax credits to those who purchase them.
According to the bank, by 2040, the percentage of new vehicles sold that are electric will be 80 percent in Japan, 75 percent in the United States, and 68 percent in China. Given Europe’s zero-emissions target, Goldman predicts that by this time, all new cars sold in Europe will be electric.
Picks for stocks
Tesla is rated buy by Goldman, with a 12-month price target of $860. On Friday, the stock closed at $643.38. “We believe the company will generate strong revenue growth and margin expansion over the intermediate and longer term, driven by a rapidly growing EV market, in which we believe Tesla has a strong leadership position,” the analysts wrote.
The bank also rates Chinese firm BYD as buy, citing the company’s “unique business combination” of being China’s No. 1 EV maker and No. 2 battery maker by sales volume. It puts the upside potential of the Hong Kong-listed stock at 47.4 percent over the next 12 months.
Analysts like VW’s increasing production of battery electric vehicles (BEVs) and partnership with US firm Gotion to manufacture batteries in Europe, as well as its expansion into autonomous vehicles and fleet management.
“We continue to like Volkswagen given its electrification leadership and remain Buy rated with a 42 percent upside to our €295 [$347] Price Target,” the analysts wrote.
Toyota plans to sell 2 million electric vehicles by 2030 and will “substantially” increase battery procurement by the same year, according to Goldman. It likes the company because of its large cash reserves, which allow it to “quickly allocate resources required should EV demand accelerate.” It stated that the stock has a potential upside of 21.6 percent over the next 12 months.
Other buy-rated companies on Goldman’s list of “Companies Supporting EV” included automakers Daimler, GM, and Honda, as well as Samsung SDI in battery cells. Goldman’s preferred battery component manufacturers include Umicore in Europe and Nippon Carbon in Japan.
Krispy Kreme stock (NASDAQ: DNUT)
According to JPMorgan, Krispy Kreme has a two-digit upside strategy for growth and strong consumer awareness.
Analyst John Ivankoe initiated coverage of the stock with an overweight rating on Monday, writing in a client note that the newly public company’s expansion of locations and other retail points makes it a smart investment.
“We regard Krispy Kreme as a large and widely admired brand, and we believe that increased accessibility will enable the company to more fully participate in the recession-resistant $650 billion ‘global indulgence’ market,” the note stated.
The restaurant chain went public on July 1 at a price of $17 per share, which was lower than the planned range. The stock rose on the first day, but has since fallen, closing at $16.71 per share on Friday.
Krispy Kreme was previously a publicly traded company before being acquired by investment firm JAB in 2016. According to JPMorgan, the improvements made since that deal will make Krispy Kreme a better bet this time.
“The previous-era over-expansion mistakes were corrected by an entirely new management team following JAB’s July 2016 purchase of the business,” according to the note.
JPMorgan set a price target of $19 per share for the stock, which is 13.7 percent higher than the stock’s closing price on Friday.
Several other companies began covering Krispy Kreme at the start of the week. Evercore ISI rated the stock as outperform, while Goldman Sachs, Wells Fargo, and Deutsche Bank rated it as neutral.
Gap stock (NYSE: GPS)
According to Deutsche Bank, Gap is the victor in the post-pandemic retail world.
Analyst Gabriella Carbone raised the retail stock from hold to buy in a note to clients on Monday, citing the company’s improving fundamentals on several fronts.
Deutsche raised its Gap price target from $38 to $42 per share. The new target is 44 percent higher than the stock’s closing price on Friday.
“We believe the company’s volatile trends are now largely behind it, and we see a path to consistent [earnings before interest and taxes] margin gains, largely driven by a reduction in fixed costs,… a mix shift to higher-margin and growth businesses (Old Navy and Athleta), improved profitability at the Gap brand with increased consumer engagement, and demand generation investments driving market shar
When back-to-school spending becomes a focus as summer comes to an end, the stock could be a winner.
“Given Old Navy’s consistent performance in the kids’ category and recent growth, we believe the company is well positioned to capitalize on the back-to-school season this year, driven by robust consumer demand,” the note stated.