Best stocks to buy now
ServiceNow (NYSE: NOW)
Goldman projects that ServiceNow could exceed $15 billion in subscription revenue in 2026. The company reported just under $1.3 billion in subscription revenue for its most recent quarter.
“Average deal sizes are very large, highlighted by Customer Workflow deals at ~$267K and Creator Workflow deals at ~$225K. As well, we believe that dollar for dollar, NOW can complement Salesforce.com and Workday in how big they are in Customer Support and HR, respectively,” the note said.
According to Goldman Sachs, recent difficulties will prove short-lived because the company will resume its growth and will soon reach a position of leadership in enterprise software.
2022 could be be a bounce back year for the company “given that net new business growth, which is a leading indicator for revenue growth, is accelerating with 1Q21 better than 4Q20 and 2Q21 tracking ahead of 1Q21,” Goldman said. “If this continues through 2H21, ServiceNow may reaccelerate revenue growth in C22.”
The company is trading below its pre-pandemic multiple of enterprise value to sales, Goldman said, and the stock has fallen 17% since late April.
The firm reiterated its price target of $695 per share, which is nearly 50% above where the stock closed on Wednesday.
UPS (NYSE: UPS)
“UPS also debuted a new pricing strategy that sets rates and enforces contract compliance using fully-allocated costs and real-time capacity. This announcement sends a strong signal to the market (and FedEx) that pricing power remains strong, which is positively correlated with parcel stock valuations,” according to the note.
According to the investment firm, UPS appeared likely to exceed its guidance, which could lead to a rise in the stock.
“Our buy-side survey indicated a willingness to re-rate UPS higher if it can meet their margin targets, and we continue to see upside to valuation and earnings for UPS at this time,” the note stated.
JPMorgan raised its price target on UPS from $224 to $243 per share, representing a nearly 21% increase from the stock’s closing price on Wednesday.
Clover Health (NASDAQ: CLOV)
After traders on Reddit caused a steep rise in the heavily shorted insurance stock, investors should abandon Clover Health, according to Bank of America.
“Despite a similar growth profile and lower near term margin trajectory, the company is now trading at a 70% premium to ALHC… its closest comp,” according to the note. “While we continue to believe that the Clover Assistant adds value and helps reduce costs, and CLOV is likely to grow faster than the [Medicare Advantage] market as a whole, the current growth trajectory does not support the valuation.”
This is not the first time the company has withdrawn from meme stocks. Another Bank of America analyst terminated coverage of GameStop and downgraded AMC last Friday.
Bank of America also expressed skepticism, citing recent guidance cuts for membership in its direct contracting business.
“To some extent, we believe falling short on membership in a new government program is completely understandable given the number of moving parts,” the note said. “However, doing so in the quarter after lowering the MA membership guide leaves us with low visibility into the outlook.”
The firm reiterated its Clover price target of $10 per share, which is more than 40% lower than where the stock closed on Wednesday.
GameStop (NYSE: GME)
It has been five months since GameStop’s stock caught fire, and the current strategy to transform the retailer into an e-commerce powerhouse is still unclear, according to investment firm Baird.
Wednesday’s announcement revealed better-than-expected revenues for the first quarter, with the help of sales of the Xbox One and PlayStation 4. They also announced that the company had hired two former Amazon executives, who would serve as CEO and CFO. They will be joining Board Member and Chewy Co-Founder Ryan Cohen, who has both e-commerce and business experience, on the executive team.
Baird analyst Colin Sebastian reiterated his neutral rating on the stock after the earnings report, saying that the eventual turnaround for the company plan remained unclear.
“As GameStop’s board continues to shuffle the management deck, the goal to transform into a ‘technology’ company that delights gamers remains mostly a mystery, particularly as the video game industry accelerates the shift toward downloads, streaming and cloud services,” the note said. “No doubt the console transition period is providing a lifeline, but games are not dog food, and investors deserve more than memes to value a company’s fundamental, long-term prospects.”
Baird has a price target of $25 per share for GameStop, more than 90% below where the stock closed on Wednesday.
The firm raised its estimates for the second quarter, but said that the recent boost from console sales wouldn’t last forever.
“We are increasing our Q2 revenue and EPS estimates to reflect the favorable impact of easing console supply constraints; however, we are also slightly lowering our Q3 and Q4 estimates as some hardware demand will likely be pulled forward as availability improves faster than previously expected,” the note said.