Retail stocks
Amateur investors who purchased AMD in the last week have seen the stock roughly flat since last Tuesday; however, shares of AMC Entertainment have risen nearly 20% in the same time period.
Some of the AMD buying could be attributed to meme traders reverting to their old strategy of focusing on stocks with high short interest in order to cause a so-called short squeeze. Analysts have learned that short interest in AMD is high, owing in part to merger arbitrage trading by hedge funds. In October 2020, AMD reached an agreement with Xilinx to acquire the semiconductor company.
Since last week, retail investors have increased their holdings of Apple, Nvidia, and Verizon.
“NVDA and AMD purchases have remained strong this week, outpacing inflows into all other FAANGM,”. “Meme stocks are on an upward trend.”
Despite a large crackdown in Beijing, retail investors were snapping up Chinese-listed companies in late August. Flows into Chinese ADRs have slowed as the rally has consolidated, with the exception of Alibaba, which has made $131 million in net purchases in the last week.
Vaccine makers stole the show in August as well, but after a sell-off in names like Pfizer and Moderna this week, retail investors stayed away. Pfizer shares are down 7%, while Moderna shares are down about 2% since last Tuesday.
“Vaccine manufacturers have suffered a significant correction this week, and retail investors have shown little appetite to buy the dip thus far,” Onatibia said.
Vinco Ventures appears to have become a new Reddit target. Since last Tuesday, the stock has received more than $56 million in net purchases. During that time, the stock has increased by more than 200 percent.
This week’s Vanda Research list also included Nordstrom, Uber, and Microsoft.
Cleanliness and hygiene stocks
“The reopening and emphasis on Health, Hygiene, and Safety as a result of COVID and ESG has increased demand for Commercial Services.” Solid demand for cleaning/disinfecting solutions, as well as a greater proclivity to outsource facility, uniform rental, and food services, should drive solid growth for Commercial Service providers, according to RBC analysts Ashish Sabadra and John Mazzoni in a report released Thursday.
According to the firm, digital transformation should also help commercial service companies improve efficiency and employee and customer satisfaction.
RBC has initiated coverage on three commercial service names that have outperform ratings. Take a look at the firm’s selections.
Ecolab
Ecolab is a company that specializes in water, hygiene, and infection prevention.
“ECL’s leadership in hygiene/sanitizing solutions and water treatment should benefit from the increased focus on Hygiene as a result of COVID and water conservation with ESG,” the analysts wrote.
RBC emphasized Ecolab’s research and development capabilities, citing the company’s thousands of patents and predictive analytics technology advantages.
According to the analysts, the company’s breadth of products and services across dozens of verticals provides “unrivaled scale in a highly fragmented industry.”
RBC set a price target of $260 on the stock, representing a 15% increase from where it is now.
Cintas
Cintas offers corporate uniforms and apparel, as well as products and services for first aid, safety, cleaning, and restrooms. According to RBC, the company is the market leader in the uniform rental space, which is valued at $25 billion.
According to the analysts, “increased emphasis on health and hygiene as a result of COVID should increase the propensity to outsource uniform rental and adoption of facility services.”
According to RBC, Cintas could expand its customer base by expanding into healthcare, education, and government organizations.
According to RBC, Cintas’ scale provides advantages in operating leverage, pricing, and vertical integration, which should help the company combat inflationary pressures.
Cintas has a $450 price target from RBC, implying a 13% increase.
Vivint
RBC also gave Vivint an outperform rating. Home security and camera systems are among the products offered by the smart home company.
According to RBC, the company’s “proprietary end-to-end solution” lowers subscriber acquisition costs, accelerates subscriber growth, and increases revenue.
Vivint made headlines earlier this year when it agreed to pay the Justice Department a $20 million settlement. According to the Justice Department, Vivint sales representatives stole people’s personal information in order to approve other potential customers for loans, and they also sold false debt to third-party debt collectors.
RBC expressed confidence in Vivint’s new leadership. According to the company, CEO David Bywater is “focused on enhancing customer value, scaling operations, and accelerating growth through partnerships (Solar, Insurance, and potentially 2-3 other areas).”
The firm also stated that the stock is trading at a relatively low level when compared to Vivint’s earnings and growth.
RBC’s price target of $15 on Vivint is 15% higher than the stock’s most recent close.
The jobs report
The economy added only 235,000 nonfarm jobs last month, far short of the 720,000 economists polled by Dow Jones. Hatzius’ team at Goldman was aiming for a 500,000 profit.
Hatzius said on “Squawk on the Street” that the weaker-than-expected report shouldn’t be interpreted entirely negatively, despite the fact that the number of new hires fell far short of the consensus estimate and his own internal projection. “It is a more mixed picture than you would get if you just looked at the headline payroll gain,” he said.
One reason for the overall drop was weakness in leisure and hospitality, which added no jobs in August. In previous reports, it had been identified as a key driver of employment growth.
Looking ahead, Hatzius sees signs of virus stabilization, such as a decrease in Covid-related hospitalizations. “I believe there is reason to believe that the situation is improving somewhat and that we will see better [jobs] numbers in the coming months,” he added.
According to Hatzius, the Labor Department’s report included “some offsets” to the disappointing overall job gains. He specifically stated that the household survey was “pretty good,” and that the unemployment rate had dropped to 5.2 percent from 5.4 percent. This decline was predicted by Wall Street.
Another encouraging sign in Friday’s jobs report, according to Hatzius, was the so-called U-6 rate, also known as the “real” unemployment rate. It fell to a seasonally adjusted 8.8 percent in August, down from a seasonally adjusted 9.2 percent in July. The U-6 rate takes into account discouraged workers who aren’t currently looking for work but have in the previous 12 months, as well as people who work part-time for economic reasons.
Wages increased 4.3 percent year on year and 0.6 percent month on month in August. Estimates had been set at 4% and 0.3 percent, respectively.
Stock ideas
Middleby Corporation, FedEx, Vizio, Perella Weinberg, PayPal, and Piedmont Office Realty Trust are among the best stocks to buy now.
Vizio
Alphabet and Facebook aren’t the only companies poised to capitalize on the resurgence of digital advertising.
In a recent note, Guggenheim analyst Michael Morris stated, “We view Vizio shares as the most attractively priced way to invest in the strong secular growth trajectory in connected TV advertising.”
Vizio recently quadrupled its advertising commitments at the recent Upfront conference, which brings together television and advertising executives to secure air time.
Morris believes that this will result in even higher unexpected revenue estimates.
Furthermore, Morris believes that the electronics maker is particularly well positioned due to its pricing power as consumers continue to flock to home entertainment in the aftermath of the pandemic.
“We anticipate a moderation in device pricing in 2022, as supply chain disruptions are alleviated,” he wrote.
Morris also lauded Vizio’s unique SmartCast operating system on its products, calling it the company’s “greatest valuation creation opportunity.”
Despite the fact that the stock is already down 5.8 percent for the month of September, the company is sticking with it and believes investors should as well.
Piedmont Office Realty Trust is a real estate investment trust based in Piedmont
According to investment firm Truist, now is the time to buy shares of one of the most “well-positioned and relatively inexpensive” office real estate investment trusts on the market.
While the firm is generally more cautious about the office sector in general, Piedmont stands out, according to analyst Michael Lewis this week.
“Roughly half of PDM’s portfolio is located in the Sunbelt, where we expect relatively favorable population and job growth trends to continue,” he said.
Lewis also mentioned that three-quarters of the company’s assets are in the suburbs and are not dependent on public transportation.
Furthermore, Piedmont has a strong balance sheet, and the company remains optimistic that a dividend increase will occur in 2022.
Market rents are also expected to be lower in many of the company’s markets, but this may not matter, according to Lewis.
The firm believes Piedmont will benefit from positive rent spreads, which are the differences between rent per square foot on a new lease and rent previously paid in the same space.
He wrote that Piedmont is “undervalued and one of the most appealing stocks in our office coverage universe.”
Piedmont’s stock is up 10% so far this year.
According to BMO analyst Joel Tiss, the food service equipment company is running on all cylinders.
Middleby shares have risen 88.7 percent in the last year, and Tiss believes there is still room for growth.
“Over the past year, the company has demonstrated resilient profitability, and the path for organic EBITDA margins to approach 30 percent in the medium term is coming into focus,” he wrote.
Middleby also reported strong second-quarter earnings on August 12, beating on earnings per share.
“Meanwhile, Middleby’s earnings power appears to be increasing as a result of capturing share and developing its technology platforms across its market-leading brands,” he added.
Tiss also praised the company’s “disciplined” management, saying it gives him even more “conviction” in the stock.
Order rates are also looking strong heading into 2022, with profitability likely to “improve,” he added.
According to the firm, “Middleby’s growth and margin trajectories are among the most appealing in our coverage group.”
FedEx-JPMorgan has an overweight rating.
“Ground remains in the driver’s seat at FedEx as the fastest growing and most profitable business segment, with opportunities to improve margins by consolidating independent service providers, redirecting SmartPost, and leveraging efficiency gains from new hubs.”
Goldman Sachs’ Perella Weinberg has a Buy rating.
“We believe PWP is one of the most appealing earnings growth stories among the independent advisors we cover. Due to their skew to areas of the advisory business that we expect to outperform, we expect them to achieve above-peer revenue growth rates through 2023. Furthermore, we see potential growth upside if European M&A accelerates, as well as as the company expands its geographic footprint and product suite over time… Furthermore, the company appears to be reasonably valued, trading below the pure play advisors that are its closest competitors.
Buy recommendation for Vizio-Guggenheim.
“We believe Vizio shares are the most attractively priced way to invest in connected TV advertising’s strong secular growth trajectory. Our updated model reflects higher advertising revenue estimates as a result of the previously announced quadrupling of upfront advertising commitments, as well as higher estimated pricing for Device sales in 2H21. We anticipate a reduction in device pricing and increased unit deliveries in 2022 as supply chain disruptions are resolved. Although current pricing power reflects healthy consumer demand for Vizio products, the longer-term value of deploying more SmartCast operating systems into homes represents the company’s greatest valuation creation opportunity.”
BMO Middleby Corporation, Outperform rating
“Middleby’s growth and margin prospects are among the most appealing in our coverage group. Over the past year, the company has demonstrated resilient profitability, and the path for organic EBITDA margins to approach 30 percent in the medium term is becoming clear. Meanwhile, Middleby’s earnings power appears to be increasing as a result of capturing market share and developing its technology platforms across its market-leading brands. A disciplined management team adds to our confidence in the stock… With order rates remaining strong, we believe 2022 is well-positioned, especially with profitability likely to improve.”
Buy rating for PayPal-Bank of America
“Over the past year, PayPal (NASDAQ: PYPL) has introduced a number of new features to its Venmo user base, including the Venmo credit card, crypto trading, and Business Profiles, with more features on the way (i.e. stock trading, high yield savings accounts and budgeting tools). We anticipate that these features will continue to drive strong growth in Venmo users and accelerate growth in average revenue per user (ARPU) in the coming years. We maintain our Buy rating and see recent weakness as an especially appealing opportunity.”
Piedmont Office Realty Trust has a Buy rating from Truist.
“A relatively well-located and low-cost office REIT…
We are lowering our 12-month price target by $1 as we continue to assume stubbornly low P/FFO and P/NAV ratios, but our $21 target still implies a 21.3 percent total return – and there are several reasons why we believe PDM is undervalued and one of the most appealing stocks in our office coverage universe.
Approximately half of PDM’s portfolio is located in the Sunbelt, where we expect population and job growth to remain relatively favorable.”
