The Analysts See Significant Upside In These Stocks
The times, they are a-changing, and that means you’re investing strategy needs to change with it. While the analysts are downgrading and lowering price targets left and right due to inflation fears and the growing threat of recession that is not all the activity we’re spotting. Kraft-Heinz (NASDAQ: KHC), Freeport McMoran (NYSE: FCX), and Ollie’s Bargain Outlet (NASDAQ: OLLI) have all received shoutouts from the analysts’ community that point to some significant upside for their share prices. In all cases, these stocks are not only well-positioned within their respective industries but supported by secular trends that should lead to outperformance over the next year or more.
Ollie’s Bargain Outlet Is At A Turning Point
Ollie’s Bargain Outlet had a tough quarter in Q1 but one thing is clear in the results. The company still has pricing power, traffic is strong relative to pre-pandemic levels, and back-half improvements are expected. The company received at least 6 shout-outs from 15 analysts following the report that have the Marketbeat.com consensus price target up more than 10% over the last 30 days. The current target of $62.60 is more than 12% above the price action and we expect to see it trend higher over the next quarter or two at least. In the eyes of RBC, Ollie’s Bargain Outlet has reached a turning point in which it will start reaping the benefits of shoppers trading down from higher price-point retailers as well as over-supply. The idea is that inventory bloat related to easing supply chains and industry efforts to build inventory will lead to higher quality deals and margin expansion too.
Freeport McMoran, A Diversified Play For The Times
Freeport McMoran may be one of the best-positioned commodity stocks in our coverage universe as a miner of metals and producer of oil. The company’s results are underpinned by the rise in both WTI, gold, copper, and silver and the outlook is only getting better. Credit Suisse analyst Curt Woodworth called the stock out as a stagflation winner (a period of high inflation and stagnant economic growth like we have now) due to the pricing dynamics for copper. In his, view, copper prices will be well-supported in the medium term despite a shift in the supply/demand balance. He upgraded the stock to Neutral from Underperform and raised the price target to $38. In our view, copper and oil prices are going to remain elevated for quite some time and will lead this company to dividend increases and share repurchases. The stock is only yielding a little over 1% but it is a safe payout and the existing buyback plan is worth another 3% of the current market cap.
Kraft-Heinz Improperly Maligned
Kraft-Heinz is a high-yielding deep-value turnaround story that we have been following for years. The recent reversal in the price action caused us some concern but does nothing to alter our outlook. In fact, the downgrades opened up yet another buying opportunity in the stock and at least one analyst agrees with us. Bank of America analyst Bryan Spillane says Kraft-Heinz got a worse rap than it deserves and the downgrades have opened the door to meaningful upside. In our view, shares of KHC stand to gain as much as 20% in the near term and could reach triple-digit gains over the next 2 years.
“Following (Walmart and Target) results in mid-May, consumer staple stocks took a turn and weakened due to a reaction from commentary on price increases pressuring households to trade down to private label,” he noted. “In our view, KHC is most insulated from this news as they were the fastest to raise price versus other companies in our coverage universe that potentially need to take another round of meaningful price increases.”