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All Contents © 2019The Kiplinger Washington Editors
By Harriet Lefton, Contributing Writer
| January 27, 2019
Which of 2018’s losers are poised for big gains in 2019?
There’s certainly no shortage of stocks to pick from. The major indices all suffered losses in 2018, with hundreds of their components (and several thousand more stocks on top of that) bleeding red ink by year’s end.
But how do you sort the promising stocks that can rebound from stocks whose falls were justified (and continue declining more)? One way is to examine what the financial experts are saying. In this case, we used TipRanks’ Top Analyst Stocks tool to pinpoint five stocks with a bullish “Strong Buy” analyst consensus rating. This is based on all the ratings a stock receives over the past three months.
Here are five “Strong Buy” stock picks for 2019, based on analysts’ bullishness for the 12 to 18 months ahead. What makes them even more attractive is the relative discounts they’re trading at following 2018’s selloff.
Data is as of Jan. 25, 2019.
Market value: $45.8 billion
TipRanks consensus price target: $218.28 (24% upside potential)
TipRanks consensus rating: Strong Buy
Delivery giant FedEx (FDX, $175.36) didn’t have the easiest 2018, with shares losing 35% over the course of the year. Much of that came in December, when the broader market sagged – but also as FedEx reduced its FY19 Express segment outlook on international macro conditions and ongoing integration challenges from TNT Express, the Netherlands-based courier service that FDX acquired in 2016.
As Stephens analyst Jack Atkins put it, these two issues “combined to wipe nearly four years of share price appreciation out over the last four months.”
Encouragingly, however, 2019 has started promisingly; shares are up 9%. And Atkins, while acknowledging shareholder frustration, believes the FedEx story is far from broken. He is modeling for low-double-digit earnings growth in fiscal 2020, on the condition that economic growth stays positive. With a $240 price target, Atkins sees 37% upside potential ahead.
Meanwhile, Oppenheimer’s Scott Schneeberger recently met up with management in the company’s Memphis headquarters, and followed up that meeting by reiterating his “Buy” rating with a $200 price target.
“While it’s clear FedEx needs to demonstrate operational/financial improvement in its Express segment, we view the stock’s substantial sell-off as overdone,” he wrote. “We expect overall margin expansion via midsingle-digit+ top-line growth, efficiencies, and TNT synergies longer term.”
You can get more analysis in TipRanks’ FDX Research Report.
Market value: $7.6 billion
TipRanks consensus price target: $79.00 (80% upside potential)
Netkar Therapeutics (NKTR, $43.92) is focused on using new chemistry approaches to make better medicines to treat cancer, chronic pain and autoimmune disease.
Its most advanced drug is NKTR-181 for the treatment of moderate to severe chronic lower-back pain. What differentiates NKTR-181 is that it provides pain relief without the high-level euphoria that can cause addiction. A new drug application (NDA) for this NKTR-181 is currently under review by the U.S. FDA.
If you held Nektar Therapeutics in 2017, congratulations – you were part of a 380%-plus run. Shareholders weren’t so fortunate last year, however, with NKTR dropping 43%. But the stock is back in 2019, off to a 34% start.
And Mizuho Securities analyst Difei Yang still sees monster growth potential ahead. She recently reiterated her “Buy” rating following the release of updated data in melanoma patients. New data showed a complete response rate of 24% vs. 11% in the previous data set from melanoma patients presented at ASCO 2018.
“We believe this deepening of effect correlates well with the proposed mechanism of NKTR-214 which promotes new cancer fighting T-cells over time while minimizing T-regulatory cells in the tumor microenvironment,” Yang wrote. She expects continued data updates in various tumor settings over the coming months to drive NKTR shares. For further stock insights, turn to TipRanks’ NKTR Research Report.
Market value: $11.8 billion
TipRanks consensus price target: $139.57 (35% upside potential)
Video game stock Take-Two Interactive (TTWO, $103.70) plunged more than 23% from September to the end of 2018. But analysts are bullish from here, predicting generous upside of 35%. And Merrill Lynch’s Justin Post is even more confident, recently reiterating his “Buy” rating with upside of 50%.
This Top 100 analyst notes that the NBA has extended its agreement with Take-Two, for the NBA 2K series, for another seven years. Post says the reported deal represents a “vote of confidence” for the stock’s future.
According to The Wall Street Journal, TTWO will pay up to $1.1 billion to NBA over the next seven years. That’s more than double the current amount, but the figure still “makes sense” to Post given that Take-Two’s NBA user base has climbed above 10 million.
Oppenheimer’s Andrew Uerkwitz picked TTWO as a top stock idea a month ago. “We believe TTWO is set for refreshes of multiple key franchises over the next five years and that a build in internal development capacity will help generate revenue consistency,” the analyst writes. He believes industry trends of a shift to digital – both game downloads and increasing consumer willingness to spend on DLC – will drive long-term margin expansion.
Overall, 11 out of 13 analysts covering Take-Two rate the stock a “Buy.” Find out more about the other analysts’ opinions in TipRanks’ TTWO Research Report.
Market value: $23.4 billion
TipRanks consensus price target: $148.40 (33% upside potential)
Royal Caribbean Cruises (RCL, $111.74) is staging a comeback following a 17% share drop in 2018. Since the start of the year, prices in one of the world’s biggest cruise companies have already rallied 14%.
Wall Street seems to think this is just the beginning. The average roughly $149 analyst price target suggests further upside potential of 33%.
Five-star Tigress Financial analyst Ivan Feinseth is firmly onboard. He writes, “We believe significant upside exists from current levels and continue to recommend purchase,” though he doesn’t offer a specific price target.
Out of all three of the major cruise companies, he is most bullish on RCL, calling it “the most consistent operator.” “We believe RCL will continue to produce positive Business Performance trends driven by its strong brand equity and positive industry operating momentum,” he writes.
Prompting this upbeat outlook is the fact that RCL continues to introduce new ships with greater onboard activities, experiences and dining choices. New ships are much more fuel-efficient and feature-rich and attract strong demand at higher prices and higher profits.
Royal Caribbean also recently increased its quarterly dividend by 17%, to 70 cents per share. RCL also has repurchased a total of $1.23 billion worth of its stock since 2014. You can check out how other analysts rate the stock in TipRanks’ RCL Research Report.
Market value: $5.8 billion
TipRanks consensus price target: $29.55 (60% upside potential)
Parsley Energy (PE, $18.46), an oil-and-gas stock focused exclusively on the resource-rich Permian basis, shed a jaw dropping 43% in 2018. But analysts say that’s simply good news for new money. All top-performing Wall Street pros are bullish on the stock, while 20 out of all 23 analysts rate PE a “Buy.”
RBC Capital’s Scott Hanold is among the analysts who believe in Parsley Energy. He has just reiterated his “Buy” rating with a $32 price target (73% upside potential).
“PE’s pivot to maintain current activity levels demonstrates the strategy maturation that should win over investors,” Hanold writes. The company is tapering growth to deliver better free cash flow (FCF).
As the analyst writes, “(Parsley Energy) is a high-growth E&P that had promises of FCF but now can show FCF with solid growth within an investable time frame.” He is now modeling for free-cash-flow generation by early in the second half of 2019, with more meaningful FCF growth set for 2020. Hanold points out the strong returns from the company’s Wolfcamp A/B wells, and sees “valuation upside” in the Wolfacmp C, Lower Spraberry and Delaware Permian delineation.
Ultimately, says the analyst, Parsley Energy shares should outperform the company’s peer group over the next 12 months. “PE’s production growth profile, balance sheet, and oil hedge book are best-in-class and differentiate from peers.”
Discover more about this basic materials stock in the TipRanks’ PE Research Report.
Harriet Lefton is head of content at TipRanks, a comprehensive investing tool that tracks more than 5,000 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.