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Goldman Sachs: these 2 “strong buy” shares can rise at least 30%
We are already in the first quarter of 2021 and it is a good time to assess what has been left behind and how it will affect what is to come. Goldman Sachs strategist Jan Hatzius believes that we are on an upward path, with better times ahead. Hatzius sees developed economies expanding as the corona crisis recedes. For the United States in particular, he is impressed by the ‘very substantial fiscal support’ that the latest COVID relief package entails. Even so, however, Hatzius believes that the fourth quarter was a weaker period and we are still not entirely out of it. He is estimating first quarter growth at 5% and says we will see further expansion “concentrated in the spring” and “accelerating to a 10% growth rate in the second quarter”. And by accelerations, Hatzius means that investors should expect second-quarter GDP to be around 6.6%. Hatzius credits this forecast to ongoing vaccination programs and the continued development of COVID vaccines. The Moderna and Pfizer vaccines are already in production and circulation. Hatzius says, regarding these programs, “The fact that we are developing more options and that governments around the world have more options to choose between different vaccines [means] production is expected to increase significantly in the coming months … It is definitely one of the main reasons for our optimistic growth forecast. ”In addition to Hatzius’ view of the macro situation, Goldman Sachs analysts are also diving into specific actions. Using the TipRanks database, we identified two actions that the company predicts will show solid growth in 2021. The rest of Street also supports the two tickers, with each bearing a “strong buy” consensus rating. Stellantis (STLA) We have talked about Detroit automakers before, and rightly so – they are important players in the economic landscape of the United States. But the United States does not have a monopoly in the automotive sector, as evidenced by Stellantis, based in the Netherlands. This international conglomerate is the result of the merger between the French Groupe PSA and the Italian-American Fiat-Chrysler. The deal was a 50-50 stock only deal, and Stellantis boasts a market capitalization in excess of $ 50 billion and a portfolio of almost legendary nameplates, including Alpha Romeo, Dodge Ram, Jeep and Maserati. The deal that formed Stellantis, now the world’s fourth largest automaker, took 16 months to complete, after it was first announced in October 2019. Now that it is a reality – the merger was completed in January this year – the combined entity promises cost savings of almost 5 billion euros in the operations of Fiat-Chrysler and PSA. These savings appear to be realized through greater efficiency, rather than through factory closings and cuts. Stellantis is new to the markets, and the STLA symbol has supplanted the Fiat-Chrysler FCAU on the New York Stock Exchange, giving the new company a legendary history. The company’s stock value has almost tripled since its lowest point, reached last March, during the ‘corona recession’, and has remained strong since the merger was completed. George Galliers, an analyst at Goldman Sachs, is optimistic about the future of Stellantis, writing: “We see four factors that, in our opinion, will allow Stellantis to meet. 1) The PSA and FCA product portfolios in Europe cover similarly sized segments at similar prices … 2) Incremental economies of scale can have a material impact on both companies … 3) Both companies are at a relatively stage incipient [in] electric vehicle programs. The merger will avoid duplication and provide synergies. 4) Finally, we see some opportunities around the core team, where existing functions can be consolidated … ”In line with this perspective, Galliers assesses STLA a Buy and its $ 22 price target indicates scope for growth of 37% the following year. (To see Galliers’ history, click here) In general, this merger generated a lot of buzz, and on Wall Street there is a broad agreement that the combined company will generate returns. STLA has a strong purchase consensus rating, based on 7 unanimous buyer reviews. The stock is quoted at $ 16.04, and the average target of $ 21.59 is congruent with that of Galliers, suggesting a potential appreciation of 34.5% in one year. (See STLA’s stock analysis at TipRanks) NRG Energy (NRG) From the automotive sector, we move on to the energy sector. NRG is a $ 10 billion public service provider, with two headquarters in Texas and New Jersey. The company supplies electricity to more than 3 million customers in 10 states plus DC, and has more than 23,000 MW of generation capacity, making it one of North America’s largest energy utilities. NRG’s production includes coal, oil and nuclear power plants, as well as wind and solar farms. In its most recent quarterly report, for 3Q20, NRG showed $ 2.8 billion in total revenue, along with $ 1.02 EPS. Although it fell year after year, it was still more than enough to keep the company’s strong and reliable dividend payout at 32.5 cents per common share. This annualizes to $ 1.30 per common share and yields 3.1%. Analyst Michael Lapides, in his coverage of this action for Goldman Sachs, classifies NRG as Buy. Its $ 57 target price suggests a 36% rise from current levels. (To see Lapides’ history, click here) Looking at the recent acquisition of Direct Energy, Lapides says he expects the company to deleverage in the short term. “Following the acquisition of Direct Energy by NRG, one of the largest competitive retailers of electricity and natural gas in the United States, we see NRG’s business as something transformed. The integrated business model – having wholesale commercial power generation that supplies electricity that is used to serve customers supplied by NRG’s competitive retail arm – reduces exposure to the commercial energy markets and commodity prices, while increasing the potential for FCF “wrote Lapides. The analyst summed up,” We see 2021, from a capital allocation perspective, as a year of deleveraging, but with NRG creating almost $ 2 billion / year in FCF, we see an acceleration in share repurchases, as well as a dividend growth of 8% ahead in 2022-23. “We are looking at another stock here with a strong buy analyst consensus rating. This is based on a 3-to-1 split between buy and wait ratings. NRG is trading at $ 41.84 and its price $ 52.75 target average suggests a 26% increase from that level over the course of a year. (See NRG stock analysis at TipRanks) To find good ideas for stock trading with attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that gathers all the information about TipRanks shares. Di sclaimer: The opinions expressed in this article are exclusively those of the analysts presented. The content is intended to be used for informational purposes only. It is very important do your own analysis before making any investment.