Buy These 2 Stocks at a Discount – They’re Over 70% Up, Says Oppenheimer
Jthe past month has seen the bears exit, as the market entered a correction. The NASDAQ is down 13% since the start of 2022, a loss that effectively erased its 12-month gain. The S&P 500 hasn’t plunged that far yet, but it’s still down 8% year-to-date. The decline has investors wondering if the sustained bull run of the previous year is over or not.
Looking at Oppenheimer’s macro picture, Chief Investment Strategist John Stoltzfus would advise investors not to get pessimistic just yet. Stoltzfus believes the coming months should bring us relief from both the pandemic and the supply chain crisis. Looking ahead, Stoltzfus says, “We feel like it’s time to write shopping lists of fundamentally sound stocks, sectors, and thematic investment ideas that might ‘have eluded us’ on the upswings. last year’s market…”
Oppenheimer stock analysts are following Stoltzfus’s lead and picking stocks they see gaining as we move forward into 2022. They see the current correction as a chance to buy at a discount, in anticipation of better times ahead. to come. Using TipRanks’ database, we located two of these Oppenheimer picks, which the company expects to see rise by 70% or better.
Hertz Worldwide (HTZ)
We’ll start with one of the most recognized brands in the world, Hertz. The car rental giant operates rental companies Hertz, Dollar and Thrifty and boasts a global reach – over 10,000 locations in 145 countries on 6 continents.
There was, however, one weakness that the COVID pandemic exposed. Hertz relies on customers in transit – and the pandemic has disrupted travel, slamming the company down and dramatically reducing the value of its main asset, its vast fleet of cars. At the same time, Hertz creditors recalled their loans, which had been secured by those same car fleets. The combination was too big and Hertz began bankruptcy proceedings in May 2020. After more than a year of litigation and restructuring, the company emerged in July 2021 in a strong position, having paid 5 billion in debt and secured $5.9 billion in new capital. .
A look at the latest quarterly report, for 3Q21, shows the extent of the company’s twisted fortunes. Revenue of $2.2 billion was up 19% year over year, while Adjusted Diluted EPS of $1.20 was significantly improved from the loss of 44 cents EPS in 3Q20. The company had $2.7 billion in unrestricted cash as of September 30, 2021. The company will report fourth quarter results around the end of February.
Along with healthy finances, Hertz has also taken steps to align its business with modern trends. The company is partnering with used vehicle e-commerce company Carvana to streamline its used car disposition channels. The partnership will see Hertz sell used fleet vehicles through Carvana, benefiting both companies. Additionally, Hertz is working with Uber and Tesla on a project to electrify its rental fleet and will make up to 50,000 Tesla vehicles available to customers who rent through Uber’s network.
And finally, Hertz has made a move that should appeal to investors. The company announced in November that it had approved a share buyback program of up to $2 billion.
In short, Hertz emerged from bankruptcy with a solid plan moving forward and the ability to execute on it. Nonetheless, the stock is down 48% from its peak in November last year.
However, Oppenheimer’s Ian Zaffino sees Hertz in solid position and ready for takeoff.
“With a significantly improved cost structure, an underleveraged balance sheet and new competitive discipline, we believe Hertz is an attractive post-bankruptcy equity. The company has the potential to roughly double its pre-COVID EBITDA margins, even as automotive production and the operating environment normalize.
He went on to add that “Hertz has been very forward-looking as it positions itself for the future of the rental industry. It recently announced deals with Tesla, Carvana and Uber. The Tesla deal has the potential to be margin accretive, especially if EVs prove to have better economics.Additionally, the Carvana partnership expands Hertz’s disposal channel and could add more than $50 million to EBITDA .
To that end, Zaffino assigns an outperform (i.e. buy) rating to the stock, which is not surprising in light of his comments, and his price target of $31 implies an increase of 72% for the coming year. (To see Zaffino’s track record, Click here.)
Overall, Hertz shares earn a Moderate Buy rating from Wall Street analyst consensus. The stock has 6 recent analyst reviews, breaking down into 4 buys and 2 holds. The average price target of $30 implies a year-over-year upside of approximately 66% from the current stock price of $18.01. (See Hertz stock forecast on TipRanks)
Oppenheimer’s second pick we’ll be looking at is Vacasa, another company that has benefited greatly from the reopening of the economy and the gradual easing of COVID restrictions. Vacasa, based in Portland, Oregon, is a vacation management company, connecting vacationers to places to stay. The company operates in 34 US states, as well as the countries of Canada, Mexico, Belize and Costa Rica. Its homes, totaling more than 35,000, have garnered nearly 300,000 5-star reviews, and Vacasa boasts of making vacation stays easier for more than 3 million guests each year.
This company went public last December, through a SPAC transaction with TPG Pace Solutions Corporation. The deal saw the VCSA ticker begin trading on December 7 and brought the company over $340 million in new capital.
From a certain point of view, this company went public at the right time. Trends in customer behavior have evolved favorably in recent months as people find they can travel and have the funds to do so. The company released its 3Q21 results a few weeks before the SPAC transaction was finalized and posted record revenue of $330 million. That’s a 77% year-over-year gain and 28% of the company’s quarterly revenue target. The company sold more than 1.8 million vacation nights in the third quarter, well above the 1.1 million sold in the year-ago quarter. Looking ahead, Vacasa raised its full-year 2021 revenue forecast by more than $100 million to between $872 million and $877 million.
A look at the company’s stock price chart may seem ominous at first glance. The stock has fallen about 40% since its IPO. However, Oppenheimer analyst Jed Kelly sees no reason to worry and believes that Vacasa is on course to become the leader in its market.
“VCSA is leveraging its positioning as the largest vacation rental management platform in the United States to increase its advantages of scale and gain outsized inventory share as consumer preference for the segment grows. We see this dynamic facilitating VCSA’s evolution into a national hotel brand and generating upward revisions to LT estimates. Additionally, we expect a robust demand environment to continue in 22,” Kelly noted.
“We see more liquidity (05/06/22 lock-up) and strong execution allowing VCSA to close the valuation gap with its online travel peers,” the analyst summed up.
Kelly thinks the stock still has some way to go, and in a way, we’re hearing 96% upside. These are the returns investors are looking for, should the stock hit Kelly’s $12 price target. No need to add, the analyst rating is a buy. (To see Kelly’s track record, Click here)
Overall, Vacasa currently holds a Moderate Buy rating from Wall Street analysts; in its short time as a public company, it garnered 4 buy reviews vs. 2 taken. The stock is selling for $6.10 and has 103% upside potential based on the average price target of $12.40. (See VCSA stock forecast on TipRanks)
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Warning: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.