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Goldman Sachs: These 2 ‘Strong Buy’ shares can go up at least 30%
We are now well into the first quarter of 2021, and now is a good time to take stock of what is behind us and how it will affect what lies ahead. Goldman Sachs strategist Jan Hatzius believes we are on an upward trajectory with better times ahead. Hatzius sees mature economies growing as the corona crisis abates. For the US in particular, he is impressed by the ‘very substantial fiscal support’ implied by the latest COVID aid package. But even with that, Hatzius believes Q4 was a weaker period, and we’re not quite sure yet. He puts growth in the first quarter at 5% and says we will see further expansion “concentrated in the spring” and an “acceleration to 10% growth in the second quarter”. And by acceleration, Hatzius means that investors should expect a second-quarter GDP of about 6.6%. Hatzius credits that prognosis to ongoing vaccination programs and the continued development of COVID vaccines. Moderna and Pfizer vaccines are already in production and circulation. Hatzius says of these programs, “That we develop more options and that governments around the world will have more options to choose between different vaccines. [means] production is likely to increase quite strongly in the coming months … It is certainly a major reason for our optimistic growth forecast. “In addition to Hatzius’ look at the macro situation, Goldman Sachs analysts have also dived into specific stocks. Using TipRanks’s database, we identified two stocks that the company predicts will show solid growth in 2021. The Rest of the Street also backs both tickers, each with a “Strong Buy” consensus rating. Stellantis (STLA) We’ve talked about the Detroit auto makers before, and with good reason – they’re major players on the US economic scene. The US does not have a monopoly on the automotive sector, Netherlands-based Stellantis proves. This international conglomerate is the result of a merger between the French Groupe PSA and the Italian-American Fiat-Chrysler. The deal was a 50-50 share agreement, and Stellantis has a market cap of more than $ 50 billion and a portfolio of nearly legendary nameplates, including Alpha Romeo, Dodge Ram, Jeep and Maserati. The deal that formed Stellantis, now the world’s fourth-largest automaker, lasted 16 months 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 is promising costs. savings of nearly 5 billion euros in the operations of both Fiat-Chrysler and PSA. These savings seem to come from increased efficiency and not from plant closures and cutbacks. Stellantis is new to the markets and the STLA ticker has supplanted Fiat-Chrysler’s FCAU on the New York Stock Exchange, giving the new company a storied history. The company’s stock value has nearly tripled since its trough hit last March during the ‘corona recession’, and has remained strong since the merger was completed. Goldman Sachs analyst George Galliers is optimistic about the future of Stellantis, writing: “We see four factors that we believe will enable Stellantis to perform. 1) PSA and FCA’s product portfolios in Europe cover similar segment sizes at similar prices … 2) Incremental economies of scale could potentially have a material impact on both companies … 3) Both companies are in relatively nascent stages [in] programs for electric vehicles. The merger will avoid duplication and generate synergies. 4) Finally, we see some opportunities around central headcount where existing functions can likely be consolidated … ”In line with this outlook, Galliers rates STLA as a buy and its $ 22 price target indicates there is room for 37% growth in the coming year. (To view Galliers’ track record, click here) Overall, this merger has created a lot of buzz, and there is widespread agreement on Wall Street that the combined company will generate returns. STLA has a Strong Buy consensus rating, based on a unanimous 7 buy-side ratings. The stock is priced at $ 16.04, and its average target of $ 21.59 is in line with that of Gauls, indicating 34.5% upside potential over a year. (See STLA stock analysis on TipRanks) NRG Energy (NRG) We are moving from automotive to the energy sector. NRG is a $ 10 billion energy supplier, with two headquarters in Texas and New Jersey. The company provides electricity to more than 3 million customers in 10 states plus DC power and has a generation capacity of more than 23,000 MW, making it one of the largest power companies in North America. NRG’s production includes coal, oil and nuclear power plants, plus wind and solar parks. In its most recent 3Q20 quarterly report, NRG showed $ 2.8 billion in total revenues, along with $ 1.02 earnings per share. While this was lower year-over-year, this was still more than enough to maintain the company’s strong and reliable dividend distribution of NLG 32.5 cents per common share. This comes to $ 1.30 per common share on an annual basis, yielding a return of 3.1%. Analyst Michael Lapides considers NRG in his report of this share for Goldman Sachs as a buy. Its USD 57 price target points to a 36% rise from current levels. (To view Lapides’s track record, click here) In view of the recent acquisition of Direct Energy, Lapides expects the company to wind down in the near future. “Following the acquisition by NRG of Direct Energy, one of the larger electricity and natural gas competing retailers in the US, we see NRG’s business as somewhat transformed. The integrated business model – owning wholesale power generation that provides electricity used to serve customers supplied by NRG’s competing retail arm – reduces exposure to trade power markets and commodity prices, while increasing FCF potential, ”Lapides wrote. We see 2021, From a capital allocation perspective, as a year of deleveraging, but with NRG creating nearly $ 2 billion / year of FCF, we see an increase in share buybacks and dividend growth of 8% in 2022-23. ”look at a another stock here with a Strong Buy analyst consensus rating. This is based on a 3: 1 split between Buy and Hold ratings. NRG is trading at $ 41.84 and the average price target of $ 52.75 suggests a 26% increase from that level on the one-year time frame. (See NRG Stock Analysis on TipRanks) To find great ideas for stocks trading at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ insights on stocks. sclaimer: The opinions expressed in this article are solely those of the recommended analysts. The content is provided for informational purposes only. It is very important to conduct your own analysis before making an investment.