These stocks have 'underappreciated' stories, Wall Street analysts say

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Brian Cornell, CEO, Target

Scott Mlyn | CNBC

Wall Street analysts are finding underappreciated and undervalued stocks in a myriad of ways. Amidst a busy earnings season, analysts see quality in companies like Corning, Target, Costco, AtriCure, and Coupa Software.

CNBC combed through sell-side stock research to find companies that analysts are singling out in their respective coverage universes.

Glass-maker Corning cut its forward guidance this week when it reported its quarterly results. Shares plummeted but that didn’t stop analysts at Bank of America from upgrading the stock to buy. The firm said the 168 year old company has an “underappreciated” content story.

“We view the pullback in shares as an especially attractive buying opportunity,” they said.

Another stock analysts see as underappreciated is Coupa Software, which got an overweight rating in new coverage from analysts at KeyBanc.

“New products in 2019 that monetize an underappreciated data asset and new B2B payment offerings could become game changers for COUP and help accelerate the path to $1B in revenue.”

Coupa, a $6 billion cloud based business spend management platform company, is up 65% year to date.

Retail giant Target has been on the receiving end of several up and down analyst calls of late. But analysts at Baird recently went further slapping a “fresh pick” label on the stock to go along with their outperform rating.

“Target’s growing suite of convenient fulfillment capabilities and improved traction with consumers seem underappreciated by the market,” analyst Peter Benedict said.

Here is what else analysts are saying about underappreciated stocks:

Bank of America- Corning, Buy rating

“Dependable cash flows; Content story underappreciated; We upgrade Corning from Neutral to Buy rating as (1) we view the growth profile as better than historical and more diversified, (2) Gross profit dollar growth should scale with near term investments that are impacting gross margin rates, (3) glass pricing environment is a tailwind and could surprise incrementally to upside, (4) operating leverage should help drive incremental margin expansion over the next few years, (5) opportunity to return incremental capital to shareholders through corporate actions/incremental debt, (6) Lower capital intensity for new initiatives given ability to re-use idle capacity (e.g. Gorilla Glass), (7) We expect a positive update at the upcoming investor day in mid-June, and (8) Corning is significantly outgrowing declining unit growth in smartphones, TVs, Autos given its increasing content in each of these. Our new PO of $40 (was $38) is based on 18x C20E EPS of $2.18. We view the pullback in shares yesterday (-6% vs SPX up 0.1%) as an especially attractive buying opportunity.”

Baird- Target, Outperform rating and fresh pick

“In short, TGT’s growing suite of convenient fulfillment capabilities and improved traction with consumers seem underappreciated by the market at ~13x NTM EPS (~22%/~38% discount to S&P500/WMT). With a return to “profitable growth” expected in FY19, prospects for multiple expansion appear good. Our $90 price target (~17% upside) assumes ~14x FY20E EPS. Reiterate Outperform rating with new positive ‘Fresh Pick’ designation.”

Baird- Costco, Outperform rating

“Increased control over product supply is an underappreciated part of the COST investment story. In short, we believe vertical initiatives strengthen Costco’s already-considerable competitive advantages in the marketplace, add durability/duration to the company’s quality/value/limited assortment strategy, and ultimately provide fuel for continued profitable market share gains. With many traditional retail models losing relevance, Costco’s vertical efforts further differentiate the company from the pack and should help support the stock’s premium valuation profile. Raising price target to $270; reiterate Outperform rating.”

PiperJaffray- AtriCure, Overweight rating

“This evening, ATRC reported Q1 results that beat expectations and management raised revenue guidance at the low end of the range (also confirmed expectations for positive EBITDA). Appendage management trends remained very strong driving most of the upside (along with strength across the OUS business), while domestic MIS remains lumpy and missed our expectations (though we are not too concerned here). Because of that continuing dynamic, we think management is being prudently conservative right now, but at the end of the day, there is plenty of upside available to the outlook. No new updates on CONVERGE from the call, but progress to a potential panel next year remains on track and we reiterate our long-held view that the FDA labeling of that product is a major value creator. That said, we think the accelerating growth story is still underappreciated and encourage investment at a reasonable 3.5x 2020E sales.”

KeyBanc- Coupa Software, Overweight rating

“New products in 2019 that monetize an underappreciated data asset (trillion dollar spend data) and new B2B payment offerings could become game changers for COUP and help accelerate the path to $1B in revenue. We are initiating coverage at Overweight with a $123 PT based on new product potential, international expansion, Federal, and a unique data asset that is in the early stages of monetization. Strong leadership, an impressive track record of execution, and several untapped growth levers help justify a premium valuation.”

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