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Cruise ship anchored off the shore of Grand Cayman Island, Royal Caribbean cruise liner Mariner of the Sea
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(This story is part of the Weekend Brief edition of the Evening Brief newsletter. To sign up for CNBC’s Evening Brief, .)
There’s still time for investors to beef up their portfolios, even as 2020 is quickly approaching.
Wall Street analysts said this week that there’s no shortage of quality stocks for clients to explore with upside potential.
CNBC did a deep dive into some of the most recent Wall Street research in search of stocks that analysts say are “undervalued.” Stocks include Royal Caribbean, Norwegian Cruise Line, G-III Apparel Group, GoDaddy, Anthem, and DuPont.
As the 2020 election year approaches, health care and “Medicare for all” are once again hot topics. While politics have caused some uncertainty to creep into the sector, Anthem is an example of a stock that’s unfairly struggled at times, according to Argus.
“While we understand these concerns, we believe that they are unwarranted given the likely opposition to the single-payer model on Capitol Hill,” analyst Jasper Hellweg of Argus Research said.
Though the stock is up 24% this quarter, it’s still only up just 2% over the last 6 months.
“We view Anthem as undervalued,” the analyst said.
GoDaddy is another stock worth taking a look at, according to William Blair.
A recent investor meeting left the firm feeling more confident about the direction of the internet domain registrar and web hosting company. An analyst said he came away impressed with the management, website opportunity, and customer care center, and went on to say he “continues to believe the stock is undervalued.”
The holidays may be approaching but that’s not stopping some other companies from making deals.
This week, International Flavors & Fragrances announced a merger with DuPont’s Nutrition and Biosciences business.
According to Bernstein, the market may be “underappreciating” the value of DuPont’s remaining assets after the deal.
“We believe DuPont is still a compelling value proposition once the Nutrition and Biosciences deal closes,” Bernstein analyst Jonas Oxgaard said.
“DuPont shares are undervalued after the deal,” he said.
Here’s what else analysts are saying about other stocks they consider “undervalued:”
Nomura Instinet – Royal Caribbean & Norwegian, Buy ratings
“Of the three sectors we follow, we believe that cruise has the strongest risk reward for investors in 2020E. Approximately 5% unit growth and 3% yield growth should translate into 16% EPS growth for NCLH and RCL. Investor skepticism is high as measured by EPS valuations that are at ten-year lows. As bear theses are proved wrong next year, we assume modest sentiment improvement.”
Cowen- G-III Apparel Group, Outperform rating
“We would be buyers of GIII into two key catalysts 1) the resturucturing/wind down of its retail business, and 2) a trade deal that would limit additional tariffs. We model a path to $4 in EPS and view the stock as undervalued as apparel stocks with meaningful wholesale channel exposure are deeply out of favor. We are Outperform rated on G-III Apparel due to the substantial earning power of the core business on a stand-alone basis, excluding BONT liquidation impact and Donna Karan, given ongoing success from its Calvin Klein and Tommy Hilfiger businesses, improved wholesale channel sector inventory levels, and restructuring/re-purposing of its Retail segment.”
Bernstein – DuPont, Outperform rating
“We argue that DuPont shares are undervalued after the deal, with the market underappreciating the value of the non-N&B assets. … We believe DuPont is still a compelling value proposition once the N&B deal closes. The remaining businesses are attractive high-margin, high-growth specialty chemical assets. Though clearly cyclical, the company trades at a significant discount to cyclical peers; we believe that exposure to tough end-markets doesn’t explain the valuation disconnect.”
William Blair – GoDaddy, Outperform rating
“Conclusions From Site Tour and Investor Dinner; Continue to Believe Stock Is Undervalued. .. .Coming out of the dinner we feel more confident in our belief that GoDaddy’s new CEO, Aman Bhutani, is not going to drastically change the company’s financial goals, and that uFCF growth should continue to outpace revenue growth. Further, we remain bullish on the company’s website opportunity and believe that what GoDaddy has accomplished since GoCentral’s release in 2017 is somewhat underappreciated. Finally, we came away with a greater appreciation for the importance of GoDaddy’s customer care centers to the company’s platform model, and the challenges with replicating this asset.”
Argus – Anthem, Buy rating
“Anthem has grown through the launch of new services, as well as through partnerships and acquisitions, leading to a successful 11-quarter run of above-consensus earnings. However, the stock has struggled recently amid concerns about the potential impact of ‘Medicare for All.’ While we understand these concerns, we believe that they are unwarranted given the likely opposition to the single-payer model on Capitol Hill. As such, with the stock now trading at just 14.9-times our 2019 estimate and 12.6-times our 2020 estimate, we view ANTM as undervalued.”
