Here are CFRA’s latest stock upgrades.
It has only been about five months since the stock market crashed to multiyear lows, and investors were staring down the barrel of the most severe downturn since the 2008 financial crisis. As improbable as it would have seemed in March, the S&P 500 is now trading at all-time highs, breaking into uncharted territory on a near-daily basis. After one of the strongest five-month rallies in history, investors sitting on the sidelines may feel they have missed the buying opportunity. But here are CFRA’s eight most recently upgraded stocks investors can still buy in September.
PTC (ticker: PTC)
PTC is an industrial software company focused on serving the internet of things. Analyst John Freeman recently upgraded PTC after the company’s fiscal third-quarter earnings and revenue beat consensus expectations by a wide margin. Freeman says PTC’s 10-year trailing compound annual revenue growth rate of just 3% doesn’t reflect the company’s transition to a high-growth subscription model. Annualized recurring revenue was up 9% year over year in the most recent quarter, and Freeman says it could continue to accelerate through at least 2023. Earnings per share were also up 72% last quarter. CFRA has a “strong buy” rating and $131 price target for PTC stock.
Advance Auto Parts (AAP)
Advance Auto Parts is the second-largest U.S. auto parts retailer. Analyst Garrett Nelson upgraded Advance in August and says sales growth for high-maintenance used vehicles will likely outpace sales growth for new vehicles over the next several years. CFRA is projecting that Advance’s EPS will decline slightly from $8.19 in 2019 to just $8 in 2020 but bounce back to $9.30 in 2021. Nelson says Advance will resume its share buybacks at some point and benefit from its ongoing partnership with Walmart (WMT). CFRA has a “buy” rating and $195 price target for AAP stock.
Ansys specializes in engineering simulation software. Freeman upgraded Ansys after the company closed its largest-ever contract in the middle of an economic downturn, a $100 million multiyear deal with an automotive customer. Operating margins bounced back from 29% in the first quarter to 43% in the second quarter. In the long term, Freeman says software simulation will continue to replace physical processes such as prototyping, testing and troubleshooting. Freeman is projecting that EPS will grow from $6.49 in 2020 to $11.74 by 2022. CFRA has a “buy” rating and $344 price target for ANSS stock.
Brinker International (EAT)
Brinker is the parent company of casual dining brands Chili’s and Maggiano’s Little Italy. The health crisis has hurt the restaurant industry, but analyst Tuna Amobi upgraded Brinker and says 84% of its restaurants have reopened since mid-August. As of July, Chili’s was reporting same-restaurant sales growth in 36% of its locations. Takeout and delivery made up more than half of Brinker’s sales in the June quarter. Amobi says the company’s virtual It’s Just Wings brand should help support margins in the near term. CFRA has a “buy” rating and $27 price target for EAT stock.
Southwestern Energy Co. (SWN)
Southwestern is one of the largest natural gas producers in the nation. Analyst Stewart Glickman upgraded Southwestern after the company recently announced an all-stock acquisition of Montage Resources. The deal is expected to close in the fourth quarter. Glickman estimates that the deal will boost Southwestern’s 2021 production by about 23% and its proven reserves by 22%. In addition, he says much of Montage’s property in Appalachia is adjacent to Southwestern’s, which could enable cost reductions. Glickman is projecting 22% revenue growth in 2021. CFRA has a “buy” rating and $4 price target for SWN stock.
FleetCor Technologies (FLT)
FleetCor is a commercial payment provider that helps to facilitate cross-border payments via specialized products. Analyst David Holt upgraded the stock and says the severe FleetCor sell-off was overdone. He projects that the company’s transaction volumes should recover to 90% of 2019 levels by the end of the year. In the long term, Holt says accounts-payable automation and other high-growth segments will drive high single-digit organic revenue growth and boost margins for FleetCor. Holt projects that revenue growth will rebound to 13% in 2021. CFRA has a “buy” rating and $275 price target for FLT stock.
Southwest Airlines Co. (LUV)
The airline industry has been one of the hardest-hit businesses during the 2020 market downturn because of a dramatic drop in travel. However, analyst Colin Scarola says Southwest is the best-run U.S. airline and has been the most aggressive in bringing back flight capacity since travel demand bottomed in April. Scarola says Southwest has the most conservative balance sheet among the four largest U.S. airlines, and it has the lowest operating costs. He says Southwest should be the first major U.S. airline to return to profitability. CFRA has a “buy” rating and $42 price target for LUV stock.
Prudential Financial (PRU)
Prudential Financial is a global insurance company that primarily operates in the U.S. and Japan. Analyst Catherine Seifert upgraded Prudential and says the company’s recent decision to divest its Taiwan insurance segment will help the company focus on its stronger franchises in Japan and South Korea. Seifert says Prudential and other insurance companies will continue to face margin pressures from historically low interest rates, but the stock could benefit from investor rotation from growth stocks to value stocks. Prudential also pays a 6.3% dividend. CFRA has a “buy” rating and $80 price target for PRU stock.
Upgraded stocks for this month:
— PTC (PTC)
— Advance Auto Parts (AAP)
— Ansys (ANSS)
— Brinker International (EAT)
— Southwestern Energy Co. (SWN)
— FleetCor Technologies (FLT)
— Southwest Airlines Co. (LUV)
— Prudential Financial (PRU)
More from U.S. News