Analysts recommend these upgraded stocks for October.
The S&P 500 dropped 4.8% in September, its worst month since the disastrous March 2020. Many investors took a hit in September, but the pullback also created some buying opportunities in high-quality stocks. Buying the stock market dip could prove to be a wise decision. Despite near-term concerns about inflation, interest rates and supply chain disruptions, many economists believe the U.S. is still in the early stages of a multiyear expansion cycle. Investors looking for the best stocks to buy following the September swoon should consider these nine recent CFRA analyst upgrades.
Walmart Inc. (ticker: WMT)
Walmart is the world’s largest brick-and-mortar retailer and is on track to generate $75 billion in e-commerce sales in 2021. Analyst Arun Sundaram upgraded Walmart and says investors are not fully appreciating the investments the company has made to set the table for sustainable post-pandemic earnings growth, including the Walmart+ membership program and its third-party marketplace. Sundaram says Walmart also has opportunities in data monetization, health and wellness and will likely maintain much of the grocery market share it has gained during the coronavirus pandemic. CFRA has a “buy” rating and $167 price target for WMT stock, which closed at $135.73 on Oct. 4.
VF Corp. (VFC)
VF is a branded lifestyle apparel, footwear and accessory company and the owner of brands such as The North Face, Timberland and Vans. Analyst Zachary Warring upgraded VFC and says the health crisis has facilitated a shift in leisure toward more active, outdoor activities. In addition, Warring says the company’s $2 billion buyout of Supreme in 2020 should provide another source of long-term growth for VF. The company’s direct-to-consumer sales model generates industry-leading margins, and Warring says those margins could expand even further in coming years. CFRA has a “strong buy” rating and $80 price target for VFC stock, which closed at $68.78 on Oct. 4.
LyondellBasell Industries NV (LYB)
LyondellBasell Industries is a leading global producer of petrochemicals, including plastics. Analyst Richard Wolfe upgraded the stock after it pulled back by 20% from June highs. He says tight supply conditions will likely keep petrochemical prices elevated through the remainder of 2021, but investors should expect sales and earnings to normalize to lower levels in 2022. Even though the 2021 earnings boost is temporary, Wolfe says, LyondellBasell’s excess cash flow can be used to deleverage its balance sheet, return cash to shareholders or even make opportunistic acquisitions. CFRA has a “buy” rating and $115 price target for LYB stock, which closed at $94.67 on Oct. 4.
Hewlett Packard Enterprise Co. (HPE)
Hewlett Packard Enterprise is a server and storage technology company. Analyst Angelo Zino upgraded the stock and says the company’s free cash flow is trending in the right direction. In addition, he says the company is growing its mix of recurring revenue and has opportunities in edge computing and high-performance computing. Zino says the company’s core computer business will remain a risk, but he is bullish on Hewlett Packard’s flash storage business and as-a-service segment, which CFRA projects will grow revenue by 30% annually through 2023. CFRA has a “buy” rating and $19 price target for HPE stock, which closed at $14.85 on Oct. 4.
Patterson Cos. Inc. (PDCO)
Patterson Cos. is a dental and animal health supplies distributor. Analyst Sel Hardy upgraded the stock after Patterson reported improving growth and better-than-expected earnings in its most recent quarter. Hardy says Patterson’s dental segment is recovering now that many patients are vaccinated against COVID-19 and dental revenue growth should normalize heading into the end of the year. He says new pet adoption will slow from pandemic peaks, but companion animal momentum will likely continue for at least several more quarters. He is projecting 7% revenue growth in fiscal 2022. CFRA has a “buy” rating and $33 price target for PDCO stock, which closed at $31.57 on Oct. 4.
Nutanix Inc. (NTNX)
Nutanix is the market leader in hyperconverged infrastructure, which is changing the way massive amounts of data are managed. Zino upgraded the stock and says Nutanix has improving cash flow metrics and impressive long-term growth prospects. He projects that the company will be free cash flow positive by the second half of 2022 after reporting $42 million in cash burn last quarter. CFRA is forecasting 25% total annualized contract value growth over the next three years. Zino says the hyperconverged infrastructure market is large and growing, and he estimates that Nutanix’s total addressable market will exceed $60 billion by 2025. CFRA has a “buy” rating and $45 price target for NTNX stock, which closed at $37.42 on Oct. 4.
Autodesk Inc. (ADSK)
Autodesk is a leading design software and services company. Analyst John Freeman upgraded the stock and says the company’s growth rate and profitability have improved since its shift to a tethered cloud model, which allows Autodesk to at least partially monetize nonpaying users. He says Autodesk’s transition to a subscription model creates financial tailwinds through at least 2024. Freeman says the company has room to grow operating margins to 40% by 2024 and projects that it can grow revenue by 19% annually over the next three years. CFRA has a “strong buy” rating and $376 price target for ADSK stock, which closed at $272.93 on Oct. 4.
Pitney Bowes Inc. (PBI)
Pitney Bowes specializes in mailroom automation systems and services. Freeman upgraded the stock and says it has an attractive valuation and the potential to be an impressive turnaround story. The company’s core business has been pressured in recent years, but Freeman says bold moves to divest legacy assets and prioritize e-commerce investment could pay off in a big way for investors. The stock’s valuation — the forward price-to-earnings ratio is just under 13 — suggests that the market has low expectations for these initiatives, but Freeman says early results have been positive so far. CFRA has a “buy” rating and $10 price target for PBI stock, which closed at $7.40 on Oct. 4.
Guess Inc. (GES)
Guess is a popular contemporary apparel and accessories brand. Warring upgraded Guess and says investors should be buying the dip in the stock after it dropped nearly 20% from summer highs. He says the sell-off dragged Guess’s forward earnings multiple well below its long-term average, making the stock a compelling value investment. Guess management understands the importance of direct-to-consumer and e-commerce sales, and Warring says its focus on these areas has the company on track to potentially return to growth and profitability. CFRA has a “buy” rating and $34 price target for GES stock, which closed at $21.58 on Oct. 4.
Upgraded stocks to buy in October:
— Walmart Inc. (WMT)
— VF Corp. (VFC)
— LyondellBasell Industries NV (LYB)
— Hewlett Packard Enterprise Co. (HPE)
— Patterson Cos. Inc. (PDCO)
— Nutanix Inc. (NTNX)
— Autodesk Inc. (ADSK)
— Pitney Bowes Inc. (PBI)
— Guess Inc. (GES)
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