Go back to the start of the year and few have seen markets rally as much as they have, especially after 2022’s overall performance was the worst since 2008.
But here we are more than six months later and the S&P 500 and especially the tech-laden NASDAQ have completely exceeded expectations, with the push building on investor appetite for all things AI.
But not all stocks have followed the AI sauce bandwagon. Some were shut out of the rally and fell back over the year, although that doesn’t mean they’re headed for the permanent bargain bin.
In fact, analysts at banking giant Goldman Sachs have been practicing one of their favorite pastimes: labeling stocks they see as poised for gains in the second half of the year. Specifically, firm analyst Adam Samuelson has identified an opportunity in two beaten names that he sees pushing higher over the next few months – in the range of 40% or more.
We scoured these tickers in the TipRanks database to see what other high street experts are doing with their odds. Here are the details.
The Mosaic Company (MOS)
Let’s start with the agricultural sector and zoom in on The Mosaic Company. This heavyweight in the crop nutrient industry has established a reputation as a world leader in the production and marketing of concentrated phosphate and potassium fertilizers. The Tampa, Florida-based company focuses on mining and processing phosphate rock, which is then used to produce agricultural fertilizers, and potash, a vital nutrient for crops. The company’s products are essential for promoting crop productivity and improving soil fertility, thereby supporting the global agricultural industry.
Early last year, fertilizer prices rose dramatically following Russia’s invasion of Ukraine and subsequent Western sanctions against Russia and Belarus led to supply problems. supply. However, as supply from Belarus has resumed – it is the third largest exporter of potash – fertilizer prices have also fallen and this has affected Mosaic’s latest quarterly results.
In Q1, adj. EPS fell from $2.41 in the same period a year ago to $1.14, while missing the street call of $0.11. Revenue also fell 8.2% year-on-year to $3.6 billion, though that figure actually beat Wall Street expectations of $340 million. More recently, the company said it expects potash sales volumes in the second quarter to be in the high end of the guide from 2 to 2.2 million metric tons and phosphates in the low end of the guide. from 1.8 to 2 million tons.
Year-to-date, MOS shares peaked in March, but have since fallen 36%. While Goldman analyst Adam Samuelson is aware of the current issues, he points to Mosaic’s appeal to investors.
“While we recognize that the current turbulent fertilizer (and commodities in general) market environment is clouding the near-term outlook, management remains cautious in capital allocation and the production asset portfolio of MOS looks heavily discounted compared to its peers, not to mention the potential replacement cost,” notes the analyst.
As a result, Samuelson rates MOS as a buy with a price target of $62, suggesting the stock will climb around 73% over the next few months. (To see Samuelson’s track record, click here)
That said, Samuelson’s take is the most exuberant on the street. Elsewhere, the stock is picking up 3 more buys, 9 holds and 1 sell, for a consensus holding rating. Nevertheless, most believe that stocks are undervalued; passing through the average target of $45.61, in one year they will change hands for a premium of 27%. (See MOS Stock Forecast)
Airline Sealed (SEE)
Now let’s move on from the fertilizer industry to packaging and the aptly named Sealed Air. Fun fact, the company is responsible for the invention of the iconic Bubble Wrap, the padding material widely used to protect fragile items during shipping, and Sealed Air was founded based on this invention.
Today, Sealed Air is a global packaging company that provides a range of innovative packaging solutions for various industries and is a leader in protective packaging and food safety solutions. Its offerings include protective packaging materials, such as foam and air cushions, as well as equipment and automated systems for packaging optimization.
The global economic difficulties have not spared the packaging industry. Companies using such products have been affected by the recessionary environment and this has in turn affected SEE’s business.
In the first quarter, volumes fell 9.3% following a 10.4% decline in the fourth quarter, two historically steep declines the company had not witnessed since 2008-09. As such, revenue was $1.3 billion, down 7.1% and below the consensus estimate of $60 million. Adj. EPS of $0.74 also missed expectations, by $0.03. For the full year, SEE reiterated its outlook for adj. EPS between $3.50 and $3.80, just below consensus at $3.66 at the midpoint.
These are the kinds of things that don’t help a stock’s performance, and indeed, stocks are down 23% since peaking in February this year. However, according to Goldman’s Adam Samuelson, this could be an opportunity for investors.
“While we recognize the short-term cyclical pressures and see the risk that the upper half of the full-year guidance and implied recovery in protection volume looks ambitious, the underlying strength of SEE’s franchise and long-term growth in automation and digital solutions remains heavily discounted at 9.1x /8.3x 2023/24 VE/EBITDA We see the current weakness providing a compelling entry point for longer-term investors said Samuelson.
Samuelson therefore recommends investors buy SEE shares, as his price target of $64 indicates a potential return of around 47% over the next 12 months.
Elsewhere down the street, 4 more analysts join Samuelson in the bullish camp and with 7 more takes, analyst consensus views this stock as a Moderate Buy. The average target currently sits at $50.27, implying that the shares will generate gains of 15% in the coming months. (See SEE stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.