Which stocks represent the most compelling investments? This is the million-dollar question for investors. Well, we say million, but that’s possibly for millionaires. For us mere mortals, it is probably the ‘few thousand-dollar question.'
We all know by now that 2019 has been a record-breaking year, with the S&P 500 breaking its own record multiple times, so it gets harder to know which stocks offer good value after such a sustained rally.
TipRanks’ Stock Screener is one way to get the lowdown, as it has a variety of filters, including upside potential, analyst consensus, and investor sentiment in which to gauge the market’s sentiment about any given stock.
So, we put our virtual detective hat on, and using the tools at our disposal dug out 3 Buy-rated stocks, all with potential for some serious gains ahead. Let’s take a closer look.
Things are looking up for Ooma, the free internet phone service provider. The Sunnyvale, California based telecom company offers Voice-over-IP (VoIP) calling using an Internet connection for small businesses, homes and mobile users.
Ooma took the Street somewhat by surprise with its FQ3 earnings report, beating the estimates on several metrics. Along with revenue and EPS beats, year-over-year revenues grew by 21%, with its business service leading the way with 67% growth. Ooma also reported positive FQ4 guidance, which the company thinks will be around $40 million, $1 million higher than the Street’s initial estimate.
The communications platform recently launched Ooma Office Pro, a small business phone service offering various premium features. This comes alongside Sprint’s launch of its cloud-based commercial phone service, Omni, which is powered by Ooma Office. Sprint is the fourth-largest mobile network operator in the United States.
B.Riley FBR’s Josh Nichols thinks these developments are significant, with the 4-star analyst noting, “We believe these new offerings represent a significant opportunity for Ooma to expand its addressable market by leveraging Sprint’s large sales network and increasing ARPU through Ooma Office Pro premium pricing. Ooma is seeing success with the large business customer secured in F2Q20 and management expects to add a significant number of users in 4Q with the potential for the cadence to continue into FY21.”
Nichols reiterated a Buy rating on OOMA stock, while slightly raising his price target from $20.50 to $21.50. This implies ample upside potential of 60% from its current price.
All in all, TipRanks shows the bulls are on Ooma’s side. Out of the 6 analysts that issued ratings in the last 3 months, 4 are bullish and rate it a Buy, compared to 1 Hold and 1 Sell. Significantly, the 12-month average price target of $18.88 suggests over 40% upside potential.
Uber Technologies (UBER)
Transport disruptor Uber has experienced one hell of a face melting ride down the charts since its May IPO. Losing almost 30% of its value and dealing with negative investor sentiment concerning whether the ride sharing pioneer has what it takes to make its business profitable in the long run. All this was exacerbated by the recent end to the lock up period – the date when early investors can finally sell their shares - which exerted further downward pressure on Uber’s share price.
One person who evidently thinks the company has the wherewithal to flourish is CEO Dara Khosrowshahi, who recently purchased 250,000 shares at a price of $26.75. Uber share price’s record low is $25.58, so Khosrowshahi possibly thinks the bottom is in, or at least, very close to it.
SunTrust Robinson’s 5-star analyst Youssef Squali thinks so too. Citing Uber Rides, in particular among the growing Uber portfolio, as “a great business”. Noting its strong category position (first or second in most markets where the service is available), secular tail winds powering growth, and robust margin profile as among factors to drive the company forward.
Squali said, “We believe Uber is a compelling growth story, built to compound at scale over the next decade and beyond. We see powerful, enduring secular trends driving robust growth across Transportation-as-a-Service segments. We believe Uber’s industry leading scale, technology and platform approach will enable it to capture and defend a disproportionate amount of the associated financial benefit.”
To this end, the top-rated analyst reiterated a Buy on Uber along with $56.00 price target, which indicates almost 90% upside from its current price.
Is the bottom in for Uber? The rest of the street seems to think so. 21 Buy ratings and 5 Holds received in the last three months amount to a Strong Buy analyst consensus. Alongside the positive sentiment, its $46.35 average price target puts the upside potential at almost 58%.
The onomatopoeically named Splunk, is a big data analytics company, providing businesses with the tools to get insights from masses of data. Companies can then use the data to make better business decisions to improve and streamline their operations.
Although there are several other operators in the field, part of Splunk’s modus operandi has been to acquire other fast evolving companies like itself, specifically ones which suit its game plan. The fast -growing tech company has been on a shopping spree over the last few years, and only last month completed the $1.05 billion acquisition of cloud monitoring service, SignalFx. The company has steadily evolved from one offering big data services into one providing full-on IT modernizing tools, comprehensive business analytics, and cyber security solutions.
Still, all the growth hasn’t come without growing pains. Following a disappointing F2Q, Splunk’s share price took a beating. The underwhelming results were partly due to the costs involved with shifting its business from a license-based model to a subscription based one. The turnaround, though, has been impressive. Following strong F3Q results which easily beat estimates, the data cruncher has now raised its revenue guidance for Q4 from $780 million versus the Street’s $768 million estimate.
The optimism is reflected in the Street too, as Splunk’s share price has risen nearly 30% in the last month.
The growth has not gone unnoticed by 5-star Rosenblatt analyst Yun Kim, who wrote, “In our view, SPLK is emerging as a de facto standard in the infrastructure and security management platform market, which positions the company well for the next stage of growth. As the infrastructure and security software market becomes increasingly data-driven, we see accelerated adoption of SPLK’s data-driven platform within large organizations to better manage and secure increasingly complex hybrid IT environments with disparate technologies. We expect its large deal activity to show faster growth, as more organizations adopt SPLK as their next enterprise standard in IT.”
According to Kim, there is still more room for growth. The analyst reiterated a Buy rating on SPLK along with a price target of $200, implying an increase of 35% from SPLK’s current price.
It seems the Street is on Kim’s side with this one. 24 Buys, 3 Holds, and 1 Sell assigned in the last three months to Splunk add up to a ‘Strong Buy’ consensus. Its $158.56 average price target indicates 7% upside potential.