To make a profit, buy low, and sell high. The hard part is judging what’s a low price, when making that initial purchase. We’ll look at three stocks, with share prices ranging from $60 to $400, and see what makes each of them a bargain today. All three of these companies have garnered recent attention from high-rated analysts in TipRanks’ database. TipRanks analyzes the analysts, creating a comprehensive listing the best stock watchers on Wall Street, ranked by their success and average return.
Teladoc Heath, Inc.
First up is Teladoc Health, the, on-demand remote medical care service. Teladoc uses videoconferencing technology to provide, in the company’s words, “remote house calls by primary care doctors.” Services focus on non-emergency issues such as sinus problems, ear infections, and pink eye, and include medical advice and basic diagnoses. Patients can use the service to get or refill prescriptions on non-addictive medications, and to handle referrals for lab tests or to specialists.
In short, Teladoc offers a low-cost method to meet the ground-level needs of a health-care system. It’s a niche that is clearly working, as the company claims several successful metrics: 20 million members in the system, 95% member satisfaction, and 92% of issues resolved after the first remote visit.
A well-defined business niche and a satisfied customer base provide Teladoc with a firm foundation, and the company has received a series of strong reviews recently. Five-star analyst Richard Close, of Canaccord Genuity, weighed in on the stock after the company’s Q4 earnings release, and specifically said that current price weakness is a buying opportunity. He added in his comments, “…the company reined in the aggressive Street estimates and that guidance is likely conservative.” Close gives TDOC shares a $95 price target, implying a 51% upside.
Earlier this month, SunTrust Robinson’s Sandy Draper also set out a bull case for TDOC. He points out “Teladoc's two key metrics - paying members and utilization - will exceed prior expectations and also offers a more positive outlook on the wide-scale telehealth adoption given the company's strong sales pipeline and an increasingly more favorable legislative environment.” Draper’s price target, $75, suggests a 19% upside potential to the stock.
Teladoc shares are up 29% year-to-date, and the stock’s outlook reflects that. TDOC has a Strong Buy on the analyst consensus, based on 9 buy ratings and 1 hold. The average price target, $84, indicates an upside of 33% compared to the share price of $62.
Nvidia Corporation
By sales, Nvidia is the tenth largest manufacturer in the semiconductor chip market. The has developed a high reputation for the quality of its graphics processing units, and the parallel processing capabilities it developed in that field have found a home in the AI field, as well. The company had a rough time in 2018, however, due to a heavy early investment in the cryptocurrency mining segment – when crypto crashed, losing 85% of its combined market cap, the crypto miners scaled back and Nvidia felt the pain.
The company is recovering, though. Its chips are highly sought-after in the gaming, AI, and autonomous vehicle industries, and Nvidia is increasing its market share in those areas. The company is also moving strongly into the data center segment, and in a related move, it recently made the winning bid to acquire the Israeli networking company Mellanox (MLNX).
Nvidia’s bid was $6.9 billion – a whopping 93% of the company’s available cash and cash equivalents. It came out to about $125 per share of MLNX, or a 15% premium over the share price at the time of acquisition. Such a large investment may seem risky, but it brings high-end networking technology in-house for Nvidia, essential as the company moves more into data centers, and it gives the chip maker a foot in the door to Israel’s marketplace for high-tech personnel.
Vivek Arya, five-star analyst from Merrill Lynch, says that the Mellanox acquisition will likely be “immediately accretive” for Nvidia’s EPS – by as much as 8% in calendar year 2020. He believes the company will focus on “attacking future growth opportunities instead of harvesting current opportunities.” In short, he sees this as a strategic move for the chip maker. Arya’s price target of $193 suggests that NVDA shares have a 13% upside.
Regarding strategy, Citigroup’s Atif Malik sees Nvidia’s future in the autonomous driving and process technology areas. He believes that Nvidia’s next project will be a migration from 12nm chips to 7nm. Malik gives NVDA a $200 price target, for a bullish 17% upside.
Overall, NVDA had a Moderate Buy analyst consensus rating. This is based on 20 buys, 9 holds, and 1 sell. Shares are trading at $169, so the $185 average price target suggests an upside potential of 9%.
Boeing Company
Two airliner crashes in the last six months – an Indonesian Lion Air flight in October and an Ethiopian Airlines flight on March 10 – both involved 737 MAX 8 aircraft, the newest model of Boeing’s most popular commercial airliner. In the days after the Ethiopian crash, Boeing shares lost 11% in the markets, mainly on panic.
There may not be any reason to panic over Boeing’s future, however, and from an investor perspective the air tragedies may have brought one of the market’s most reliable growth and dividend stocks down to a discount price.
For starters, BA shares have leveled out since March 12. The stock is currently trading at $378, essentially sideways over the last three sessions. Boeing also offers one of the best dividends on Wall Street. The yield is modest, at 2.17%, but the high share price makes the current annual payout $8.22.
The company has no plans to change that. Finally, Boeing has a rock-solid business foundation, with current work and back orders sufficient to keep the factory floors operating for the next five years. The company’s only peer competitor, Airbus, has an even longer backlog, and so is unlikely to pirate orders while Boeing copes with the inevitable investigation into the 737 MAX 8.
Finally, the 737 family is the world’s most popular narrow-body airliner. There are enough 737 models in service to keep Boeing busy with upgrades and spare parts, and even build orders on older versions, even if the MAX 8 must be phased out. In short, Boeing has the resources to deal with this, from the business standpoint.
Two five-star analysts have weighed in on Boeing in recent days. Cai Rumohr, of Cowen, noted that the bad news may continue in the near-term, but that Boeing is low-risk for the long term. He points out that Boeing is already promoting a software fix to address autopilot control issues, and that “pressures facing the FAA should force its hand to allow the software update, which Boeing says is a quick procedure.” Rumohr gives BA a 25% upside potential, with a $475 price target.
JPMorgan analyst Seth Seifman also sees underlying strength in Boeing as key to the company getting through this storm. He examines the company’s immediate potential financial hit, estimating it at some multiple of $115 million, depending on how long the 737 MAX 8 aircraft are held out of service, but adds that, “Boeing generates far more cash than any industrial company in the world and this financial strength should be useful.” Seifman’s price target, $450, would indicate an 18% upside to the stock.
On the analyst consensus, Boeing maintains a Moderate Buy rating. This is based on 15 buys, 4 holds, and 2 sells. Compared to the share price of $378, the average price target of $434 suggests an upside potential of 14%.
