This year started off gangbusters, with strong across-the-board gains for stocks in January – and it’s been followed in February by moderate losses, as stocks first leveled off and now are trending down. The market shifts have investors worried that last year’s volatility is still with us, making for an unpredictable market environment. And it has those same investors looking for a way to cut through the data ‘noise’ and find the right stocks for an unsettled time.
TipRanks’ Smart Score is just that, an intuitive data parsing tool based on an AI-powered algorithm that collects and collates the data on more than 8,000 publicly traded stocks – and then distills that data down to a single-digit score on a scale of 1 to 10. The score is based on 8 separate factors for each stock, and each factor is known to correlate with future share outperformance. A stock doesn’t need perfect scores on every factor to hit a ‘Perfect 10’ from the Smart Score, but that ‘Perfect 10’ will still tell investors that here is a stock worth a deeper look.
We’ve gotten this ball rolling with a look into the TipRanks database, to find three stocks that earned the ‘Perfect 10’ Smart Score. All three of these stocks get top ratings from the Street, and show plenty of reasons for a bullish stance. Let’s take a closer look.
NICE, Ltd. (NICE)
First on our list is NICE, a software company working in the field of customer experience, offering a range of enterprise services through its cloud-based CXone platform. NICE’s services include improving customer experience and loyalty, reducing the cost of services while increasing sales, and regulatory compliance and fraud prevention. The company counts some of the business world’s largest names among its customer base, including American Airlines, Farmers Insurance, and Radisson Hotels.
Zooming out, NICE shows the signs of an upwardly mobile tech firm. In the company’s financials, both top line revenues and bottom line earnings have been showing a steady upward trend for the past several years. At the same time, NICE shares have underperformed the NASDAQ so far this year, gaining ~6% compared to the 9% increase on the index.
A look at the most recent financial report, released last week for 4Q22, shows one reason for the stutter. NICE did report a strong top line, with quarterly revenues up 10% year-over-year at $568.6 million. This include a 26% increase in cloud revenue, which made up $358.9 million of the total top line. In earnings, the company reported non-GAAP diluted EPS of $2.04 per share, up 18% y/y. For the full year, the revenue of $2.18 billion was up 13% from 2021.
Looking ahead, however, investors expressed some worry about the forward guidance. The company published 2023 revenue guidance in the range of $2.345 billion to $2.365 billion, while the Street had been expecting something closer to $2.41 billion. The shares are down 5% since the earnings release.
The Smart Score on NICE, however, presents several reasons for optimism. The ‘Perfect 10’ is based on several factors, including 100% positive sentiment from the financial bloggers, and a positive trend on the crowd wisdom. News sentiment on NICE is also 100% positive recently. Most importantly, the hedge funds tracked by TipRanks increased their holdings in NICE by well over 815,000 shares last quarter.
In his coverage of NICE for JMP, analyst Patrick Walravens sees several paths forward for the company, and outlines them in support of his bullish view: “We continue to view NICE as an excellent opportunity for long-term capital appreciation in a tough market for several reasons, including: 1) NICE has a leading cloud-based contact center solution, with growth driven by strong enterprise traction, international demand, and its AI capabilities; 2) we like the veteran leadership of CEO Barak Eilam and CFO Beth Gaspich, with the long-time support of Chairman David Kostman; 3) NICE sees its competitive positioning improving relative to other vendors in the space that are less financially sound…; and 4) the company still has in front of it a huge opportunity to convert its roughly $500M maintenance stream to the cloud which, at a 3x multiple, implies around a $1.5B opportunity.”
Taken all together, these factors lead Walravens to rate this stock as Outperform (Buy), with a price target of $343 implying a one-year upside potential of 68%. (To watch Walravens’ track record, click here.)
This leading tech firm has picked up 7 recent analyst reviews, and these include 6 to Buy against just 1 to Hold, for a Strong Buy consensus rating. The shares are priced at $203.99 and their $262.14 average price target suggests a gain of 28% on the one-year horizon. (See NICE’s stock forecast at TipRanks.)
Public Storage (PSA)
Next on our list is Public Storage, a firm organized as a real estate investment trust (REIT) but with its properties focused on self-storage facilities across the US. Public Storage derives its income from a combination of leases and management fees on the properties. With a market cap exceeding $50 billion and more than 2,900 locations in the US, Public Storage is the largest of the publicly traded self-storage REITs.
The company released its earnings report for the fourth quarter and full year 2022 on February 21, and some important metrics beat the forecasts. The company’s revenues of $1.09 billion, while flat from Q3, were up 18% y/y and edged over the expectation of $1.08 billion. In a key metric that should interest income-minded investors, the company’s core funds from operations (FFO) was reported at $732 million, up 17.5% y/y; on a per share basis, this metric was $4.16, beating the forecast of $3.97 by a wide margin.
The FFO is used to fund the company’s dividend, which was raised by 50% in the last declaration. The common share dividend, now at $3 per share, is scheduled for payout on March 30. At an annualized rate of $12, the dividend yields 4.1%. While not high enough to offset inflation, the dividend is approximately double the average yield found among S&P-listed firms.
On the Smart Score, PSA rates high on several metrics to support its Perfect 10. The news sentiment is 100% positive recently, while the financial bloggers are 85% positive. The crowd wisdom shows an upward trend, with individual investors increasing their holdings in the stock over the past 30 days. The hedges also have been buying in, adding 194,400 shares last quarter, and company insiders, who never trade their own shares lightly, have bought $23.1 million worth of PSA in the last three months.
The bullish view on Public Storage is set out clearly by Stifel’s 5-star analyst Steve Manaker, who writes, “Although the business is normalizing and seasonality has returned, we believe the REIT remains well positioned to generate strong top and bottom-line growth through ECRI (existing customer rent increases) and stabilization of the non-same-store portfolio. 4Q’s numbers showed this…. While growth is decelerating, we continue to believe PSA will have strong results, with FFO increasing 7.3%/6.8% in 23/24 (based on our estimates). Our 2023 estimate is 1.7% above the high-end of guidance (we believe 2H23 operating results will be relatively strong given easier comps). PSA shares trade at a very attractive 4% discount to the REIT universe…”
In-line with his stance, Manaker rates PSA shares as a Buy, and his price target, which he has placed at $360, indicates his confidence in a 23% gain over the next 12 months. (To watch Manaker’s track record, click here.)
With 6 recent analyst reviews on record, including 5 to Buy against 1 to Hold, this stock has earned its Strong Buy consensus rating. Shares are trading for $293.24, and the average price target of $354.80 implies a 21% increase going out to the one-year time frame. (See Public Storage’s stock forecast at TipRanks.)
Terns Pharmaceuticals (TERN)
Last on our list is Terns Pharmaceuticals, a clinical-stage biopharma firm working on novel small-molecule compounds intended as therapies for a range of serious medical conditions, including non-alcoholic steatohepatitis (NASH), severe obesity, and chronic myeloid leukemia (CML). The company’s drug candidates are under investigation as both mono- and combination therapies, for conditions that have high unmet medical needs due to few existing effective treatment options.
The company’s most advanced programs, both in the treatment of NASH, are for TERN-501. The drug candidate is undergoing a pair of human clinical trials, the Phase 2a DUET series. One trial is testing TERN-501, a THR-beta agonist, as a monotherapy for NASH; the other trial is testing TERN-501 in combination with TERN-101, making a THR-beta/FXR combo. The Phase 2a trials were initiated in May of last year, and top line data is expected for release in 2H23.
Also in human trials is TERN-701, a drug candidate for the treatment of CML. The Phase 1 trail was initiated in 2Q22. The Phase 1 trial is being undertaken by the Chinese firm Hanosh, on license from Terns. Patient dosing in the trial is underway. A clinical trial in the US is planned for 2H23, with a potential data release next year.
Finally, Terns is ready to move its drug candidate TERN-601 from preclinical to clinical testing, and is looking to initiate a Phase 1, first-in-human clinical trial of the compound in 2H23. TERN-601 is being developed as a treatment for severe obesity. If the Phase 1 trial is to begin on schedule, the company expects to have data available for release during 2024.
In Terns’ Smart Score, we find that the two key metrics are hedge fund purchases, which totaled 1.7 million last quarter, and the insider buys, which reached $4.7 million in the last 3 months. In addition, the stock is showing a solid 213% positive momentum over the last 12 months.
JMP analyst Silvan Tuerkcan is impressed by this biopharma’s ability to manage multiple shots on goal, and writes of TERN, “Terns marries development of chemically differentiated small-molecule therapeutics with validated MOAs (mechanism of action) with distinct commercial opportunities in large patient populations. We continue to see value with small-molecule development, especially when molecules with proven and derisked MOAs can be further improved. Additionally, designing fast-follower type assets substantially derisks the development pathway based on known endpoints and trial designs, and allows an early read on efficacy and safety through reference data sets… At the same time, TERN is innovating its molecules to address shortcomings of successful therapies.”
Looking forward, Tuerkcan rates this stock as Outperform (a Buy) and sets a price target of $17, suggesting an upside potential of 62% for the year ahead. (To watch Tuerckan’s track record, click here.)
This biopharmaceutical firm has attracted attention from 4 analysts recently, and their reviews include 3 to Buy and 1 to Hold – for a Strong Buy consensus rating. The stock is currently priced at $10.51 and its $14.25 average price target implies that it will gain 35% in the next 12 months. (See Terns’ stock forecast at TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Source: finance.yahoo.com