With the coronavirus grinding the global economy to a halt, investors are focused on companies that have strong enough balance sheets to weather the storm, and that could come out stronger and thrive on the other side of the pandemic.
In a Monday afternoon note, analysts at Stifel wrote that while uncertainty still remains high, “people are resilient and adaptable. Although we don't know the depth or duration of the pandemic, we know that optimism and prosperity will eventually prevail.”
Stifel asked its equity research analysts to hypothesize what a post-coronavirus world would look like for the companies they cover, and highlight which companies are poised to thrive.
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Markets Insider calculated the implied upside of each stock using their closing prices on Monday and the price targets in the report.
Here are Stifel's 12 stocks to buy to endure the coronavirus downturn and thrive in the aftermath.
1. Delta Air Lines
Ticker: DAL
Price Target: $43
Implied Upside: 81.9%
Stifel's Take:
“Delta is likely to be the biggest beneficiary of the changes that come from COVID-19 as the company was already building sub-entities with less exposure to typical airline competition (loyalty, MRO, private travel) that should be quicker to rebound on the other side of the pandemic. Further, given its financial position is among the best in the industry and its hub structure is the most fortified, we see Delta as being in a strong position to take high quality route share once the pandemic concludes.”
Source: Stifel
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2. Salesforce.com
Ticker: CRM
Price Target: $220
Implied Upside: 35.2%
Stifel's Take:
“Salesforce has cobbled together a broad suite of products via M&A over the past several years, some of which have the opportunity to outperform going into a recession, and others that are the quintessential ‘rocket fuel' applications that are appealing purchases coming out of a recession. We particularly see the company's Service Cloud and MuleSoft offerings as having the potential to be outperformers because both offer a means of accelerating digital transformations in the enterprise. MuleSoft, in particular, is aimed at enabling large enterprises to extract legacy information from legacy applications and share that data with modernized Cloud applications.”
Source: Stifel
3. Peloton Interactive
Ticker: PTON
Price Target: $38
Implied Upside: 22.3%
Stifel's Take:
“Peloton is well positioned to provide a wide range of consumers with at-home fitness content and equipment through its core products and low-priced digital app. The company's platform has strong retention characteristics, with minimal churn and a highly engaged user base. Peloton can leverage its industry-leading premium content to capture share as consumer trends increasingly favor at-home fitness content and equipment.”
Source: Stifel
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4. Wendy's
Ticker: WEN
Price Target: $22
Implied Upside: 21.8%
Stifel's Take:
“Wendy's was already focused on building a comprehensive digital platform, including a loyalty program, before the crisis and will benefit from incremental EBITDA growth into 2021 following the launch of a new breakfast daypart in early March. Much of its sales are generated outside of the dining room, and it generally rates as among the more craveable brands in fast-food.”
Source: Stifel
5. Spotify
Ticker: SPOT
Price Target: $175
Implied Upside: 21.0%
Stifel's Take:
“Spotify is arguably the best pure play on the secular shift toward digital audio consumption, which we believe has an extremely long runway. Streaming music should continue to grow adoption as awareness of services grows, bandwidth speeds improve, and legacy music formats struggle. Podcasts and spoken word consumption are much earlier on the adoption curve, but they are showing signs of disrupting talk radio and traditional news programming. A hybrid subscription / ad-supported business model allows Spotify to thrive even in emerging markets where advertising is more challenging.”
Source: Stifel
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6. Waste Management
Ticker: WM
Price Target: $115
Implied Upside: 17.1%
Stifel's Take:
“Waste Management took the lead on fleet conversion to CNG – 65% in FY20 when the industry average is 20%. We look for it to push the envelope on technology advances to leverage labor productivity, improve operating efficiency in recycling and improve employee safety. The outcome could be $150 million in total cost and cash savings over three years. Leverage is not an issue, whether Waste Management closes or does not close the ADSW merger.”
Source: Stifel
7. Snap Inc.
Ticker: SNAP
Price Target: $15
Implied Upside: 16.1%
Stifel's Take:
“With most young people at home spending an increased amount of time using social media, Snap's audience metrics will likely benefit materially in the coming months. In addition, it could also attract older demographics as people have shown a greater willingness to try new services to pass the time. Snap's focus on building better tools for direct response advertisers better positions its ad platform to ride out the looming disruption to ad budgets, while its business should be stronger on the other side of COVID 19 with advertisers seeing battle-tested ROI.”
Source: Stifel
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8. Microsoft
Ticker: MSFT
Price Target: $200
Implied Upside: 14.2%
Stifel's Take:
“We believe Microsoft should remain a strong share gainer in coming years, given its hybrid compute (Azure + Server) offerings and its growing platform of productivity and security offerings. As we have previously written, we expect Azure to become Microsoft's largest revenue stream in the coming years and represent the largest gross profit pool a few years after that. Additionally, with about $140 billion of gross cash, we expect management to take advantage of the current volatility and increase its share repurchase activity as well as explore potential acquisitions.”
Source: Stifel
9. Facebook
Ticker: FB
Price Target: $200
Implied Upside: 12.2%
Stifel's Take:
“Facebook is seeing accelerating usage across its core app, Instagram, Messenger, and WhatsApp during the COVID-19 crisis, and consumption will likely remain elevated in a post COVID-19 world. Facebook will likely take significant share of ad budgets during the coming months as marketers are more careful about ROI on ad spend. And, when industry revenues recover, Facebook's growth should rebound faster than most. A target of much criticism since the 2016 election, Facebook is gradually rehabilitating its image through the COVID-19 crisis by creating awareness of the virus, supporting local businesses and news outlets, paying employees who cannot come into work, and maintaining its aggressive hiring plans for 2020.”
Source: Stifel
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10. Home Depot
Ticker: HD
Price Target: $220
Implied Upside: 6.7%
Stifel's Take:
“Home Depot has not completely closed its stores (at least as of this writing), and is no doubt a relative beneficiary of DIY projects, given the time the average consumer has at home. The company had a good online business before the pandemic, and we imagine online activity has increased dramatically during this period. Home Depot should benefit from consumers taking on home improvement projects, especially those who wouldn't have otherwise attempted to do so.”
Source: Stifel
11. Nike
Ticker: NKE
Price Target: $90
Implied Upside: 2.4%
Stifel's Take:
“We see NIKE positioned to benefit from both secular shifts to casualization and health and wellness and structural shifts to ecommerce. NIKE's strong core offering, investments in digital and analytics, and increasing digital engagement/dialogue with consumers positions the business for global growth and a mix to a higher margin, higher return model.”
Source: Stifel
12. Amazon
Ticker: AMZN
Price Target: $2,400
Implied Upside: 0.3%
Stifel's Take:
“Amazon is seeing rising demand for household goods and grocery delivery as traditional retailers remain severely challenged throughout the current crisis. The prolonged nature of the pandemic and the associated social distancing measures are likely to accelerate long-lasting eCommerce adoption, particularly in Fast Moving Consumer Goods (FMCG) categories. Amazon will also benefit as companies and institutions invest in expanding their cloud and remote access capabilities, given the need for distributed workforces and remote education.”
Source: Stifel
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