There are several stocks on the verge of exploding, Wall Street analysts wrote this week. These companies are not yet priced to perfection, analysts say, and should be bought now. CNBC Pro combed through top Wall Street research to find stocks with big potential upside. They include: AECOM, Lululemon, Workday , Transocean and Intercontinental Exchange. Lululemon “Standout is an understatement,” Morgan Stanley analyst Alexandra Straton said of the athletic retailer’s robust earnings report last week. The firm said the across-the-board beat gave it even more confidence that Lululemon knows how to outperform in a tough macroeconomic environment. Straton also raised her price target to $343 per share from $313 and said she sees a “re-rating opportunity.” “After trading down in sympathy with the broader retail space since mid-August as peer reports confirmed 2Q22 topline/margin & FY guidance risk, LULU bucked the trend in the space with its 2Q22 report & FY guidance raise,” she gushed. Straton was particularly intrigued by management’s commentary indicating no change in consumer behavior. The analyst concluded her table pounding analysis by writing that Lululemon’s valuation is simply too attractive to ignore at current levels. “And we think there’s only further room to run from here,” she wrote. Shares of Lululemon are up 16.2% over the past month. Workday “Despite a turbulent environment, WDAY shines in 2Q with excellent execution,” Monness Crespi Hardt analyst Brian White said in late August following the company’s latest earnings report. The on‑demand financial management, human capital management provider had a solid beat on the top and bottom line. Monness Crespi said investors should be impressed by the company’s execution given the economic uncertainty. On Workday’s conference call, which White described as positive, management said trends appeared healthy, with Workday outlining steps it’s taking to tackle uncertainty. White says a recession would be a setback but one that the company can overcome. “Workday is prepared for a more uncertain environment in H2:FY23, acknowledging that some deals are receiving greater scrutiny, and this could lead to longer sales cycles,” White’s August report said. No matter what happens, though, the firm expects Workday to emerge in a stronger position. “Given the long-term shift to the cloud and broader digital transformation trends, we believe Workday has further room to run in the HCM (human capital mgmt) market…” he wrote. The stock is up 3.2% this month. Intercontinental Exchange Rosenblatt analyst Andrew Bond is betting it will be a “happy ending” for investors in the global financial exchange and markets company. The firm recently initiated coverage of Intercontinental Exchange with a buy rating. Shares are down 24% this year, but Bond says he sees minimal downside at the stock’s current valuation, plus several positive catalysts. “We believe the Street is overlooking the strength of its higher margin futures & data business, while giving no credit to a defensible equities business with a number of market structure and regulatory tailwinds,” he said. In addition, Bond wrote that ICE is at the forefront of the growing value of data as well as the electronification of markets. “While equity markets are far along the growth curve with cash, options, and exchange-traded derivatives mostly electronified, fixed income trails behind with more room to run,” he added. Add in an underappreciated energy business and Bond says investors should immediately start accumulating shares. “Given past results, we like the set-up and believe as usual, ICE investors will be rewarded,” the firm said. AECOM- KeyBanc, Overweight rating “Following the F3Q22 print, we are incrementally confident that over the NTM ACM can continue to deliver: 1) consistent bookings > 1.0x; 2) accelerating revenue growth; and 3) healthy margin expansion, while maintaining strong FCF conversion and reducing shares outstanding. … .ACM has established a nearly three-year track record of solid quarterly performance (no misses), its margin profile is now leading the peer group, and management is messaging there is more room to run.” Transocean- BTIG, Buy rating “Leading Edge Drillship Rates Above $400K With A Lot More Room to Run. We Upgrade RIG to Buy (from Neutral) with an $8 PT. … .We upgrade RIG to Buy and start with an $8 PT, on the back of improving dayrates in the floater market that will allow the company to recharter its rigs at higher levels. We note Norwegian semi rates are also starting to tick up. Bottom line: we believe we are in the early innings of the ongoing offshore rig upcycle, which should provide strong cash flows and refinancing opportunities for RIG to improve its balance sheet.” Workday- Monness Crespi Hardt, Buy rating “Despite a turbulent environment, WDAY shines in 2Q with excellent execution. … .Workday is prepared for a more uncertain environment in H2:FY23, acknowledging that some deals are receiving greater scrutiny, and this could lead to longer sales cycles. … .Given the long-term shift to the cloud and broader digital transformation trends, we believe Workday has further room to run in the HCM (human capital mgmt) market…” Lululemon- Morgan Stanley, Overweight rating “Standout is an understatement. … .This leaves room for ongoing positive EPS revisions, & we continue to see a re-rating oppty. … . After trading down in sympathy with the broader retail space since mid-August as peer reports confirmed 2Q22 topline/margin & FY guidance risk LULU bucked the trend in the space with its 2Q22 report & FY guidance raise. … .And we think there’s only further room to run from here.” Intercontinental Exchange- Rosenblatt, Buy rating “ICE is once again in transformation mode making this a story about execution…fortunately for investors we’ve seen this story before, & we’re betting on another happy ending. … .We believe the Street is overlooking the strength of its higher margin futures & data business, while giving no credit to a defensible equities business with a number of market structure & regulatory tailwinds. … .While equity markets are far along the growth curve with cash, options & exchange-traded derivatives mostly electronified, fixed income trails behind with more room to run. … .Given past results, we like the set-up and believe as usual, ICE investors will be rewarded.”
© heardonwallstreet.com