We are now in the last month of the decade, one which has seen the market rally to unprecedented heights. This year in particular, the S&P 500 has soared beyond expectations, and is on its way to its biggest yearly gain since 2013.
The question on investors' minds is whether 2020 will see a continuation of the trend. Like anything else, when it comes to investing, there are no certainties, but we can try and mitigate the fear of the unknown by using the best tools at hand.
TipRanks' Smart Score tool displays the "best stocks to buy" by collecting data from 8 key metrics and using the results to score the stocks accordingly - from 1, at the bottom, all the way up to a “perfect 10,” at the top.
So, heading into the new decade we zoomed in on 3 stocks which apart from displaying Strong Buy status also rank up the higher echelons of the smart score chart. Let’s take a look.
The US-China trade war has wreaked havoc on all sorts of industries this year due to increased tariffs. The shoe industry has not been spared, either, as global footwear retailer, Caleres, can attest. The stock has vastly underperformed the market this year, slumping almost 20% overall.
The recent third-quarter report was a mixed bag, too. The strong performance from Famous Footwear has contributed to record sales in the quarter, yet the increased tariffs weighed down on EPS, which came in at $0.78, and missed estimates by 5 cents. The company cut back its forecast for F2019 to reflect the impact of new tariffs.
Nevertheless, 4-star Wedbush analyst Christopher Svezia is stepping up to call Caleres a buy: "CAL shares trade at a ~37% discount to historic levels, cheap for a stock with momentum building into a de-risked 4Q and another year of sales growth and margin expansion driving +LDD EPS gains for FY20.” The analyst further added, “CAL has significantly improved its op. model by divesting non-core assets and moving distribution towards premium channels while improving efficiencies, leading to higher-margin sales across much of its wholesale platform. There is room to drive more productive sales through speed to market capabilities, international growth, the launch of Veronica Beard in SP20 and more.“
To this end, Svezia reiterated an Outperform rating on Caleres stock, along with a price target of $27, implying potential upside of 22% from today's closing price. (To watch Svezia’s track record, click here)
Svezia isn't alone in his bullish take on Caleres' potential. The stock's "perfect 10" Smart Score indicates a "Strong Buy" analyst consensus, as well as increased hedge fund activity. (See Caleres’s stock analysis on TipRanks)
Talking of China, we move on to Guangzhou, which houses the headquarters of live streaming platform, Huya.
The platform’s primary focus is gaming and esports, and in the last quarter alone it organized 110 e-Sports tournaments with over 500m viewers, as well as hosting 38 inhouse organized tournaments. The business is diversifying, though, with reality shows, musical performances, and animated content being added to the platform.
The broadening of the company’s remit comes alongside international expansion. Huya currently has 17 million monthly active users outside China and has set its sights on 20 million by the end of the year. A driving force towards reaching this goal is the Huya owned Nimo TV, a Spanish language live streaming platform with markets predominantly in Latin America. There are half a billion Spanish speakers worldwide, a huge market for Nimo TV to tap into.
Huya reported 3Q19 results with revenue and earnings ahead of consensus on better-than-anticipated live streaming and gross profit margins, and Jefferies’ Thomas Chong likes what he sees.
The analyst opined, “Mid-point of 4Q19 revenue guidance is 5% and 11% ahead of consensus and our estimates… We believe the better-than-expected guidance is due stronger sequential growth in paying users, while the company is heading towards the goal of 150m domestic MAU (monthly active users). We see Huya as demonstrating strong execution in its domestic market with overseas expansion in the long run, thanks to its content diversification and localization strategies.”
Accordingly, Chong maintained a Buy rating on the Chinese streamer, and increased his price target from $26.80 to $30. The target implies hefty potential upside of nearly 60%. (To watch Chong’s track record, click here)
Huya's "perfect 10" score includes a “Strong Buy” consensus analyst rating alongside encouraging sentiment from bloggers and hedge funds. (See Huya's stock analysis on TipRanks)
Shares of customer service software maker Zendesk are up roughly 30% year-to-date. But not everything has been so glamorous for the stock, especially in the end of July. A disappointing Q2 report halted the upward curve, after which the share price fell sharply.
The recent Q3 report was a mixed bag, too. While revenue grew year-over-year by 36%, there were diminishing returns from EMEA (Europe, the Middle East, and Africa) for the second quarter in a row on account of macro and sales implementation headwinds. Billings growth slowed down as well, dropping to 25% as opposed to 35% in the previous quarter.
However, Piper Jaffray’s Brent Bracelin is not concerned, saying, “Despite mixed fundamentals over the last two quarters, we still view ZEN as a strategic cloud asset with a unique offering and customer base that sits squarely in an area where spending could increase materially in 2020.”
Zendesk has been adding a set of complementary software products to its support ticketing system and customer service software, and these seem to be hitting the spot. Bracelin added, “Fortunately for ZEN, revenue growth has been resilient within the U.S. region accelerating to 41% vs. 38% last quarter driven by strong adoption of the Zendesk Suite and Duet bundles... Interest in Sunshine is high suggesting an even broader move up market could unfold if this product takes hold next year.”
Bracelin assumed coverage on ZEN with an Overweight rating, alongside a price target of $94, which implies about 25% upside from current levels. (To watch Bracelin’s track record, click here)
Overall, ZEN has received 10 “buy” and 2 "hold" ratings over the past three months. That, alongside encouraging sentiment from investors, bloggers and hedge funds, contributes to a "perfect 10" Smart Score for ZEN. (See Zendesk’s stock analysis on TipRanks)
