Wells Fargo: 3 stocks to buy now
Wall Street hit some rough waters last week. With the presidential election only two days away, and COVID-19 numbers rising and hopes of a dwindling stimulus package ahead of the elections, stocks saw their worst week since the peak of the pandemic in March. All three major US stock indices also posted a second consecutive monthly decline. According to the pros on Wall Street, there is uncertainty about the markets. However, some strategists are citing this month’s Federal Open Market Committee meeting, which will be held November 4-5, to potentially reassure investors. Should more liquidity be made available, stocks could rise in the medium to long term, even if there are no additional incentives. Additionally, the pros argue that the recent sell-off could provide an opportunity to find compelling names at a more attractive entry point. With this in mind, we reached out to Wells Fargo’s seasoned stock pickers for inspiration. The investment firm is among the top 10 on TipRanks’ list of top performing research firms. Looking at three Wells Fargo-sponsored tickers, we used TipRanks’ database to figure out why the company’s analysts see both as such an exciting opportunity. RealReal (REAL) First up, we have RealReal, a leading provider of online authenticated luxury broadcasts. Wells Fargo has high hopes for this retailer following an important new partnership. On October 5th, REAL announced a new partnership with Gucci, one of the most popular brands on the REAL platform. Under the terms of the contract, the two companies will develop an online platform for selling used Gucci products, with the website also promoting a circular economy for luxury. This platform will act as a website within a website on the REAL platform and will contain products that are primarily supplied by third parties, as well as some that are supplied directly by Gucci. For every item sold, the company plants a tree through the non-profit organization One Tree Planted. Wells Fargo analyst Ike Boruchow sees several positive results from this collaboration that “mean a clear victory for the cops in the short term.” He stated, “The fact that REAL is partnering with one of the world’s most recognizable luxury brands should give them significantly more credibility with consumers (and the luxury industry at large). Interestingly, Marco Bizzarri, CEO of the Gucci brand, stated in an interview with Women’s Wear Daily that the growing popularity of the resale market is very interesting for us. “In addition, the agreement reflects another instrument for the acquisition of supplies, which Boruchow believes is of vital importance as“ the development of supplies is one of the biggest growth drivers for REAL ”. He also points out that while Gucci will only deliver a limited number of pieces, it will be “incremental to delivery from REAL”. If that weren’t enough, Boruchow argues that the partnership highlights the environmental benefits of the resale market. The analyst assumes that this will continue to “make the resale market increasingly attractive to consumers who are increasingly aware of sustainability and environmental factors”. On the business basics, Boruchow believes supply was a bigger problem than demand in 2020, especially during the COVID-19 pandemic. Nonetheless, REAL has found new ways to get an offer that analysts say “can help unlock REAL’s long-term growth potential.” In summary, Borukhov said, “As a result, we believe that gross value will continue to accelerate in the coming quarters and that long-term runway growth is extremely compelling.” As a result, Borukhov stuck with the cops. In addition to being overweight, he sets a price target of $ 20 on the stock. Investors could pocket a 59% gain if that goal is met in the next twelve months. (To see Boruchov’s track record, click here.) If you turn to the rest of the street, opinions are almost evenly divided. With 3 buys and 2 holds in the past three months, the word is on the street that REAL is a moderate buy. At $ 17.25, the average target price implies an upside of 37%. (See RealReal Price Targets and Analyst Reviews on TipRanks.) JELD-WEN (JELD) Next we have JELD-WEN, one of the world’s largest manufacturers of doors and windows. Wells Fargo calls JELD one of the company’s “favorite real estate stocks” and believes that big things could be in store. Analyst Truman Patterson writes for the company that Windows and Interior Doors sewer inventories are meager due to his sewer inspections and that delivery times have increased by 2-3 weeks. This led the analysts to the conclusion that “the industrial manufacturers of both products are fully or almost fully utilized”. It should be noted that JELD has struggled with inefficiencies in Windows production over the past few years, which “were at times due to the inability to adapt to rapid fluctuations in demand”. This has shattered investor confidence and resulted in a lower valuation, according to the analyst. That being said, Patterson sees better days on the horizon. “Despite the unexpected surge in demand for COVID that caused JELD to close production to full, we believe JELD has improved its Windows manufacturing operations as contacts suggest that the company’s product quality control issues are a thing of the past . We are giving management the benefit of the doubt in the future as Global Footprint’s rationalization and JEM initiatives become increasingly important, providing a potential EBITDA tailwind of more than $ 200 million, ”said Patterson. In addition, he argues that improving production processes should lead to multiple expansion. On top of the good news, the price announcements are solid for both products. After unprecedented price increases for interior doors earlier this year, both JELD and its peer Masonite appear determined, in Patterson’s opinion, to structurally improve prices in the industry. The analyst explained this as follows: “In addition, JELD has apparently announced a nationwide price increase for windows of 7 to 11% (3 points above normal), and the main competitors have followed with similarly high increases. Given the above industry-wide bottlenecks in both products and the rapid recovery of New Res, we believe JELD will be able to realize at least the traditional 40% to 50% of the advertised prices in its product portfolio. Patterson expects JELD to hit North America prices in the range of 4.5% in 2021 and expects EBITDA margin to widen 200-300 basis points after some inflation in SG&A and post-COVID investments. “We don’t think the above will be fully appreciated by the street as JELD is only one of three stocks in our HB / BP coverage of 20 companies that have been flat or in decline since the start of the year,” he noted. To top it off, there was only one manufacturing issue caused by a poorly timed and unexpected product line withdrawal from a large home center. “Given the robust demand environment that is likely to depress inventory in the home centers (HD / LOWs SSS up 20-30%), we believe that HCs will make sure their supply chain is not disrupted and that they should be more price sensitive is increasing “Said Patterson. It should come as no surprise, then, that Patterson left an overweight rating and a target price of $ 32 on the stock. To that end, the upside potential is 52%. (To view Patterson’s track record, click here.) Other analysts are more cautious about JELD. A hold consensus rating is divided into 3 buys, 6 holds and 1 sell. With an average target price of $ 24.35, the upside potential is 16%. (See JELD-WEN stock analysis on TipRanks) Associated Banc-Corp (ASB) Associated Banc-Corp is the largest bank headquartered in Wisconsin and has a branch network of over 200 locations serving over 100 communities, mostly within its three – Wisconsin, Illinois and Minnesota State Footprint. While the company has faced some challenges, Wells Fargo believes it has taken steps in the right direction. Firm analyst Jared Shaw explains to clients that while third-quarter results have been mixed, he has high hopes for the banking gamer. A higher than expected provisioning charge resulted in earnings per share of $ 0.24, $ 0.01 ahead of consensus estimate. For the NIM, management believes the 2.31% figure is a low point and that margin will improve from here. Lending was more mixed, as NCOs rose from 44 basis points to 49 basis points due to oil and gas (reserved at 15.3%) and NPAs rose 24 basis points thanks to the migration of two mall-oriented REITs. “Forbearances were a bright spot, however,” with the total number of forbearances falling from spikes by 69% to 2.1% of loans, compared to peers, which saw an average decrease of 72% and 2.8% in deferred loans. “So far, consumer loans that have expired have had a cure rate of 97%, which gives us some optimism about the credit remaining,” Shaw said. In addition, the ALLL quota rose by 8 basis points to 1.60% without PPP compared to the previous quarter. “We expect little incremental build from here as we consider the most vulnerable areas to be appropriately reserved and encouraged by displacement trends,” commented Shaw. On top of the good news, ASB was the first bank in Shaw’s coverage to highlight cost-saving initiatives resulting from COVID-related shutdowns. These initiatives appear to be paying off as the spending targets announced last month have been repeated. Fourth quarter spending is projected to be $ 175 million and is projected to be $ 685 million in 2021, versus an estimated core cost of $ 712 million for 2020. Should be the figure of $ 685 million reached, it would be the lowest annual spending level since 2014. “Given the tailwind from spending initiatives likely to improve the NIM, share trading of only 87% of the current TBV and a dividend of 5.1%,” Shaw sees things big in stock for ASB. Consistent with his bullish approach, Shaw is on the bulls’ side, reiterating an overweight and $ 18 price target. This goal conveys his confidence in the ASB’s ability to grow 31% over the next year. (To see Shaw’s track record, click here.) In terms of the consensus breakdown, 1 buy and 3 holds have been issued in the past three months. Therefore, ASB receives a consensus rating for moderate buy. Based on the average target price of $ 15.67, stocks could rise 14% over the next year. (See Associated Banc Corp Target and Analyst Ratings on TipRanks.) Disclaimer: The opinions expressed in this article are solely those of the analysts featured. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.