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Top Stocks with Room to Run According to Analysts
Compass, a real estate company, has been doubling down on shares, according to Oppenheimer analyst Jason Helfstein. The company is gaining share rapidly, has a wide range of positive catalysts ahead, and is a beneficiary of AI. The company is in the early stages of building out its high-margin adjacent services offering, which presents a $183B TAM opportunity. Compass also has a mortgage business it's testing out in key markets and new products like an agent dashboard should roll out in 2024. Volume growth remains robust despite inventory challenges.
Bank of America highlights the growth potential of Amazon for the coming times. They were encouraged by CEO commentary that retail margins could improve beyond pre-pandemic levels. Growing 2024 N.A. retail margins 2-3pts y/y could drive $4-8bn in operating profit upside vs. Street, and estimate trends seem to drive the stock. Since the February bottom, 2024E Op Income is up just 3%, and while expectations have moved higher (stock +47% YTD), we think margin upside can still drive outperformance.
Elf Beauty has been called a "timeless beauty" by Morgan Stanley. The firm reports solid upside left both fundamentally and in terms of subsequent stock upside. Elf Beauty's organic sales growth momentum is accelerating, and consensus margin estimates are too low. With these factors in mind, the firm raised its price target on the stock to $118 per share.
Palantir is considered one of the dominant providers of AI, says Bank of America. The firm has developed and implemented the architectural design that supports generative AI in a compliant and private world out of experience working with the government and highly regulated industries. The company has also launched its Artificial Intelligence Platform that could help it further penetrate within existing customers and open up partnership opportunities. The analyst raised her price target to $18 per share from $11 with the stock up a whopping 153% this year.
PowerSchool Holdings is presenting a sizeable upside over time as existing customers undertake greater digitization. The average PowerSchool customer is using only two of the company's 19 available products. PowerSchool is achieving success in driving higher cross-sell activity, with 80% of bookings from existing customers. At yearend 2022, PowerSchool generated $630 million in ARR across 50 million plus students, whereas there is an estimated $3 billion in addressable opportunity by growing within existing accounts across currently-available products.
The top stocks with room to run according to analysts may not only provide exciting opportunities for investors, but also carry implications for new businesses entering these markets. Compass, with its rapid share gains and initiatives around AI and adjacent services, presents a potential template for real estate startups looking to disrupt this industry. Amazon's CEO's comments on retail margins may indicate a shift in the ecommerce giant's strategy that could impact how new players approach this space. Elf Beauty's outstanding sales growth and margin estimates also suggest that beauty startups could benefit from developing lean and efficient business models that prioritize organic growth. Palantir's dominant position in the AI landscape and track record working with regulated industries could hold lessons for tech startups that aim to target these markets. PowerSchool's success in driving cross-sell activity may highlight the importance of building long-lasting relationships with customers and continuously expanding product offerings. Startups that are attentive to these trends and seek to add novel value to existing markets may be well positioned for success.
Article First Published at: https://www.cnbc.com/2023/06/17/stocks-like-amazon-are-poised-for-a-second-half-breakout-.html