Wall Street’s New Darlings: 3 Stocks Soaking Up Analyst Love
Investors, weary of volatility due to economic uncertainty and geopolitical tensions, have been seeking stability and growth potential in their stocks. When it comes to portfolio performance, stocks with analyst upgrades can be important as endorsements by brokers.
When analysts raise their ratings, the move signals increased confidence in the company’s future prospects. This newfound optimism can attract more investors to the stock, driving up demand and potentially pushing the price higher. Therefore, we now delve into three such stocks with analyst upgrades, exploring the reasons behind the recent brokerage moves. Then, you can decide whether these companies deserve a place in your long-term portfolio.
Array Technologies (ARRY)
We start our discussion on stocks with analyst upgrades with Array Technologies (NASDAQ:ARRY), which provides utility-scale solar tracker systems. These single-axis tracker structures optimize solar energy capture by adjusting the angle of solar panels throughout the day to maximize sunlight exposure. Array Technologies is leveraging advanced technology to meet the growing demand for renewable energy solutions.
In late March, the solar tracker systems manufacturer reported mixed financial results for the first quarter of 2024. Revenue reached $153.4 million, slightly exceeding analyst expectations. However, adjusted net income declined 77% compared to the previous year to $9 million. Adjusted diluted earnings per share (EPS) came in at 6 cents, beating Street estimates. During the quarter, management secured $400 million in new business, achieving a book-to-bill ratio of over 2.5x, which potentially bodes well for its future revenue streams.
Meanwhile, Array Technologies announced the launch of its Hail Alert Response system in March. The proprietary software suite leverages advanced weather prediction algorithms to proactively safeguard solar assets from hail damage. The system for extreme weather is an example of strategic focus and innovation by the company. In other words, Array is focused on enhancing its product offerings and capitalizing on the growing demand for renewable energy solutions.
Yet, ARRY stock has plunged 31% year-to-date, making its valuation compelling at 10.3x forward earnings and 1.27x sales. Despite this decline, the company’s management remains optimistic about its strategic direction and ability to leverage industry growth. Similarly, analysts have a favorable 12-month price target of $18 for ARRY, suggesting a potential upside of almost 60% from current levels.
Valaris (VAL)
Another stock with a recent analyst upgrade is Valaris (NYSE:VAL), a notable player in the energy equipment and services industry. The company provides offshore contract drilling services with a diverse fleet of ultra-deepwater drillships, semisubmersibles and shallow-water jackups.
The energy equipment and services sector is highly competitive and cyclical, influenced by global oil prices, geopolitical factors and technological advancements. Valaris recently reported mixed financial results for the first quarter of 2024. Revenues jumped 22% to $525 million compared to the prior-year quarter. However, net income plunged 45% year-over-year (YOY) to $25.5 million due to a tax expense of $12.9 million. Meanwhile, diluted EPS dropped 42.6% YOY to 35 cents.
In late April, the offshore drilling contractor announced a significant expansion of its contract backlog through a series of new contract awards and extensions. These deals span across Angola, Brazil, the U.K. North Sea and the Gulf of Mexico. As a result of these strategic wins, Valaris’ contract backlog has climbed to a robust $4.0 billion, putting the company on analysts’ radars.
So far in 2024, VAL stock has advanced 10% and is currently trading at 16.8 times forward earnings and 3.04 times sales. And Wall Street remains optimistic about the prospects of VAL stock, with a 12-month median price forecast of $95.50. Such an upmove could mean a 25% upside, but interested investors could wait for a pullback toward $73 before initiating positions.
Lear (LEA)
Rounding out the stocks with analyst upgrades is Lear (NYSE:LEA), which manufactures automotive seating and electrical distribution systems. Its Seating segment contributes about three-quarters of sales. The rest of the revenue comes from the E-Systems segment, which offers electrical distribution and connection systems.
The automotive seating manufacturer announced positive financial results for the first quarter of 2024 in late April. Revenue reached a record $6.0 billion, an increase of 3% compared to the first quarter of 2023. Adjusted net income of $183 million and adjusted EPS of $3.18, surged 11% and 14%, respectively. Despite flat industry volumes, Lear’s management anticipates higher sales and operating earnings, with expected improvements in margins in the second half of 2024.
In a strategic move to bolster its operational efficiency and safety, Lear has announced the acquisition of WIP Industrial Automation. By acquiring Spain-based WIP, which specializes in advanced automation, Lear is increasing its capabilities in robotics and artificial intelligence (AI) based computer vision. Investors will be watching how the company may further its product offerings and global footprint in the quarters ahead.
So far in the year, LEA stock has lost 7% and is trading at 9.1 times forward earnings and 0.33 times sales. Shares also support an attractive 2.35% dividend yield. Finally, analysts have a 12-month price target of $164 for LEA, suggesting a potential upside of 25% from current levels.
On the date of publication, Tezcan Gecgil did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
