Moving into late summer, the only certainty in the markets is uncertainty. The July jobs report was solid, but businesses continue to deal with a stubborn labor shortage. The Biden Administration looks like it will get what it wants from Congress, in the form of a $1 trillion infrastructure bill and the $3.5 trillion budget package, but inflation is rising and the massive infusion of government spending will likely make that worse. It seems for every market argument, there’s a counter-argument.
The bull side in the current environment is ably set forth by Goldman Sachs chief US equity strategist David Kostin, who says, “We expect earnings growth will be the primary driver of U.S. equity returns in 2H 2021 and 2022, as it has been so far this year.”
Kostin goes on to give his forecast for the S&P as we round out the earnings season. Kostin expects overall earnings per share among S&P-listed companies to gain 45% year-over-year for the second quarter. In his view, the boost in earnings will power further gains in the index, which could climb over 4,700 – and maybe reach as high as 4,950 – by year’s end. On a cautionary note, Kostin does warn against volatility in the coming months, as the Fed adjusts policy.
Against this backdrop, the analysts at Goldman Sachs have been looking for the equities primed to gain in current conditions. And just recently, they’ve tapped three stocks new to the public markets as likely to jump 60% or more in coming months – a solid return that investors should note. We ran the three through TipRanks database to see what other Wall Street’s analysts have to say about them.
We’ll start with a company from Turkey, D-Market, called Hepsiburada in Turkish. D-Market is a leading e-commerce platform in Turkey, connecting customers with merchants on a huge scale. The company boasts over 50 million products in its catalogs, and in 2020 linked 33 million member shoppers with 45,000 active merchants. The company’s Turkish brand name translates into English as ‘Everything is Here.’
D-Market made a bit of market history in July, when it became the first Turkish company to gain a public listing on the NASDAQ index. The IPO, which saw the stock start trading in the US on July 1, was ambitious: the company wanted to raise over $680 million in new capital and hit a valuation over $3 billion. In the event, it beat those goals, raising $738 million in gross proceeds and reaching a market cap of $3.9 billion. After a month and half of trading, the company’s market cap now stands at $4.2 billion.
This company has drawn attention from Goldman Sachs analyst Asli Tuncer who sees the growth profile as a key point here.
“HepsiBurada is the second largest e-commerce platform in Turkey, an early-stage e-commerce market with penetration currently only at c.10%. We see this accelerating to c.22% by 2025, a key driver of our forecast of a c.57% CAGR in HepsiBurada’s GMV over 2020-25 with the company’s active user base and order frequency per user CAGRs at c.22% and c.27% respectively," Tuncer wrote.
The analyst added, "We expect HepsiBurada to reach positive EBITDA by 2023, driven by marketplace expansion and an increasing share of categories with higher take-rates, noting that HepsiBurada was profitable over 2018-19. Margin expansion coupled with the company’s negative working capital model and lower capex intensity post 2022 should drive an increase in the net cash position, in our view, to c.TRY11.7 bn by 2025."
To this end, Tuncer rates HEPS a Buy along with a $25.90 price target. Investors stand to take home about 99% gain, should the target be met over the next 12 months. (To watch Tuncer’s track record, click here)
Overall, there are 4 recent analyst reviews on file for HEPS, including 3 to Buy against a single Hold. This gives the stock a Strong Buy consensus rating. Shares are priced at $13, with a $19.08 average price target that suggests ~47% one-year upside. (See HEPS stock analysis on TipRanks)
Blend Labs (BLND)
The next Goldman pick we're looking at is Blend Labs, a software company with a niche in the real estate business. The company offers a platform that enables a faster, more efficient home buying process for both buyers and lenders, and particularly facilitates mortgage lending. The company boasts that it can help its customers process up to $5 billion in new loans every day, and has processed a total loan volume of $1.4 trillion since 2020.
Those kind of numbers both drip cash and promise growth, and Blend used them as the basis for its IPO in July. The company priced the offering at $18 per share, with 20 million shares going on the market and an underwriter option for an additional 3 million shares. This was at the top of the initial pricing estimates ($16 to $18), and the company raised $360 million in the offering. Almost a full month after listing, Blend now has a market cap of just over $4 billion.
Currently, Blend has over 290 customers, mainly financial and lending institutions. Blend’s platform is available for use facilitating loans in a range of industries, as the company has expanded from its real estate and mortgage roots. The company maintains a strong connection to the real estate business, and in June of this year completed its acquisition of Title365, purchased from the Mr. Cooper Group for $500 million.
Turning to Goldman Sachs, analyst Michael Ng initiated coverage on BLND shares with a Buy rating and $30 price target. This figure indicates his confidence in ~64% upside from current levels. (To watch Ng’s track record, click here)
"We forecast Blend to grow at 3-year consolidated revenue CAGR (2020-23) of 15% reflecting growth in transaction volume on the platform and expansion of market place services. This includes 19%/-1%/30% revenue growth in 2021/22/23, with the negative growth in 2022 primarily driven by a decline in refinancing activity back towards pre-pandemic level," Ng opined.
The analyst continued, "Despite declining refinance transactions, (1) mortgage revenue should continue to grow as Blend gains market share. (2) Further, Blend’s best-in-class technology platform and expansive network of ecosystem partners should create a competitive moat and drive further revenue expansion with existing customers. (3) Lastly, Blend should be able to expand its TAM by building out its consumer banking and marketplace offerings."
Overall, it’s clear that Wall Street agrees with Ng on the forward prospects for Blend. The stock’s 8 recent analyst reviews include 7 Buys and 1 Hold, for a Strong Buy consensus indicative of a bullish outlook. The shares are priced at $18.18 and their $25 average price target implies a 12-month upside of 37%. (See BLND stock analysis on TipRanks)
Full Truck Alliance (YMM)
For the last stock, we’ll take a look at a Chinese company that has gone for a US listing. Full Truck Alliance is a digital freight platform, the largest in the world by gross transaction value. It connects shippers in China with truckers, facilitating ships and road transport with a digitized standard and smart logistics infrastructure. Some recent numbers indicate the size of the business: In 2020, Full Truck facilitated 71.7 million shipping orders, and approximately 20% of China’s heavy- and medium-duty truckers used the platform that year.
The company’s recent 2Q21 report shows that the 2020 numbers were no outliers. Full Alliance reported US$173.3 million in total revenues for the quarter, up 100.9% from the year-ago quarter. The gross transaction value, or GTV, a key metric for the company, was up 57.8% year-over-year to US$11.5 billion. And finally, in the second quarter, truckers using the platform fulfilled 36 million orders, up 87.9% from 2Q20.
The 2Q21 report was Full Alliance’s first as a public company on the US markets. The company’s IPO opened on June 23 this year, when 82.5 million American Depositary Shares (ADSs), each worth 20 class A common shares, were made available to the public at $19 per ADS. The underwriters had options on an additional 12.375 million ADSs.
Full Alliance met expectations in the sale. The IPO raised $1.6 billion in the largest US opening by a Chinese company so far this year. As of mid-August, the company has a market cap of US$13.5 billion.
Goldman Sachs analyst Ronald Keung, in his note on YMM after the quarterly release, saw several points indicating further growth for the company. First among these was the impressive fulfillment rate.
"Continued improvement in fulfillment rate to 30% in 2Q21, vs. 24% in 1Q21/17% in 2Q20, on the back of innovative product features and service upgrades, including Tap & Go and more closed-loop transactions. Going forward the company plans to continue improving its algorithm to better match truckers and shippers, and further lift fulfillment rates," the analyst noted.
Keung's bullish outlook and Buy rating on the stock come with a $20.50 price target, indicating his confidence in ~77% growth for the year ahead. (To watch Keung’s track record, click here)
While there are only 2 reviews on record for YMM so far, they both agree that this is a stock to Buy, making the Moderate Buy consensus rating unanimous. The average price target is $20.50, matching Keung’s above, and the current trading price is $11.56. (See YMM stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.