Wall Street analysts say don’t overlook Plug Power & Squarespace
Plug Power GenDrive Fuel Cell with GenFuel hydrogen.
Source: Plug Power
Finding fresh investment opportunities in the current financial environment isn’t easy, to say the least.
However, following the recommendations of analysts who consistently get it right is one way to find compelling plays that may be overlooked by the investing community. TipRanks analyst forecasting service attempts to pinpoint the best-performing analysts on the Street. These are the pros with the highest success rate and average return per rating, with both metrics factoring in the number of ratings published by each analyst.
Here are five stocks that Wall Street’s best-performing analysts think investors might be overlooking.
Despite Squarespace‘s solid second-quarter performance, Guggenheim analyst Ken Wong is anticipating some concern from investors. However, the analyst’s bullish thesis remains very much intact.
In line with his optimistic approach, Wong kept a Buy rating on the website building and hosting company. Although he trimmed the price target from $70 to $60, this still leaves room for a 40% gain over the next year.
Digging deeper into the print, Squarespace posted revenue and billings of $196 million (a 31% year-over-year increase) and $206 million (a 24% year-over-year gain), respectively. Both results beat the Street’s $189 million and $200 million calls. Additionally, Presence and Commerce revenue surpassed Wong’s estimates. It should also be noted that most of the increase in take rate came from Tock’s contribution, which Squarespace acquired earlier this year.
“Management also highlighted better cash retention this year, which should stave off concerns that pandemic subscription cohorts could see elevated churn as economies normalize,” the analyst added.
That being said, Wong believes the “flattish Q3 trajectory likely to disappoint investors.” For the full year, the company actually bumped up its revenue outlook by $6 million at the midpoint from a range of $764 million to $776 million to a range of $772 million to $780 million.
“We believe the increase would have been just ‘good enough’ in a vacuum. However, we expect investors to scrutinize the Q3 revenue outlook guide ($193-198 million, 19-22%), which projects for a modest sequential decline at the mid-point and falls ~$2 million below consensus estimates ($197.5 million). Management emphasized a prudent approach to outlook due to the uncertain macro and health climate. Investors we caught up with were understanding of the volatile demand environment, but felt the lack of specificity around which business segments and KPIs magnified the confusion,” Wong explained.
Long-term, though, Wong is standing in the bull camp. “We remain positive on SQSP’s long-term opportunity to enable digital commerce… We expect a more thoughtful growth roadmap at the company’s inaugural Analyst Day in November. Following the noisy outlook, we expect investors to home in on the commentary around revenue mix shift, additional monetization/take rate opportunities, details surrounding the Tock acquisition and integration and other potential long-term growth accelerators,” he commented.
Currently, Wong is tracking a 68% success rate and 27.1% average return per rating.
Following The Trade Desk’s second-quarter earnings call, Needham’s Laura Martin tells investors that there are “several upside value drivers we’ve underestimated, until now.”
In accordance with her optimistic stance, the five-star analyst reiterated a Buy rating on the media-buying platform provider. Additionally, Martin left the $100 price target as is, which implies 21% upside potential.
What exactly are these value upside drivers? First and foremost, Martin points to TTD’s Unified ID 2.0 solution. According to the analyst, this solution is “less about replacing Cookies and more about creating a targeting and measurement competitive advantage for the Open Internet versus Walled Gardens.”
Expounding on this, Martin stated, “TTD is trying to roll out Unified ID 2.0 into CTV targeting, and all other digital advantage channels, and then to convince advantage buyers that unduplicated reach and data granularity is much better in the Open Internet than from Walled Gardens such as Amazon, Google/ YouTube, Facebook, Roku, etc. Finally, TTD believes Unified ID has reached ‘critical mass,’ (our estimate is 150-200 million consumers) implying every company must accept Unified ID targeting.”
On top of this, Video revenue of $106 million made up 38% of the total Q2 revenue. Of this, $84 million, or 80%, was CTV.
“TTD believes that the 79 million households in the U.S. that advertisers can reach using CTV ad units is larger than total linear TV homes… CTV revenues grew faster than 101% total revenue growth year-over-year. CTV consortiums like Open AP are making their targeting IDs comparable with Unified ID 2.0 as are some CTV owners directly, such as FUBO,” Martin said.
What’s more, Martin highlights the fact that its deal with Walmart adds shopper marketing total addressable market of $100 billion to TTD’s revenue in 2022, with the data integration still on track for completion in the fourth quarter of 2021.
It should be noted, though, that Walmart doesn’t pay TTD a revenue share, but rather, “TTD makes money from Walmart deal by attracting shopper marketing ad budget (TTD has ZERO of these today) from CGP advertisers that want to move products on shelves at Walmart.”
“This is 100% a new TAM for TTD. TTD will charge its normal 20% take rate on this new revenue stream. Walmart is trying to mirror AMZN, which reported $7.3 billion of shopper marketing advantage revenues in Q2 2021,” Martin explained.
Achieving a 63% success rate and 26.2% average return per rating, Martin is ranked #130 out of over 7,000 analysts tracked by TipRanks.
Oppenheimer analyst Colin Rusch sees Plug Power as “leading the hydrogen ecosystem scale-up.” As such, the top analyst reiterated a Buy rating on the stock. At $62, Rusch’s price target suggests that 126% upside potential could be in store.
“With PLUG delivering upside to Q2 2021 revenue expectations and raising 2021 revenue guidance, we believe the company is making sound decisions as it lays the foundation for growth of hydrogen as a transportation fuel. We believe expenses related to swapping out Air Products equipment in its hydrogen fuel supply chain as well as PLUG paying force majeure expenses builds strong customer loyalty and will help the company grow partnerships for hydrogen off-take agreements and vehicles,” Rusch said.
Leading up to the company’s Hydrogen Symposium, it revealed its estimated output and updated construction progress for the Rochester facility.
“Leveraging automation, scale, and a seasoned leadership team, we believe PLUG can achieve significant product cost improvement at production scale. Management noted equipment is currently being installed, and expects to ship 250MW of electrolyzers out of the factory in 2021,” the analyst said.
Notably, this month, PLUG started working on its third green hydrogen plant, with this “expanding its reach to cover the majority of the eastern U.S./I-95 corridor,” said Rusch. As the combined production capacity will accelerate to 75 tons per day between the three plants, the analyst argues “this footprint provides critical scale for enabling commercial vehicle fuel cell adoption.”
Taking all of this into consideration, PLUG bumped up its guidance for FY21 gross billings from $475 million to $500 million, with the consensus estimate landing at $474 million. In addition, the company is calling for bookings of 250-500 MW of electrolyzers.
Ranked #10 on TipRanks’ list, Rusch boasts a 64% success rate and 65% average return per rating.
BTIG analyst Mark Palmer believes that investor focus should be landing on Verra Mobility. With this in mind, he reiterated a Buy rating and $19 price target, suggesting 18% upside potential.
Palmer acknowledges that the company’s Commercial Services segment, which provides automated tolling solutions to rental car companies (RACs), was “one of the most severely impacted businesses” in his coverage universe as a result of the COVID-19-related travel restrictions. That being said, given the company’s sufficient liquidity, its ability to generate free cash flow despite lower revenue and the revenue from the school speed zone camera installations in New York City during the pandemic, VRRM shares stabilized.
The tide appears to be turning though. Palmer said, “Now, VRRM’s Commercial Services segment is the primary driver of a reopening play that appears to be coming into sharper focus. The segment’s emphatic rebound during Q2 2021 enabled the company to post significant top- and bottom-line beats versus consensus estimates, spurring its stock price higher during today’s extended trading session. With management noting that the segment’s tolling volumes remained below pre-pandemic levels, the strong implication was that it would have ample room for additional upside as the pandemic’s impact on travel continues to abate.”
During the second quarter, the Commercial Services business delivered a surprisingly impressive performance. Revenue for the quarter came in at $66.5 million, a 144% gain from the year-ago quarter. In addition, adjusted EBITDA was almost $43 million, reflecting a 64% segment margin.
What was behind this strong showing? According to management, it was the recovery in leisure travel, which “arrived faster than they had anticipated due to the vaccine rollout and economic reopening as the reasons for the segment’s eye-popping results.”
Based on the solid second-quarter earnings results and favorable macro trends, the company brought back its full year 2021 financial guidance that was suspending due to the pandemic. Management is calling for total revenue of $510 million to $530 million, including the contribution from the Redflex acquisition, which closed in June.
Delivering a 66% success rate and 21.1% average return per rating, Palmer is among the top 150 analysts tracked by TipRanks.
Although Stifel analyst Scott Devitt sees a “minor marketing issue,” he thinks there is a “major market opportunity” for Poshmark.
“We continue to view Poshmark as the best positioned player in the resale eCommerce landscape, with an asset-light and easily extendable business model supporting attractive long-term margins,” Devitt said.
To this end, Devitt left his bullish call on Poshmark unchanged. Even though the analyst slightly reduced the price target from $50 to $48, the upside potential still lands at 75%.
In the most recent quarter, Poshmark posted GMV of $450 million, rising 25% year-over-year and beating Devitt’s $439 million call. Revenue clocked in at $81.8 million, also exceeding the analyst’s estimate of $81 million. Meanwhile, adjusted EBITDA of $6.1 million easily beat Devitt’s $2.4 million forecast as marketing spend going into the quarter was lower-than-expected.
It should be noted that in the second quarter, changes to IDFA policy, which increased mobile advertising costs, affected the company. Management, however, believes these impacts will normalize throughout the rest of the year.
On top of this, Poshmark revealed that it is planning to expand its platform to India. Weighing in on this move, Devitt stated, “India is an attractive eCommerce growth market, with approximately 622 million active internet users and an increasingly active Gen Z and Millennial demographic, with strong resale momentum. On the call management continued to highlight international expansion as a key strategy to grow GMV and active users, and stated it will expand to new English-speaking countries (most likely the U.K., in our view) in the coming quarters.”
Reflecting another positive, Poshmark released a new integration within Snapchat called Poshmark Mini, enabling users to go to Posh Parties, shop Poshmark’s whole catalogue and engage with brands that have the most buzz on the platform.
The company also made several other improvements to the platform, including the addition of Style Tags to help with search, discovery and categorization as well as Price Suggester functionality to strengthen new seller efficacy.
The #34 best-performing analyst on Wall Street has achieved a 70% success rate and 34.8% average return per rating.