We’re winding up the third-quarter of 2023, and what could be more natural than to figure out the best stocks for the rest of the year?
Stock picking of this sort is an essential skill for every investor, and fortunately, the Street’s analysts make it easier. They research and analyze various stocks, taking into account a wide range of factors such as company financials, market trends, and growth potential. Through their expertise, these analysts identify and highlight which stocks they believe to be their ‘Top Picks.’
We can take a closer look and find out just which stocks are making the cut. Here are the details on two of them, drawn from the TipRanks platform; each is a Strong Buy, with solid upside. Let’s dive in and find out just what makes them ‘Top Picks’ for the rest of 2023.
Evolv Technologies Holdings (EVLV)
The first ‘Top Pick’ we’re looking at is Evolv Technologies, a leading company specializing in cutting-edge weapons detection systems tailored for security screening. Evolv is developing new generations of weapons detection technologies to meet the challenges posed by today’s multifaceted threat environments. Rather than using legacy metal detection, Evolv bases its security and detection systems on advanced sensors and AI for the most sensitive possible detection of concealed weapons. Evolv locates its sensors at ingress points and allows entrant screening without anyone having to hand over bags or submit to hand screening.
Evolv has not just opened up new technological vistas for security screening; the company has also deployed them in a range of environments. The scanners can be found in ticketed venues, casinos, schools, and even industrial workplaces. Evolv has consciously tried to avoid the traditional ‘transport hub’ locations for public screening.
One quick statistic will show just how popular Evolv’s screening tech is: the company has, since its founding, screened more than 750 million people, making it second in scale only to the Department of Homeland Security, which oversees airport screening.
Evolv saw $19.8 million at the top line in its last reported quarter, 2Q23. The company’s revenue was $5.6 million ahead of the estimates. At the bottom line, Evolv showed some losses. The GAAP EPS figure missed expectations, coming in at a 45 cent per share loss and 31 cents per share lower than had been expected. The non-GAAP figure was also a net loss of 10 cents per share, which was only 2 cents below the expected value. In an important metric for future performance, the company registered a 195% Q2 increase in Evolv Express subscription customers.
Cantor analyst Brett Knoblauch describes the second quarter results as ‘strong,’ and points out that the company has had ‘two strong quarters in a row.’ He also notes the stock’s solid year-to-date gains (~88%), and recommends that investors buy and hold these shares for the long-term.
“EVLV has delivered two strong quarters in a row, and we believe it is still a largely unknown name, despite the shares being up YTD. We believe EVLV is a stock investors should own and not trade, as over the next 10 years, management expects to increase deployments to 100k from ~3,400 today. With the company’s average recurring revenue (ARR) of ~$16k per installed unit, we see a path for ARR to rise to over $1.5bn from $54.3m currently (with gross margin exceeding 70%),” Knoblauch opined.
The analyst goes on to explain why the stock is attractively priced at current levels: “We question why every school or public venue does not deploy an EVLV weapons detection unit given the safety (and convenience) it provides to families and school and building operators. For investors that have missed out on their strong YTD performance, the shares have given up all of their post-2Q23 gains (was up +20% on day of earnings), which we believe offers an attractive entry point, particularly as EVLV has just announced an additional product, expanding its product portfolio to two.”
Along with ‘top pick’ status, Knoblauch rates EVLV shares as Overweight (i.e. Buy), with an $8.60 price target that implies a robust one-year upside potential of ~77%. (To watch Knoblauch’s track record, click here)
Overall, the Strong Buy consensus rating here is based on 5 recent analyst reviews, including 4 to Buy and 1 to Hold. The shares are trading for $4.86 with a $7.28 average price target suggesting ~50% gain on the one-ear horizon. (See EVLV stock forecast)
Playa Hotels & Resorts (PLYA)
Next up is Playa Hotels & Resorts, a leisure company operating a network of luxury hotels and resorts in Mexico and the Caribbean. The company has 26 properties, with prime beachfront locations in Mexico, Jamaica, and the Dominican Republic, and a total of more than 9,700 rooms available. The company’s hotel brands include Hilton and Wyndham, and Playa has options for both adult-only and family-friendly resort vacations.
Playa has benefited from the pent-up demand for leisure travel following the COVID-19 pandemic. But more recently, there have been some headwinds, particularly softening demand as that surge normalizes. In addition, as demand softens, Playa is also facing increased competition.
Even in the face of those headwinds, however, Playa delivered a sound 2Q23 earnings report. Those financial results, the last reported, showed the company had a top line of $248 million, beating the forecast by $10.3 million and growing 12% year-over-year. The bottom line, a non-GAAP EPS figure of 14 cents per share, while down 4 cents per share from the prior year, was in-line with expectations.
For Oppenheimer analyst Tyler Batory, this all adds up to a Top Pick. The analyst writes of Playa, “We reiterate PLYA as a top idea in our coverage post a management meeting. We think the company is well positioned vs. others exposed to leisure travel. Its all-inclusive product offers a compelling value, and its market exposure can contribute to sustainable demand growth. It also has more favorable margin comps than US hotels that showed outsized expansion last year given the mismatch between revenue and expenses. PLYA also has the best leverage profile in its history as a public company, no upcoming debt maturities, and enough cash flow for substantial buyback activity (reduced share count ~12% since 9/2022).”
Looking forward, Batory gives PLYA shares an Outperform (i.e. Buy) rating, with a $12 price target pointing toward a gain of ~66% in the next 12 months. (To watch Batory’s track record, click here)
Overall, Playa’s stock gets a unanimous Strong Buy consensus rating from the Street, based on 4 recent positive analyst reviews. The stock’s $7.24 trading price and $13 average price target combine to imply an upside potential of ~80%. (See PLYA stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.
