How do you define a stock market opportunity? Is it a windfall, a piece of luck, or the result of careful planning, a strategy to make the most of any opening?
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The savvy investor seeks out the latter, looking for stocks that offer inducements to entry, be it a high upside or a depressed share price or a recent positive analyst review – or better yet, a combination of all three.
So there’s a profile. We’ve used the TipRanks database to look up two stocks that fit it – stocks with Strong Buy consensus ratings, plenty of upside potential, and recent thumbs up from the analyst corps. And, while these stocks have plenty of positives in the profile, each one has also experienced steep share price losses in recent months. Let’s take a closer look.
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Sunnova Energy International (NOVA)
We’ll start in the residential solar installation niche with Sunnova Energy. This firm is one of the leaders in the US residential solar industry, where its operations include everything from installing rooftop solar panels to setting up the home power system and bringing in power storage batteries. Sunnova also backs up its solar installations with repairs, modifications, and replacement parts available to customers as needed. On the sales and financial side, the company can provide financing options for its customers.
Founded in 2012 in Texas, Sunnova now has a presence in 46 US states and territories and boasts more than 348,000 customers on its books. The company has a nationwide network of more than 1,300 dealers, sub-dealers, and builders engaged in marketing and building out its solar installations, and in its last reported quarter, 2Q23, the company added more than 39,000 customers. As of June 30, Sunnova’s business was running strong, and the company expects to gain between 135,000 and 145,000 new customers for all of 2023.
However, despite its strong market presence and growth trajectory, Sunnova’s shares have experienced a significant decline since reaching their peak value in July. The drop has been substantial, marking a decrease of 62% from the highest point.
Sunnova reported its third-quarter earnings last week, which, while missing analyst expectations, came with an optimistic outlook for FY 2024. The company reported revenues of $198.39 million, marking a year-over-year increase of 32.8%, but $3.6 million below the forecasts. The bottom line figure, an EPS loss of $0.53, was 16 cents below expectations. Nevertheless, Sunnova’s positive outlook shines through as the company initiated FY 2024 adjusted EBITDA guidance, ranging from $350 million to $450 million, well above the analyst consensus of $332 million.
It is interesting to note here that late last month, Sunnova entered a deal with the US Department of Energy for partial loan guarantees up to $3 billion. The government support will help back the company’s Project Hestia, a solar loan channel for disadvantaged homeowners and communities in the US market.
UBS analyst William Grippin, looking at Sunnova, is impressed by the company’s prospects for boosting its market share, as well as its exposure to US government support and funds. He writes, “We see NOVA as well-positioned to take market share driven by increasing demand for third-party-owned (TPO) residential solar systems which have relatively more favorable tax treatment under the Inflation Reduction Act (IRA). In our view, the decline in NOVA share price, driven by near-term market growth concerns and rising rates, provides an opportunity on a 12-mo forward basis. We estimate that NOVA’s current net contracted customer value (NCCV) is ~$13/ sh and forecast an incremental ~$6/sh of value creation in 2024E.”
Grippin follows up his bullish stance with a Buy rating and a $16 price target that implies a one-year upside potential of 82%. (Watch Grippin’s track record.)
Overall, Sunnova’s 20 recent analyst reviews include 15 Buys and 5 Holds, for a Strong Buy analyst consensus rating. The stock’s $8.79 trading price and $20.31 average price target combine to suggest a robust 131% upside on the one-year horizon. (See Sunnova stock forecast.)
Exact Sciences (EXAS)
Next up is Exact Sciences, a medical tech firm, a specialist in developing early testing technology for cancer screening. The company is dedicated to improving cancer treatment – and prevention – through accurate and timely early diagnostic testing. The company has a lineup of test kits for various cancers, particularly colorectal cancer and liver cancer, and backs that up with several tests designed to find predispositions in individual patients’ genetics.
On the practical side, the company has been marketing its Cologuard at-home colon cancer screening test since 2014. The test is based on stool-DNA and can detect colon cancer at early stages when treatment is easier and more effective. The company also has the Oncoguard Liver test on the market, a blood-test detection kit for HCC, hepatocellular carcinoma, the most common form of liver cancer. Liver cancers are particularly dangerous, and early detection is vital.
Also available are Exact Sciences’ Oncotype test, a standard-of-care test for breast cancer, capable of predicting not just the recurrence of invasive breast cancer but also the likely benefit of chemotherapy treatment. The company’s OncoExTra test is used in tumor profiling, based on whole exome and whole transcriptome sequencing and an extensive panel of approximately 20,000 genes. The test kit is one of the most comprehensive molecular tests currently available for cancer patients and treatment providers.
In an announcement at the end of August, Exact Sciences made public that the OncoExTra test has been selected as a tool in national clinical trials funded by the National Cancer Institute, the ComboMATCH trials.
This company’s success with its strong portfolio of testing products has led to a gradual increase in revenue over the past few years. The last set of financial results, from 2Q23, showed a top line of $622 million, up 19% year-over-year and nearly $21 million above the estimates. The company’s quarterly EPS, while a loss of 45 cents per share, was 6 cents per share better than had been expected. Notably, the company has revised its full-year revenue guidance, now projecting a range of $2.441 billion to $2.466 billion, up from the previous estimate of $2.38 billion to $2.42 billion. The consensus estimate among analysts stands at $2.42 billion.
Despite these strengths, it’s worth noting that EXAS shares have experienced a 40% decline from their peak in July.
Analyst David Westenberg, of Piper Sandler, notes the share price fluctuations, but also the company’s solid asset in Cologuard – and sees the current price as a good time to buy.
“With strong Cologuard growth (we estimate 29% YoY in 2023) and a clear path to five+ years growth rates of above 10%, we think the pullback since highs in July represent a pretty compelling entry point. Over the next three years, we model adj. EBITDA to end up at $518M (in 2025E), but we think there could be upside to our estimates,” Westenberg opined.
“Meanwhile,” the analyst added, “we think the company will be only lightly impacted by macroeconomic factors or from regulatory factors such as LDT regulations. Following brutal market selloffs in the lab space, we’re picking what we see as the highest quality company in the space. Lastly, while we have concerns with both fecal and blood based competitors, we think the selloff likely reflects the increased concern and that the current entry point is too compelling.”
These comments support Westenberg’s Overweight (i.e. Buy) rating on EXAS, and his price target, at $90, implies a 35% upside potential for the coming year. (Watch Westenberg’s track record)
Overall, the bulls are running for Exact Sciences, and the 13 recent analyst reviews include 11 Buys vs. just 2 Holds for a Strong Buy consensus rating on the stock. The shares are priced at $59.06, and the average target price of $103.45 is more bullish than the Piper Sandler view, suggesting a 12-month gain of 75%. (See EXAS 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.
