The old stock market axiom to buy when others are fearful could readily apply right now, according to Ashish Shah, chief investment officer at Goldman Sachs.
Amid concerns markets will be volatile following Federal Reserve Chair Jerome Powell’s Jackson Hole policy speech on Friday, Shah thinks that doesn’t mean investors should stay on the sidelines at present.
It’s preferable to buy “when there’s fear in the market,” say Shah. “Don’t fall into the trap of buying when there’s FOMO,” he added.
Against this backdrop, Shah’s analyst colleagues at the banking giant have pinpointed two names which they think would make good investment choices in the current environment. In fact, they see them posting gains of at least 90% over the next year. We ran the two through TipRanks database to see what other Wall Street’s analysts have to say about them.
Dole (DOLE)
Markets are gonna do whatever they need to do, but regardless of the fluctuations you’re gonna have to get your daily dose of fruit and veg. This is where Dole enters the frame.
The Dublin, Ireland-based company is the world’s biggest producer of fruits and vegetables, boasting over 300 various products which are distributed in 90 countries. Dole has 74,300 full-time and temporary employees spread out across 162 distribution and manufacturing centers, while the company also has several packhouses, cold storage factories, salad processing plants, and owns 13 ships.
The main business sells fresh and frozen fruits and drinks, and the company’s four segments are split into Fresh Fruit, Fresh Vegetables, Diversified Fresh Produce – EMEA and Diversified Fresh Produce – Americas and ROW.
In its latest quarterly report, for 2Q22, Dole delivered revenue of $2.36 billion, amounting to a 95% year-over-year increase, but fell $20 million shy of the consensus estimate. Non-GAAP EPS of $0.44, however, came in above the $0.36 expected on the Street.
But investors weren’t too pleased with the outlook; the adjusted EBITDA is now expected in the range between $330 million to $350 million compared to the prior range of $350 million to $370 million.
That said, Goldman analyst Adam Samuelson thinks the positives outweigh the negatives. Assessing the print, he wrote, “While we recognize the guidance reduction and less-linear earnings recovery is disappointing, we believe underperformance in its smallest business alongside FX headwinds should not fully overwhelm the generally solid performance in the balance of the business. With shares trading at 10% and 16% FCF yield on our respective 2022 and 2023 estimates, risk/reward remains compelling, in our view, particularly when considering the Fresh Vegetables losses and sizable working capital step-up embedded in this year’s FCF baseline.”
To this end, Samuelson rates DOLE shares a Buy and his $17 price target suggests shares have room to climb 91% higher in the year ahead. (To watch Samuelson’s track record, click here)
Only one other analyst has recently chimed in with a DOLE review and they are also confident in its ongoing success, resulting in the stock’s Moderate Buy consensus rating. The average price target stands at $16, indicating the stock will add ~80% over the coming months. (See DOLE stock forecast on TipRanks)
Melco Resorts & Entertainment (MLCO)
The next Goldman pick we’re looking at is Melco Resorts & Entertainment, a casino resort operator, boasting facilities in Asia and Europe. Its flagship casino is the $2.4 billion resort City of Dreams Macau, which boasts around 511 gaming tables, 572 gaming machines, hundreds of rooms, suites and villas, and all the fancy accompaniments you would expect of such a place. The company also has other resorts in its portfolio including the Altira Macau, the City of Dreams Manila and the City of Dreams Mediterranean in Cyprus plus the Studio City Macau.
It’s well-known that resorts suffered badly during the covid pandemic and given the Macau resorts are heavily dependent on Chinese tourism, the recent lockdowns in the region impacted Q2’s performance.
Revenue fell by 47.7% from the same period last year to $296.1 million while the company showed an EBITDA loss of $13.8 million, compared to the profit of $56 million delivered in the prior quarter and the profit of $79.05 million in 2Q21.
That said, recent data has been more promising. Between August 18 to August 24 visitors to Macao grew week-over-week by more than 43%. This obviously bodes well for the business.
However, over the past year the stock has also borne the brunt of investor fears around the de-listing of Chinese and Hong Kong-based companies should they fail to meet U.S. auditing standards.
But with the stock down by 43% year-to-date, while cognizant of the various headwinds, Goldman Sachs analyst Simon Cheung smells opportunity.
“While the overall operating environment remains fluid and timing for a resolution of the potential de-listing risk is uncertain, we believe MLCO’s fundamentals remain solid vs. some of its peers, i.e., business recovery outside of Macau, less liquidity issue near term after several rounds of refinancing. At the current share price, the stock’s valuation looks compelling,” Cheung opined.
You can say that again. Alongside Cheung’s Buy rating, his $13 price target implies one-year share appreciation of a hefty 125%. (To watch Cheung’s track record, click here)
Cheung is the Street’s most prominent MLCO bull and with the addition of 1 Buy and Hold, each, the analyst consensus rates this stock a Moderate Buy. Overall, there’s plenty of upside projected here; going by the $9.67 average target, the shares have room for ~68% growth over the one-year timeframe. (See Melco stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
