In recent times, the markets have been hit by a combination of persistent headwinds that have been dragging it down. Elevated interest rates, surging oil prices, and geopolitical concerns have all played their part in keeping sentiment low.
But now, with the S&P 500 having retreated by 8% from the 52-week high of 4,607, Piper Sandler’s chief market technician Craig Johnson thinks various indicators are signaling that stocks are in oversold territory, positioning the benchmark index to push higher from here.
“You’re getting a lot of the bad stuff out of the way,” Johnson recently said. “The market is already sold off to a degree here. But I think once we get some clarity brought into what’s going to happen in Washington, get through the earnings seasons, these kinds of things, I think there’s a real meaningful pop. And we still think there’s still decent upside to go here.”
How much upside, exactly? With Johnson’s year-end target for the S&P 500 remaining at 4,850, there’s room for a 14% rally, he believes.
With that positive outlook in tow, the stock experts at Piper Sandler are pointing investors toward the equities they see as ready to ride the anticipated surge. They have homed in on two names and we decided to see what makes them good investment choices right now. For a fuller view of their prospects, we ran the pair through the TipRanks database. Here’s what we found.
Instacart (Maplebear, Inc.) (CART)
We’ll start with Instacart, the business name of Maplebear, Inc. This company, based in San Francisco, specializes in grocery delivery services through online and mobile apps. Instacart’s users can place their grocery orders through the service, and delivery can be scheduled for delivery or pick-up as early as the same day.
Instacart bases its service on a wide network of providers, including some 80,000 stores – everything from local grocers to large chains. Customers can select from more than 1 billion products available through the site, and the service is available in over 14,000 cities across the US and Canada.
This firm was founded back in 2012, but it’s a company new to the public markets; it held its IPO just this past September. The offering was priced at $30 per share, and the company put 22 million shares of common stock on the market, raising $660 million in the IPO. Since closing its first day’s trading at $33.70, the stock has retreated somewhat, and the company has a current market cap of $6.8 billion.
Covering this stock for Piper Sandler, 5-star analyst Alexander Potter outlines the contours of Instacart’s market and addressable opportunity, writing, “As a result of the COVID-19 pandemic, demand for grocery delivery surged, and Instacart’s gross transaction value (GTV) went from $5.1B in 2019, to $28.8B in 2022, a ~78% CAGR. Recently, due to a number of headwinds (a return to pre-COVID habits, disinflation, and the loss of EBT SNAP benefits), Instacart’s GTV growth has slowed to an expected 4% in 2023 and 4.5% in 2024; this compares to mid-teens growth at other gig platforms. This delta vs. peers may cause near-term valuation pressure – but ultimately, we think growth will re-accelerate. In the meantime, CART’s superior margins provide protection in a shaky macro.”
The analyst goes on to express his belief that Instacart will realize gains going forward: “Once transitory growth headwinds are overcome, we think CART’s superior profitability and thriving ads business may warrant a valuation similar to UBER.”
Potter gives CART shares an Overweight (Buy) rating, and his $36 price target implies the stock will gain 36% on the 12-month time horizon. (To watch Potter’s track record, click here)
This new stock has a Moderate Buy consensus rating from the Street, based on 14 recent reviews that include 9 Buys and 5 Holds. The stock is currently selling for $26.4 and its $36.27 average price target suggests it has room to gain 37% by this time next year. (See CART stock forecast)
Wintrust Financial (WTFC)
The second stock we’ll look at here is Wintrust Financial, a financial services holding company. Its eponymous Wintrust Community Bank operates 150 branch locations, centered in the Chicago area and spreading across Illinois, Indiana, and Wisconsin. Wintrust offers its customers full-service banking solutions, for both personal and commercial banking needs. Services include checking & savings accounts, mortgages & home equity credit, investment & insurance, and asset management, among others.
Through the third quarter of this year, Wintrust reported having $41.45 billion in total loans on the balance sheet. This was covered by the $44.99 billion that the company was holding in total deposits. The company had $418.1 million in cash assets on hand, and paid out a 40-cent-per-common-share dividend in August of this year. That payment annualized to $1.60 and gave a forward yield of 2.1%.
In its recent earnings report, from 3Q23, the company put in a strong showing. The top line figure came in at $574.8 million, improving on 2Q23’s $560.57 million, and up more than 14% year-over-year. Additionally, it was $4.7 million above analyst expectations. At the bottom line, the EPS figure of $2.53 beat the forecast by 12 cents per share. These beats were supported by strong gains in the banking company’s total deposits, which expanded by $1 billion, or 9%, y/y; and by the total loans, which expanded by $423 million, or 4%, from the prior year.
This midwestern bank holding company caught the eye of Piper Sandler’s Nathan Race, who sounded an upbeat note when he wrote of the stock, “WTFC is one of our favorite mid-caps following solid 3Q results given WTFC’s superior operating leverage prospects driven by its unique facets to generate an above average future NII trajectory partially via continued high-quality growth on both B/S sides. WTFC’s more measured operating expense growth outlook with its unique scale in Chicago should also contribute to superior future operating leverage.”
Race’s comments back up his Overweight (Buy) rating, while his $97.50 price target implies the shares will gain 32% over the coming year. (To watch Race’s track record, click here)
Turning now to the rest of the Street, where the stock holds a Strong Buy consensus rating, after picking up 10 reviews with a 9 to 1 breakdown of Buys over Holds. The trading price of $73.99 and the average target price of $91.56 together suggest a one-year upside potential of 24%. (See WTFC stock forecast)
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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.
