The clouds are gathering on the global economic horizon. In a clear sign that the good times of easy money are well and truly over, last week three major central banks – the US Federal Reserve, the Bank of England, and the Swiss National Bank – all enacted interest rate increases. For the Federal Reserve, it was a 0.75% hike, the largest bump since 1994, in reaction to news that the year-over-year inflation rate had reached a 40+ year high of 8.6%.
So, how can investors ride out this hostile environment?
One simple answer is, turn to the experts. The major investment banks employ cadres of experienced, professional stock analysts, who scour the markets looking for the larger patterns, and also looking for the individual stocks that will stand out.
Goldman Sachs, the Wall Street giant, has had its analyst corps doing just that. They’ve been pointing out stocks that stand to show considerable gains going forward, even as the general market forecasts decline. We’ve used TipRanks’ database to sort through some of the Goldman picks, and have found 3 that the firm believes will bring over 40% return over the coming year. Here are the details, along with the Goldman commentary.
Global-e Online (GLBE)
The first Goldman pick we’ll look at is Global-e Online, an international e-commerce tech firm. Global-e operates an online platform that facilitates direct-to-consumer online commerce in the cross-border markets. The platform allows merchants to smooth out tax and customs differences between sellers and buyers, and lets retailers streamline their international customers’ online shopping in over 200 local markets, adapting to differences in languages, currencies, shipping, and regulatory authorities. The company works with enterprise customers in the US, European, and Asian markets.
Global-e made good use of last year’s bull market. In May 2021, Global-e raised $431 million in its IPO. The stock closed its first day’s trading at $25.50 and has seen volatile trading since then, peaking at $81 in September and falling 70% this year alone.
On financial performance, Global-e experienced a rough 1Q22. The company’s EPS, at a 35-cent loss per diluted share, was more than 4x steeper than the year-ago loss of 8 cents. Top line revenue was better, coming in at $76.3 million, up 65% year-over-year. The company’s gross merchandise value (GMV), a measure of what Global-e collects from merchants and buyers on every transaction, rose an impressive 71% y/y in Q1, to reach $455 million.
So, while earnings are down, business is up. Goldman analyst Will Nance takes note of this in his review of the stock, writing: “While the macro environment remains highly uncertain, the company believes its low double-digit EBITDA margins, positive free cash flow, efficient customer acquisition model, and strong secular tailwinds are likely to support continued growth and investment in the business, even if we see a slowdown in broader spend trends in 2H22.”
“In addition, the company noted that its ongoing geographical expansion and diversification, its exclusive strategic partnership with Shopify, and the continued merchant demand the company has seen should continue to drive strong growth in the years ahead,” Nance added.
To this end, Nance believes that Global-e’s potential justifies a Buy rating, and his $28 price target suggests a one-year upside of 43%. (To watch Nance’s track record, click here)
The Goldman view is no outlier on this e-commerce company. GLBE’s 9 recent analyst reviews are all unanimous, as Buys, for a Strong Buy consensus rating. The shares are selling for $19.57 and their $29.89 average price target is even more bullish than Goldman Sachs allows – implying an upside of ~53% in the next 12 months. (See GLBE stock forecast on TipRanks)
Innoviz Technologies (INVZ)
Next up, Innoviz, produces LiDAR systems, an advanced sensor system used in GPS and airborne cartography, topography, and surveying, but that also has applications in navigation and autonomous vehicles. LiDAR systems use advanced laser technology (the acronym stands for ‘light detection and ranging’) to act as the eyes of self-driving cars, and, along with high-end AI computing, are part of the essential tech that will make autonomous vehicles a reality.
Innoviz currently has two LiDAR hardware systems available, the first generation InnovizOne and the second generation InnovizTwo. These products have been tested and used in a range of driving applications and conditions, including robotaxis, sidewalk deliver tech, industrial drones, and consumer vehicles – as well as heavy trucks, industrial equipment, and commercial drones. Both systems are compatible with Level 3-5 autonomous vehicles. Innoviz’ LiDAR systems can be complemented by the company’s Perceptions software package.
The company’s next main product, the ‘next generation’ Innoviz360, is under final development for both automotive and non-automotive applications. It is scheduled for marketing in Q4 of this year.
In May of this year, Innoviz made a major announcement – that it has scored an agreement with one of the largest global automotive groups for the manufacture of LiDAR systems. The agreement has increased Innoviz’ forward looking order book by some $4 billion, to a new total exceeding $6.5 billion. The name of the automotive partner was not disclosed, although Innoviz is currently working with BMW on the mass production of LiDAR for Level 3-5 autonomous vehicles, making it the first LiDAR firm to partner with a major automaker in the field.
Innoviz is still in the early stages of commercializing its products. The InnovizOne system is showing sales growth, and the comp
any expects to see its first InnovizTwo sales later this year. Revenues, while low, are increasing; the 1Q22 top line of $1.8 million was more than double the year-ago figure of $0.7 million.
Analyst Mark Delaney covers this stock for Goldman, and he sees a clear path forward based on the company’s recent contract announcements and its solid foundation in the niche.
“Innoviz has experienced strong momentum with engagements since winning the series production program with a leading global OEM as a tier 1 supplier… We continue to believe that its most recent win underscores its strong position in the market, as it now has 3 series production wins contributing to a forward-looking order book of $6.6 bn (significantly higher than other lidar suppliers in the space, although we note that there is a degree of estimation involved in calculating an order book),” Delaney wrote.
“While the recently announced win as a tier 1 represents a significant longer-term revenue opportunity, in the intermediate term Innoviz believes it can generate material revenue in 2023 from both of its previously announced series wins (with BMW and an L4 autonomous shuttle program), as well as from non-automotive end markets,” the analyst added.
In line with this outlook, Delaney rates INVZ shares a Buy, and his $7 price target implies a one-year upside potential of ~69%. (To watch Delaney’s track record, click here)
All in all, Innoviz shares get a unanimous thumbs up, with 3 Buys backing the stock’s Strong Buy consensus rating. Shares sell for $4.13, and the average price target of $8 suggests an upside potential of ~94%. (See INVZ stock forecast on TipRanks)
Adobe, Inc. (ADBE)
Let’s wrap up with one of the best-known names in software, Adobe. This company has achieved two of the major goals for any firm: a solid product line with a strong following, and sound branding to back it up. Adobe is known as the developer of the PDF format, as well as products like Photoshop, Illustrator, and InDesign, now available as SaaS offerings through the proprietary Creative Cloud.
In addition to that, Adobe has brought home strong revenues and earnings. In its 2Q for fiscal year 2022, which ended on June 3, the company reported record-level revenue of $4.39 billion, up 14% year-over-year. The non-GAAP EPS of $3.35 came in just over the $3.31 forecast, and the company’s cash flows from operations reached $2.04 billion. It was a solid performance from a company that has a history of solid quarterly reports.
In its updated guidance, however, management cut its 2022 forecast for revenue and EPS. Adobe had previously published full-year guidance of $13.70 EPS and $17.9 billion in revenue; that was reduced in this report to $13.50 EPS and $17.65 in revenue. The reduction spooked investors, at least temporarily.
Covering Adobe for Goldman Sachs, 5-star analyst Kash Rangan wasn’t too fazed by the reduced guidance. He believes that Adobe will continue to deliver the goods long-term, and wrote: “Despite navigating additional FX headwinds, we continue to believe in the strength of the underlying business, which is showing strong demand and a resilient operating model. We believe Adobe is on track to grow revs 2x in the LT, potentially entering the top ranks of software companies to reach $40bn+ of revenues.”
Rangan didn’t just write up an upbeat outlook; he backed it up with a Buy rating and a $540 price target that showed his confidence in a 48% upside for the year ahead. (To watch Rangan’s track record, click here)
Giant tech names like Adobe have no trouble catch analyst reviews – and there are 25 such reviews on record for ADBE shares. They break down to 20 Buys and 5 Holds, for a Strong Buy consensus view. The stock is currently trading for $365.33 and has an average price target of $472.58, suggesting a one-year potential gain of ~30%. (See Adobe stock forecast on TipRanks)
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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.