Markets are rising and investor sentiment remains bullish. Conventional wisdom predicts further upside, assuming we are still in a secular bull market. And Wall Street institutions seem to agree.
Jonathan Golub, chief U.S. equity strategist who is monitoring the situation from UBS, said he agreed with the bullish view. Mr. Golub explains where the market is finding support and shows where the market is likely to go. “The rate cut should lower interest expense and default risk, increasing both EPS and valuation. Financial conditions show less stress and improved liquidity, which is positive for valuation,” Golub said. Ta. “We are adjusting our 2024-25 year-end S&P 500 target from 5,600 and 6,000 to 5,850 and 6,400…These expectations translate into 2024-26 EPS estimates of $240, $257, and $275. 9.1%, 7.1% and 7.0% growth in 2026.
Against this backdrop, UBS analysts have issued recommendations for two stocks, highlighting their strong growth prospects. According to TipRanks, both stocks have an analyst consensus of “Strong Buy” and significant support from the Street. Here are the details and the bank’s comments on both:
Allegro Microsystems (ALGM)
First, Allegro MicroSystems is a semiconductor company focused on integrated circuits (ICs), which are critical components for a wide range of technological and industrial applications. Allegro’s IC products are used in sensor hardware and application-specific analog power systems, particularly in the automotive industry where they are critical components in electric vehicle charging systems, industrial regulators, and various motor and electric factory conveyor systems. Helpful. The company’s products are essential for self-driving safety systems, factory automation, and, outside of the automotive industry, power-saving technology in data centers.
Like many chipmakers, Allegro is a “fabless” company. This means that it handles the design and development work for its own products and assembles prototypes, while outsourcing mass production work to external chip foundries. The fabless model allows Allegro to focus its energy and resources on putting together the strongest product line for its customer base.
And now its customer base is widespread. The company boasts more than 10,000 enterprise customers worldwide, and its customer list includes more than 50 OEMs in the automotive industry. Allegro’s chip products are ubiquitous in the global automotive supply chain, with more than nine of them in the typical car on the road today. The company has more than 650 U.S. patents to protect its intellectual property and has shipped more than 11 billion sensors.
Allegro’s product line gives the company a stake in the electric vehicle industry, and the recent slowdown in EVs has affected the company. Allegro’s revenue, earnings, and stock price have all declined in recent months. The company’s fiscal 2025 second quarter financial results hit a high of $187.4 million. This was down 32% year over year and slightly below expectations. The company’s bottom line for the quarter was 8 cents on an adjusted basis. The share beat expectations by two pennies, but was down from 40 cents in Q2 2024.
All of this hasn’t helped the stock, which has fallen 32% so far this year. However, looking to the future, UBS analyst Timothy Arcuri, who holds the No. 3 overall rating on TipRanks, listed several specific reasons why Allegro’s prospects are positive, saying the following about the company: I am writing. Going forward (we are 4%/3% ahead of F25/F26 EPS), estimates do not seem to factor in pricing or share gain potential, with ALGM’s auto revenues among the highest. It seems like it can be counted. Risk is reduced throughout the analog world. ALGM is being leveraged for vehicle electrification, but hybrids have much the same opportunity as EVs, and their magnetic sensors are a relatively low-cost/high-value part of the BOM, so they don’t stick to the mix. Finally, while ALGM is opportunistic in industrial markets, the Street is very conservative and assumes that this third of its business will never return to historical levels. ”
Arcuri sums it up: “The company is in the driver’s seat as the analog semiconductor market recovers, and is in an isolated position in the EV bill of materials, with no price/share/content contribution to support long-term growth. “The driving forces underpin most of the long-term outlook.” …”
Comments from 5-star analysts support a Buy rating, and Arcuri’s $30 price target indicates a 45% one-year upside potential. (Click here to see Arcuri’s track record.)
Overall, Allegro’s “Strong Buy from the Street” is unanimous, based on 7 positive reviews set in recent months. The stock is priced at $20.64, and the average price target of $28.17 suggests a one-year upside of 36.5%. (look Allegro stock price prediction. )
code energy (CHRD)
The next UBS-backed stock we’ll look at, Cord Energy, is an independent oil and gas company with operations in the Williston Basin of North Dakota and Montana. The region is well known for its rich natural resources, including coal, potash, oil, and natural gas. The latter is Chord’s business. The company has extensive, high-quality assets in the region, including more than 1.26 million acres and six operating drilling rigs. Of Chord’s on-site proven reserves, 57% are crude oil.
Earlier this year, the company completed its acquisition of Canadian company Enerplus. Enerplus’ assets will boost Chord’s overall position and net square footage, and the combined company is currently working to smooth operations and integrate Enerplus’ assets into Chord’s operations.
In Chord’s last quarterly report (covering Q2 2024), the company’s production for the quarter totaled 207.2 MBoepd, above the high end of its guidance. Of this total, 118.1 MBopd was crude oil. These operations resulted in the company’s total quarterly revenue of $1.26 billion, exceeding expectations by more than $308 million and growing 38% year-over-year. The company’s non-GAAP EPS of $4.69 was 40 cents less than expected, but up from $3.65 in the year-ago period. Also of note is that the company reported adjusted free cash flow of more than $216 million. Cord is scheduled to announce its third quarter financial results tomorrow (Thursday, November 7th).
UBS analyst Josh Silverstein remains optimistic about Code stock and its near-term prospects. The analyst said, “Our positive outlook reflects CHRD’s improved operational efficiency by combining Ener+ (ERF), a strong balance sheet that returns 75% of FCF to shareholders, and an attractive valuation. “I am supported by my presence,” he wrote. We believe CHRD’s valuation gap does not reflect its strong fundamentals and is priced at a 25-30% discount to WTI. We expect the discount rate to narrow, with multiple revaluations up to 3.0x to 4.0x, as CHRD continues to execute its consolidation strategy and generate higher FCF/BOE and returns through the adoption of simal flux and longer laterals. I believe it will become…”
Mr. Silverstein rates CHRD as a “buy” and has a price target of $168, expressing confidence in the stock’s 32.5% upside in one year. (To see Silverstein’s track record, click here.)
UBS’s view here is bullish, but the Street is even more bullish. The stock’s “Strong Buy” consensus rating is supported by 10 buys and 2 holds, with an ask price of $126.64 and an average target price of $186.33, giving it 47% upside potential over the coming year. It suggests that. (look Code stock price prediction. )
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. Content is for informational purposes only. It is very important to perform your own analysis before making any investment.
