Small Cap Movers with Strong Analyst Outlooks
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
We saw a number of strong performers from the small-cap space on Friday. These are stocks that had key developments that could very well lead to multi-day or multi-month rallies. However, these gains were also pushed higher by a number of analyst calls. Therefore, I am looking at three stocks that moved higher with a market cap under $1.5 billion that were also upgraded by analysts.
Shares of the technology/services/financial company Cardtronics rose more than 6% on Friday after a very bullish outlook from JPMorgan, which tackled the number one concern of investors. According to the firm, the concerns regarding interchange revenue have unduly pressured the stock, and now the worst case scenario has been priced in. Therefore, the stock is undervalued.
From what I can tell, it appears that the market agrees, as the stock has reversed its trend with a 9% gain in 2013. This is a company that has continued to grow, had posted large multi-year returns, and now has pulled back and is presenting value. Therefore, I agree with JPMorgan.
SodaStream outperformed the broader market and posted a gain of more than 2% following its “Buy” rating from Citi. This call was an initiation of coverage from the high-profile rating firm, and its note was short and sweet. According to Citi, SodaStream is among the fastest growing of the consumer products in the market, and has a number of new distribution channels that should produce further growth.
I completely agree with Citi on this rating, SodaStream is growing remarkably fast and may be the most undervalued consumer company in the market. The company has consistently grown its revenue by more than 50% and has improved its margins. The company also has a number of new distribution channels including Wal-Mart and more to come. With a 2.50x price/sales and forward P/E ratio of 18.23 this is a cheap stock compared to growth.
The market’s most controversial biotechnology stock, Dendreon, rose 21% thanks to data showing that its drug, Provenge, is being used more often. However, the gains were also complemented by an upgrade to “Buy” with a $10 price target at Bernstein. The firm simply noted that rising sales of Provenge along with a growing interest in the company as an acquisition target makes it a “Buy,” and will take shares higher.
This is a stock I bought back in November, and also owned as part of my Motley Fool CAPS, but then sold on Thursday (stupid me). However, aside from my loss, the news on Friday was huge for both the outlook and the future of this company. And I agree, it now becomes a prime takeover candidate. I say watch this stock closely, and don’t be surprised if it continues to climb and reaches Bernstein’s price target of $10.
A firm that offers reasons for their call is taken more seriously because they provide substance for their reasons. However, like all analyst calls, there are always two sides to a story -- for every bullish call there is someone else who is bearish. Therefore, use this information as part of your research, but it shouldn't dictate your investment decision.
BrianNichols owns SODA. The Motley Fool recommends SodaStream. The Motley Fool owns shares of Dendreon and SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!