After months of building up a crisis Russia launched a full-dress invasion of Ukraine on February 24, after several months. The crisis has caused markets to drift as investors were unsure how to react to a more uncertain and difficult financial environment. Market confusion has been exacerbated due to several factors, including the unexpectedly strong resistance of the Ukrainian Forces and the weak performance by the Russian Army.
The US Federal Reserve is poised to tighten monetary policy and raise interest rates, which will undoubtedly slow down growth. The stock market has been in a slump this year and the NASDAQ is currently in a correction, down 13%.
Morgan Stanley’s chief U.S equity strategist Mike Wilson believes that domestic factors will have a greater impact on the US markets. He wrote, “While the Russia/Ukraine situation can make this slowdown even more severe, ultimately we think that the primary drivers will be preexisting fundamental risk we’ve been focusing on for months.”
So where do we go from here? Wilson believes the stock markets are oversold. However, caution is warranted right now. He wrote, “[We]We recognize that equity markets have become very oversold, and that sentiment is bearish, even if it is not. While relief would likely result in a tactical rally given the Russia Ukraine situation, we recognize that uncertainty remains very high.
Morgan Stanley’s stock analysts have been identifying stocks that they think are likely to gain in a challenging environment. In fact they see more than 60% upside for these stocks. We have looked up three of their selections on the TipRanks platformFor the latest information, please visit
ironSource (IS)
IronSource, a global software company has taken advantage of the digital economy to promote apps. ironSource provides a platform for app developers and owners to monetize their apps. This allows them to focus on creating new apps, while we take care the rest. ironSources platform can monitor all aspects of apps backstage, including user growth, monetization, analysis, creative management and publishing.
ironSource has 9 offices around the globe. The platform is used by over 2.3 billion users and 87% of the top 100 online gaming sites. IronSource reported $158.2 million in the fourth quarter of 2021, up 46% from last year. EPS was listed at 2 Cents, which was flat from the previous quarter, year-over-year, and lower than the predicted 3 Cents. Full-year data showed even greater growth with $553 million at top line, an increase of 67% yoy. The company expects to make $820 million in 2022 sales, which would translate into 48% yoy growth.
The company joined the SPAC bandwagon last summer, becoming public on Wall Street via a business combination with Thoma Bravo Advantage. IronSource received $2.15 billion in gross cash proceeds from the transaction when the IS ticker began trading on June 29. IS shares started trading at $11 per share and have fallen 47% since then.
Analyst Matthew Cost covers ironSource stock for Morgan Stanley. He writes that he is bullish on the product. (1) Sonics 4Q performance, contribution to 22 guidance are a sign that the product is still just beginning to reap the benefits from a diversified contextual information set. (2) We remain bullish about Auras two new (as of yet undisclosed), telco customer signingups. These will be important contributors over the course 22. (3) We believe IS is well-positioned to reap the benefits of incremental privacy changes in mobile ecosystem.
Cost rates the stock as an Overweight (i.e. Buy, with a $10.50 target price that suggests a 79% upside for the year ahead. (To see Costs track record, Click here)
Morgan Stanley is bullish but it’s not an anomaly. Wall Street gives ironSource shares 10 Buy reviews and 1 Hold to give it a Strong Buy consensus rating. Based on an average target price of $11.32 and current trading prices of $5.87, the shares have a 93% upside possibility. (TipRanks ironSource stock forecast)
Werner Enterprises (WERN)
Werner Enterprises, a Nebraska-based logistics firm, is next. With 13500 employees and contractors, the company is present in the US, Mexico and Canada. Werner is a trucking company, offering a full range of shipping services, including one-way trucking, dedicated shipments, intermodal shipments, temperature-controlled trailers, expedited transport, cross border trucking, and final mile transport.
The company has suffered severe headwinds from supply disruptions in the past 6 to 8 months, which have caused Q2 and Q3 results to fall below expectations. Werner managed to weather the storm. The company reported $765.2 millions at the top for 4Q21 and $2.73 billion in total revenues for the full year 2021. After coming in blow estimates for the previous two quarters and rising to $1.13 per shares in Q4, the EPS was well above the 96 cents expected.
Ravi Shanker, a Morgan Stanley analyst, is one of the bulls. While short-term investors may be concerned about the near-term cost headwinds and whether the cycle is still alive and well after WERN overcomes these cost challenges, it is clear that management has set up a LT earnings machine. If reached, the LT targets will be $6.50-7.00 EPS. Although the near-term story is not as exciting as some peers, we believe WERN can be an effective compounder over time.
Shanker rates WERN as Overweight (i.e. Buy, along with a $73 price goal that suggests potential for 68% upside in the next twelve months. (To see Shankers’ track record, click here Click here)
What do other analysts think? You can see that the consensus breakdown shows that analysts’ opinions are more evenly distributed. 6 Buys are accompanied by 2 Holds and 1 sell, which makes the consensus Moderate Buy. The average price target of $53.78 indicates a potential upside of 24%. (TipRanks stock forecast for WERN)
Allbirds, Inc. (BIRD)
We’ll wrap up today’s Morgan Stanley picks with Allbirds. This New Zealand-based shoe company sells shoes on a sustainable basis. It offers products with a lower environmental footprint, up to 30% lower than standard sneakers. Allbirds is committed to using sustainable, natural materials in its manufacturing process. Sugarcane, eucalyptus, and merino are the sole materials used in the shoes.
Allbirds, which was founded in 2015, boasts that it sold more than 8,000,000 pairs of shoes. This remarkable number is impressive for a company who has not gone wholesale and relies only on direct-to consumers marketing. 82% of the company’s 4,000,000 customers are located in the US.
The company took this success and went public last November. Allbirds sold 23.22 Million shares at the event. 16.85 Million were placed on the market by the company. The company also raised $303M in new capital. This was in addition to a $1.7 billion round of funding in 2020 and gave Allbirds a solid foundation to continue operations.
Allbirds reported two trends in its 4Q21 earnings report that should be reassuring to investors. First, revenue increased sequentially from $62million to $97million, a company record. Second, the quarterly EPS loss decreased from 25 cents down to 9 cents. Allbirds’ net revenue for the full year 2021 was $277 million, an increase of 27% over 2020.
Analyst Kimberly Greenberger covers Allbirds at Morgan Stanley and loves what she sees.
“The compelling product offering allowed management to lower prices without experiencing price resistance. All this while acquiring new customers (+1M for the third consecutive year) and growing AOVs (+11% y/y in 2021). This shows that brand momentum is not slowing down and will likely continue to grow into 2022and beyond. Management’s 2022 revenue guidance at the mid-point of +30% y/y implies an acceleration of top-line growth, driven by 1-3% points of benefit from additional prices increases, which Greenberger stated.
Based on the above, Greenberger has set a price target at $17, which suggests a strong 126% upside to her Overweight (i.e. The stock has a Buy rating. (To watch Greenbergers track record, Click here)
Since its IPO, this unique footwear company received 12 reviews. They include 10 Buys and 2 Holds for a Strong buy consensus rating. The average price target of $18.82 suggests a strong 150% upside potential compared to the current share price $7.52. (TipRanks has a stock forecast for BIRD)
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Disclaimer: The opinions expressed within this article are solely the views of the featured analysts. The information is provided solely for informational purposes. It is important to do your own analysis prior to making any investment.
These opinions and views are the author’s. They do not necessarily reflect those expressed by Nasdaq, Inc.
