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 by several factors, including the surprising strength of the Ukrainian forces and the unexpectedly poor performance of 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%.
Mike Wilson, chief U.S. equity strategist at Morgan Stanley believes the domestic factors will play in for greater influence in the US markets, writing, While the Russia/Ukraine situation obviously can make this slowdown even worse, ultimately, we think that preexisting fundamental risks we’ve been focused on for months will be the primary drivers.
So where are we now? Wilson believes that the stock market has oversold, but caution is advised now. He writes, “[We]Recognize that equity markets are oversold and sentiment bearish, even though positioning is not. With the Russia Ukraine situation now weighing heavily on equity markets, relief would likely lead to a tactical rally, but we acknowledge that uncertainty remains extremely 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 checked out three of their selections on the TipRanks platformTo get the most recent details, click here
ironSource (IS)
IronSource, a global software company has taken advantage of the digital economy to promote apps. ironSource offers app developers and app owners a platform to monetize, allowing them to concentrate on creating new apps while we take over the rest. ironSources platform provides functions to monitor and analyze backstage features for apps. These include monetization, user growth, creative management, publishing, analysis, and data analysis.
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’s fourth quarter 2021 saw $158.2million at the top, up 46% over the previous quarter. 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 more growth, with $553million at the top line, a 67% increase yoy. The company anticipates sales of $820 million by 2022. This will result in 48% yoy growth.
The company, which was a business combination of Thoma Bravo Advantage and this company, jumped on the SPAC bandwagon in 2013 and went public on Wall Street. IronSource brought in $2.15 Billion gross cash proceeds when the IS ticker went on trading on June 29. IS shares started trading at $11 each and have fallen 47% since then.
Covering the stock for Morgan Stanley, analyst Matthew Cost writes that he remains bullish on ironSource, including among his reasons: “(1) Sonics 4Q performance and contribution to 22 guidance speak to a product that is still only beginning to reap the benefits of a diversified contextual data set, derived from sources across the advertising, telco, and publishing solutions… (2) We remain bullish on Auras two new (as yet undisclosed) telco customer signups, which we expect to become important contributors over the course of 22.” (3) We continue to view IS as well positioned to benefit from incremental privacy changes in the mobile ecosystem.”
Cost rates the stock as an Overweight (i.e. Buy with a $10.50 price target, which implies a potential upside of 79% for next year. (To see Costs track record, Click here)
Morgan Stanley’s bullish view is not unusual. Wall Street has given ironSource shares 10 Buy reviews to 1 Hold, indicating a Strong Buy consensus rating. Based on an average target of $11.32 per share and a current trading cost of $5.87, the shares offer 93% upside potential. (See ironSource stock prediction on TipRanks.
Werner Enterprises (WERN)
Werner Enterprises, a Nebraska-based logistics firm, is next. With 13,500 employees and contractors, the company operates in the US, Mexico, 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 blow estimates in the first two quarters, Q4’s EPS rose to $1.13 per Share, which is well above the expected 96-cents.
Ravi Shanker from Morgan Stanley is one of the bulls. She makes a bullish case to long-term investors. Short-term investors may worry about the near term cost head winds and whether WERN will overcome these cost challenges. However, it is clear that management plans to build a LT earnings engine. If achieved, the LT targets are $6.50-7.00 EPS. While the near-term story may not seem as exciting as other peers, we believe that WERN can be a strong compounder in the long-term.
Shanker rates WERN Overweight (i.e. Buy, with a $73 price target which indicates potential for 68% upside in the next 12 months. (To view Shankers’ track record, Click here)
What do other analysts think? The consensus breakdown shows that opinions from other analysts are more dispersed. 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%. (See TipRanks WERN stock prediction)
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 has made a commitment to being environmentally friendly in its manufacturing, using all-natural, sustainably-sourced materials in its product line. Sugarcane, eucalyptus, and merino are the sole materials used in the shoes.
Allbirds claims that it has sold over 8 million pairs of shoes since its 2015 founding. This is a remarkable feat for a company that has opted not to go wholesale and relies solely on direct-to consumer marketing. Some 3.3 million of the company’s 4 million customers, or 82% are located in the US.
The company decided to continue its sales success by going 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 sale came after a $1.7billion funding round in 2020. It gave Allbirds a strong foundation to continue operations.
Allbirds’ 4Q21 earnings reports highlighted two trends that should be reassuring for investors. First, revenues increased sequentially from $62 million up to $97 million, which is a record for the company. The quarterly EPS loss was reduced from 25 to 9 Cents. Allbirds’ net revenue for the full year 2021 was $277 million, an increase of 27% over 2020.
Analyst Kimberly Greenberger is a Morgan Stanley analyst who covers Allbirds. She likes what she sees.
“The compelling product offering has allowed management to take prices without experiencing price resistance, all while acquiring new customers (+1M new customers for the third year in a row) and growing AOVs (+11% y/y in 2021). This shows brand momentum has not slowed and will likely continue into 2022 and beyond, according to our opinion. Additionally, management’s 2022 revenue guidance of +30% y/y at the mid-point implies an acceleration in top-line growth y/y, driven by 1-3% pts of benefit from additional price increases, which we view as achievable, Greenberger opined.
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 Buy reviews against just 2 Holds to give it a Strong Buy consensus rating. The average price target at $18.82 indicates a strong 150% upside potential over the current share prices of $7.52. (See TipRanks BIRD stock prediction)
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Disclaimer: The opinions contained in this article are the sole opinions of the featured analysts. The information is provided solely for informational purposes. It is crucial to do your own analysis before you make any investment.
