“Bring it on,” Raymond James says of these two buy-rated stocks

By | April 1, 2024

The good feelings from last year’s bull market are still there and driving more profits. Since bottoming in October, the S&P 500 is up 27.5% and the NASDAQ is up 29.5%. The gains took the stock well into bull market territory and mark the latest episode of a secular bullish trend that has lasted more than a decade so far.

It’s clearly a positive environment for equity investors; the biggest difficulty is finding the right stocks to buy. Last year, profits were driven by Big Tech companies. This year, these gains are more broadly based. In a recent note, Raymond James Chief Investment Officer Larry Adam looks at current market strength and adds some context: “The S&P 500 isn’t off to its best start to the year since 2019, rising ~10% and reaching his 20th record high YTD. … Resilient economic data, strong earnings (2024 earnings have broken the typical downward revision trend), AI optimism and increased investor optimism have been the key drivers. Historically, a strong start has been a positive signal for the market, with the S&P 500 rising an average of another ~7% for the rest of the year, while the first quarter performance was greater than 10%. While we remain optimistic in the longer term, caution is advised in the short term.”

Although Adam advocates a careful approach at this time, this does not mean that there are not good options available. Looking ahead, Raymond James analysts select Buy-rated stocks where they see solid potential for gains. The company advises investors to ‘load up’ now – and we opened up TipRanks’ databases to get a better sense of two of their picks. Let’s take a closer look at that.

Weave communication (WEAV)

The first stock we will look at is Weave Communications. This technology company offers a software platform optimized to streamline the way small and medium healthcare businesses locate, contact, and interact with their patients and customers. The company serves the US healthcare industry and the platform can support office phone lines, messaging systems, digital forms and online assistants, email marketing and patient scheduling, and data analytics and customer insights.

The company claims its platform helps users – mainly medical and dental clinics – miss fewer calls, save work hours and work more efficiently. Smoother office communications can have a ripple effect in other areas of the operation: Medical clinics using Weave report better patient scheduling and billing compliance thanks to text message reminders, a feature that can be automated through the system.

Financially, both revenues and profits have shown an increasing trend in recent years. This was clearly visible in the last reported quarter, Q4 2023. Weave showed revenue of $45.7 million, a year-over-year increase of 21% and an improvement on forecast by $1.5 million. Like many emerging technology companies, Weave operates at a net loss; in the final quarter of 2023, that loss was $0.8 million, or 1 cent per share. This was a strong improvement from the fourth-quarter 2022 earnings per share loss of 6 cents, beating forecasts by two cents per share.

Over the last twelve months, the shares are up 131%, although they have pulled back slightly since publication. Raymond James analyst Alexander Sklar believes that investors should take advantage of this. He writes an optimistic response to the company’s recent earnings and prospects: “We believe the recent momentum in the business will continue into 2024 and that the decline in share prices following the Q4 2023 report represents an even more favorable risk /yield ratio creates. Our positive fundamental thesis is centered around the belief that the growth acceleration from 2023 can be sustained in 2024 (with a chance of improvement over the medium term), which is not reflected in shares trading at ~4x our 2024 sales.”

Sklar goes into some detail and gives his outline of where Weave is headed, and how it will benefit investors, saying: “We see several contributors supporting higher growth in 2024, including: 1) Higher absorption rates of the largest bundle (ARPU up); 2) Improved reputation/productivity and repeat growth; 3) A broader lead-gen movement (digital, live events, partners, etc.); 4) A formal focus on large specialty medical verticals (now the third largest customer base); 5) Continuous product improvements (integrations, multi-office functionality, new offerings). With an improving profitability profile, an attractive beat-and-raise setup and the potential for a ~20% growth profile to continue into 2024, we believe a Strong Buy rating is warranted.”

That Strong Buy rating is supported by a $15 price target, which shows confidence in a 30.5% upside potential over a one-year time horizon. (Click here to view Sklar’s track record.)

Overall, WEAV stock gets a Moderate Buy rating from the Street consensus, based on seven recent analyst ratings, including five Buys and two Holds. The shares are trading for $11.48 and their $14.57 average price target implies a 27% one-year upside. (To see Weave’s stock forecast.)

GoDaddy, Inc. (GDDY)

Next is GoDaddy, an internet company, a company that offers web domain and hosting services. GoDaddy is based in Arizona and offers web hosting and domain registration for a broad customer base of private individuals and companies. The company ranks among the top web hosting companies in terms of market share and hosts more than 84 million domain names with more than 21 million entrepreneurs among its customer base.

Services domain registrants can access include free installations for up to 150 apps, an easy-to-use management dashboard, 24/7 customer support, and a 99.9% uptime reliability guarantee. The company gives its customers one free domain name during the first year of the paid hosting plan, and plenty of choices in monthly subscription services and payment options. It’s all designed to make GoDaddy the one-stop shop for web domain hosting.

The online world is changing rapidly as AI permeates virtually every digital activity – and GoDaddy is adapting to the new circumstances. The company has introduced a suite of tools, GoDaddy Airo, designed to leverage AI technology and capabilities for website domain maintenance, site construction, email marketing, and more. The tools aim to make AI-based automation available to site builders and administrators, in the interest of streamlining online operations.

Turning to the financials, we see that GoDaddy’s revenue has been consistently high in recent years, at or near $1 billion per quarter. In its latest quarterly report, which covers Q4 23, the company reported a result in line with expectations at $1.1 billion for the period. This figure increased by almost 6% year-on-year. The final result, GoDaddy’s GAAP earnings per share of $7.85, came in $6.80 above forecast – this was reportedly due to a one-time “release of valuation allowance on US and state deferred tax assets.”

In other numbers, the company reported total bookings, a measure of future business, of $1.1 billion, up 7% year-over-year, and free cash flow of $305.1 million, up 51% year-over-year.

This company’s solid performance and smart moves in AI have caught the attention of Josh Beck, one of Raymond James’ five-star analysts. Beck, who ranks in the top 2% of Street Stock professionals, writes about GoDaddy: “Our ‘SMB GenAI Tailwind’ thesis is based on GoDaddy using the innovative Airo GenAI stack to reduce the adoption hurdles of products outside of core domains, such as creating logos, effectively reduce costs. , presence, commerce/GPV which should lead to an increasing mix of customers with more than 2 products (currently >50%). We believe that over time, GoDaddy will develop customer service expertise and a deep data set (over 20 million customers and 14 million interactions, including a unique conversation corpus across email, messaging, and social media accounts from SME) can effectively ‘outsource’ to produce a more autonomous SME agent that can help respond to customer requests and generate a meaningful autonomous SaaS component.”

Beck quantifies his view and rates the stock a strong buy, with a $150 price target implying a solid 26% upside for the next twelve months. (Click here to view Beck’s track record.)

This stock also gets a Moderate Buy rating from The Street consensus, based on 16 analyst recommendations that equate to 11 Buys and 5 Holds. The current trading price of $118.68 and the average target price of $130.64 together indicate a 10% stock upside for the coming year. (To see GoDaddy’s stock forecast.)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ stock insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.

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