As we head into the holiday season and the last weeks of a rocky 2022, let’s get ready for the next year by taking a look at potential winning stock choices. According to the data, these are Strong Buy equities with solid upside potential – and they each get a ‘Perfect 10’ from the Smart Score data tool.
The Smart Score is based on the TipRanks database; it sorts out the data on every publicly traded stock by a set of 8 factors, all known as indicators of future outperformance. The factors include the well-known technical and fundamental data points, but they also add in sentiment from news sources and financial bloggers, and purchase activity from hedge funds and individual investors. These are all factors that investors and stock analysts will use to base their decisions on – but it’s the rare bird who considers them all at once.
That’s where the Smart Score excels. The tool collects and collates the data, and distills it into a single-digit score for each stock, on an intuitive scale of 1 to 10. We’ve opened up the TipRanks database to pull the details on two ‘Perfect 10’ stocks with solid long-term potential; here they are, along with commentaries from some of the Street’s top analysts.
GlobalFoundries, Inc. (GFS)
We’ll start in the semiconductor chip industry, a vital sector in today’s digitally driven economy. GlobalFoundries is based in Santa Clara, California, and offers chip design and manufacturing services on contract to customers in the automotive, computing, IoT, mobility, and wired networking industries. The company operates worldwide, through a network of offices, including chip foundries and centers for design, R&D, and manufacturing.
GlobalFoundries boasts steadily rising revenue over the past year – its first as a publicly traded company – with the 3Q22 result of $2.1 billion coming in at a 22% year-over-year gain. This was a record top-line quarterly result for the company, and reflects the ever increasing need for semiconductor chips. The company’s net income also hit a record, at $336 million, and GFS finished Q3 with $3.5 billion in cash and other liquid assets on hand.
Earnings have been growing even faster than revenues. At the bottom line, GlobalFoundries reported a Q3 diluted EPS of 67 cents, up 15% from the 58 cents reported in Q2 – and almost 10x higher than the 7 cents reported in the year-ago quarter. Looking ahead, GlobalFoundries expects net revenue in 4Q22 to exceed $2 billion again, and for bottom line EPS to come in between $1.16 and $1.39.
The ‘Perfect 10’ Smart Score on GlobalFoundries finds support from the simple moving average, an important technical factor based on the ratio of the 20 day sma to the 200 day sma – it is positive for GFS shares. The financial bloggers, who are frequently a fickle bunch, give the stock 100% positive coverage, while the hedges bought 4.8 million shares in the last reported quarter.
5-star analyst Chris Caso, of Credit Suisse, points out a long term case for buying into GFS, writing, “…we believe the tight supply and higher capital intensity in legacy node manufacturing is structural rather than cyclical, largely driven by the lack of availability of used equipment that supplied this market segment in the past. GFS also benefits from the industry’s desire to diversify outside of Taiwan, and will benefit from government incentives in their existing European and US manufacturing centers.”
Looking forward from this stance, Caso sees reason for an Outperform (Buy) rating on the shares, and his price target, at $78, suggests room for 30% share appreciation in the coming year. (To watch Caso’s track record, click here.)
The 9 recent analyst reviews on GFS break down 8 to 1 in favor of Buys over Holds, for a Strong Buy consensus rating. The stock is currently trading for $60.03, and its average price target, $76.22, implies a gain of 27% on the one-year horizon. (See GlobalFoundries’ stock forecast at TipRanks.)
Ciena (CIEN)
For the second stock on our list, we’ll shift over to the East Coast, where Maryland-based Ciena operates in the networking sector, providing services, software, and systems to global customers – including such major names as AT&T, Sprint, and Verizon. One of Ciena’s key strengths is its intellectual property, buttressed by a portfolio containing more than 2,000 patents. The company’s products are used in intelligent automation, routing and switching, and domain control and management.
CIEN shares are down more than 37% so far this year – but they jumped early this month, by almost 20%, when the fiscal 4Q22 financial release showed revenues and earnings above the estimates. While both the top and bottom lines were down y/y, investors were pleased that the company beat the forecasts.
At the top line, revenue came in at $971 million, 14% above the forecast and 11% above the fiscal Q3 result. Turning to the bottom line, adjusted EPS was reported at 61 cents per share – far above the 8 cents expected.
For the full fiscal year 2022, Ciena saw over $3.63 billion at the top line, up slightly from the $3.62 billion reported in fiscal 2021. The recently ended fiscal year’s result was driven by solid results in the converged packet optical platform, which saw $2.38 billion in sales, or 65% of the total annual revenue.
Turning to the Smart Score, we find that CIEN shares rate high on several factors. News sentiment on the stock has been 100% positive lately, as has the coverage from the financial bloggers. Of the hedge funds tracked by TipRanks, holdings in CIEN increased by 1.2 million in the last quarter. And lastly, the crowd wisdom is rated ‘very positive’ here, as individual investor holdings in CIEN have increased for both the last month and the last week. It all adds up to a ‘Perfect 10.’
Connecting the dots on Ciena, Cowen’s 5-star analyst Paul Silverstein comes up with a bullish picture, saying of the company, “We see CIEN as the communications equipment supplier best leveraged to an optical upgrade cycle in which service providers are significantly shifting their optical capital expenditures to next-generation optical systems… We expect Ciena to continue to benefit as service provider optical capital expenditures continue to shift to these next-generation optical platforms in order to bridge the chasm between growth in bandwidth consumption and the lack of corresponding growth in service revenues.”
Quantifying this outlook, Silverstein rates the shares as Outperform (a Buy) while setting a $76 price target that implies an upside potential of 57% for the next 12 months. (To watch Silverstein’s track record, click here.)
Tech stocks tend to get plenty of attention from the Street’s analysts, and Ciena is no exception – the stock has 13 recent analyst reviews, including 10 to Buy against 3 Holds, for a Strong Buy consensus rating. The shares have an average price target of $63.75, suggesting 32% one-year gain from the current share price of $48.42. (See Ciena’s stock forecast at TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Source: https://finance.yahoo.com/news/tipranks-perfect-10-list-2-134928427.html