Remote lifestyles and an increasing reliance on technology products and services helped many companies generate solid growth last year. And their stocks' skyrocketing rally has in some instances made them overvalued. When the economy started recovering this year, investors opted to drop these stocks in favor of quality bargains that are well positioned to gain with the economic recovery.
While the sector rotation led to a sell-off of overvalued pandemic winners, many of those companies still hold immense growth potential. That’s because many of the pandemic-driven trends, particularly remote working and shopping, are expected to continue in the post pandemic world. This, along with the increased scope of these businesses in a post-pandemic world and current easy monetary policy, is boosting analysts’ confidence in the upside some of these stocks can still deliver.
Wall Street analysts expect Baidu, Inc. (BIDU), Peloton Interactive, Inc. (PTON), and QuantumScape Corporation (QS) to rally by more than 45% in the near-term. This, coupled with their strong fundamentals, makes them worth adding to one’s watchlist.
Baidu, Inc. (BIDU)
Headquartered in Beijing, China, BIDU offers a Chinese language search platform on its Baidu.com website that allows users to find information online, including webpages, news, documents and multimedia files, through links provided on its website. The company operates through two segments—Baidu Core and iQIYI. Baidu Core provides search-based, feed-based, and other online marketing services, while iQiyi is an online entertainment service provider that offers original, professionally produced and partner-generated content on its platform.
On April 26, 2021, at BIDU’s 2021 Wanxiang Conference, Baidu Mobile Ecosystem Group unveiled its new X+Y strategy to advance intelligent search through "servitization" and "humanization" and announced its new brand slogan: "Baidu for a Better Life". BIDU aims to provide a better end-to-end experience for users and to strengthen the commercial value of its search tools.
On March 17, BIDU priced a global offering of 95 million new Class A ordinary shares, which comprises an international offering and a Hong Kong public offering. The shares were priced at HK$252.00 each. BIDU plans to use the proceeds from the offering for technology investments in Baidu Mobile Ecosystem, for working capital and for general corporate purposes.
BIDU is scheduled to report its fiscal 2021 first quarter financial results on May 18, before the market opens. For the fourth quarter, ended December 31, 2020, the company’s total revenues increased 4.8% year-over-year to $4.64 billion. Its non-GAAP operating income was $1.08 billion, which represents a 4.5% improvement year-over-year. And its total assets increased 10.4% year-over-year to $332.71 billion as of December 31, 2020.
Analysts expect BIDU’s EPS to improve 12.8% year-over-year for the current quarter, ending June 30, 2021, to $2.46. It has surpassed the Street’s EPS estimates in each of the trailing four quarters. And its 44.65 billion consensus revenue estimate for the current quarter represents a 21.2% rise on a year-over-year basis.
The stock has gained 114.4% over the past year and 81.9% over the past nine months. BIDU closed yesterday’s trading session at $216.46.
Of 17 Wall Street analysts that have rated the stock, 15 rated it a Buy and two rated it Hold. The average price target of $351.60 indicates a potential upside of 62.4%.
Peloton Interactive, Inc. (PTON)
Headquartered in New York, PTON provides an interactive fitness platform and delivers in-studio fitness classes, fitness clubs, at-home fitness equipment & content, and health & wellness apps. The company operates through three segments: Connected Fitness Products, Subscription, and Other. It markets and sells its interactive fitness products directly through its retail showrooms and at onepeloton.com.
On April 1, PTON closed the acquisition of Precor, one of the largest global commercial fitness equipment providers. It hopes to establish its U.S. manufacturing capacity and boost research and development capabilities with Precor's highly skilled team, and to accelerate its penetration of the commercial market. Also, PTON plans to produce connected fitness products in the U.S. and enhance its customer experience before the close of 2021.
In an announcement dated March 8, PTON said it will introduce Peloton Bike, Peloton Bike+ and the Peloton App for their Australian debuts, scheduled for the second half of 2021. PTON hopes to attract health-conscious Australians with the various product portfolios in their retail showrooms.
PTON is scheduled to release its fiscal 2021 third quarter results on May 6, 2021 after the market closes. PTON’s revenues were $1.06 billion for the fiscal 2021 second quarter, ended December 31, 2020, which represents an improvement of 128.4% year-over-year. The company’s gross profit was $424.80 million, up 115.5% from the prior-year period. Its income from operations came in at $58.80 million for the quarter, compared to a loss of $61.50 million in the second quarter of 2019. PTON’s net income was $63.60 million, compared to a net loss of $55.40 million in the year-ago period. Also, its EPS was $0.18 for the quarter, compared to a loss per share of $0.20 in the prior-year period.
A $0.31 consensus EPS estimate for the current fiscal 2021, represents a 196.9% rise year-over-year. The stock has surpassed consensus EPS estimates in three of trailing four quarters. Also, its $1.16 billion consensus revenue estimate for the current quarter ending June 30, 2021 represents a 91.6% rise from the prior-year period.
The stock has rallied 225.4% over the past year and 67.1% over the past nine months. PTON ended yesterday’s trading session at $103.27.
Wall Street analysts expect the stock to hit $159.50 in the near term, which indicates a potential upside of 54.5%. Of 25 Wall Street analysts, 20 have rated it a Buy and four rated it Hold.
QuantumScape Corporation (QS)
QS is engaged in the development and commercialization of solid-state lithium-metal batteries for electric vehicles and other applications. The company uses its original equipment manufacturer (OEM)-validated battery technology to design these batteries.
On April 15, QS announced plans to build a highly automated factory to manufacture advanced electric vehicle batteries in North San Jose. It plans to spend $230-$290 million this year to build the factory. QS hopes to produce 100,000 sample battery cells each year from this QS-0 facility.
On 31 March, Volkswagen Group of America Investments, LCC (VW) successfully tested QS’ solid-state lithium-metal cells in its labs in Germany and will invest $100 million in QS. QS is looking forward to working with Volkswagen to bring solid-state lithium-metal battery technology into industrialized mass-production. QS announced the closing of an underwritten public offering of 11.96 million shares of its Class A common stock on March 29, generating $478.4 in gross proceeds. The company had $115.41 million in cash and cash equivalents as of December 31, 2020, which represents a 350.9% improvement year-over-year. QS’ total assets increased 518.8% year-over-year to $1.07 billion.
The stock closed yesterday’s trading session at $38.91, which is its 52-week high. Wall Street analysts expect the stock to hit $56.75 in the near term, which indicates a potential upside of 45.9%. Of the four analysts that have rated the stock, two have rated it a Buy and two rated it Hold.
BIDU shares were trading at $216.77 per share on Tuesday afternoon, up $0.31 (+0.14%). Year-to-date, BIDU has gained 0.25%, versus a 12.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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