Markets are rising, and investor sentiment stays bullish. The standard wisdom is predicting further gains, on the idea that we’re still in a long-term bull market. And it could seem that Wall Street’s institutions are in agreement.
Watching the situation from UBS, chief US equity strategist Jonathan Golub has set out his own agreement with the bullish view. Golub explains where the market is finding support, and goes on to put out where markets are more likely to go. “Rate cuts should lower interest expense and default risk, adding to each EPS and valuations. Financial conditions point to less stress/more liquidity, a positive for valuations,” Golub said. “We’re adjusting our year-end 2024-25 S&P 500 targets to 5850 and 6400, from 5600 and 6000… These forecasts are based on EPS estimates of $240, $257, and $275 for 2024-26, implying 9.1%, 7.1% and seven.0% growth.”
Against this backdrop, UBS analysts have issued recommendations on 2 stocks, highlighting each based on its strong growth prospects. In line with TipRanks, each stocks also boast substantial support from the Street with a “Strong Buy” analyst consensus. Listed below are the small print, and the bank’s comments on each.
Allegro MicroSystems (ALGM)
First up is Allegro MicroSystems, a semiconductor company with a give attention to integrated circuits (ICs), a key component in a big selection of technological and industrial applications. Allegro’s IC products are utilized in sensor hardware and in application-specific analog power systems, and are particularly useful within the automotive industry, where they’re vital parts of electrical vehicle charging systems, industrial regulators, and various motors and motorized factory conveyor systems. The corporate’s products are vital for autonomous driving safety systems, factory automation, and, outside the auto industry, in power-saving technologies for data centers.
Like many chip makers, Allegro is a ‘fabless’ company; that’s, it handles the design and development work on its products and puts together the prototypes – while farming out the mass production work to outside chip foundries. The fabless model allows Allegro to focus its energies and resources on putting together the strongest product line for its customer base.
And at once, that customer base is extensive. The corporate boasts over 10,000 enterprise customers worldwide and claims greater than 50 OEMs from the automotive industry in its customer list. Allegro’s chip products are widespread on this planet’s automotive supply chain, with greater than 9 in the standard automobile on the road today. The corporate has over 650 US patents to guard its mental property and has shipped out a cumulative total of greater than 11 billion sensors.
Allegro’s product lines give the corporate a stake in the electrical vehicle industry, and up to date slowdowns in EVs have impacted the corporate. Allegro’s revenues, earnings, and share price are all down in recent months. The corporate’s fiscal 2Q25 results showed a top line of $187.4 million. This was down 32% year-over-year and just skidded underneath the forecast. The corporate’s bottom line within the quarter, at 8 cents per adj. share, was 2 pennies above the forecast – but was down from 40 cents in fiscal 2Q24.
All of that hasn’t helped the stock, which has fallen by 32% this 12 months. Nevertheless, looking ahead, UBS analyst Timothy Arcuri, who holds the #3 rating overall from TipRanks, sets out some concrete the explanation why Allegro’s outlook is vivid, writing of the corporate, “To our eyes, the Street appears to be underestimating the cyclical recovery ahead (we’re 4%/3% above F25/F26 EPS), estimates appear to bake in no pricing or share gain potential, and ALGM’s autos revenue appears amongst probably the most de-risked in your entire analog universe. ALGM is levered to autos electrification, but agnostic to combine because it has concerning the same opportunity in hybrids as EVs and its magnetic sensors are a comparatively low price/high value portion of the BOM. Lastly, ALGM is opportunistic in the economic market, though the Street is so conservative it assumes this third of the business won’t ever return to historical levels.”
Summing up, Arcuri says, “The corporate is in the driving force’s seat because the analog semiconductor market recovers, with an insulated position in EV bill of materials, secular growth drivers supporting most of long run guidance even with none contribution from price/share/content…”
The 5-star analyst’s comments support a Buy rating, and Arcuri’s $30 price goal points toward a one-year upside potential of 45%. (To look at Arcuri’s track record, click here.)
Overall, Allegro’s Strong Buy from the Street is unanimous, based because it is on 7 positive reviews set in recent months. The shares are priced at $20.64 and the $28.17 average goal price suggests a one-year gain of 36.5%. (See Allegro’s stock forecast.)
Chord Energy (CHRD)
The subsequent UBS-backed stock we’ll have a look at, Chord Energy, is an independent oil and gas company operating within the Williston Basin of North Dakota and Montana. This region is well often known as a source of wealthy natural resources, including coal, potash, and oil and natural gas. The latter are Chord’s business; the corporate has extensive, high-quality assets in the realm, including greater than 1.26 million net acres and 6 operated drilling rigs. Of the proven reserves on Chord’s acreage, 57% is crude oil.
Earlier this 12 months, the corporate accomplished its acquisition of the Canadian firm Enerplus. Enerplus’s assets provided a lift to Chord’s overall position and net acreage, and the combined entity is now working to smooth out operations and integrate the Enerplus assets into Chord’s operations.
In Chord’s last quarterly report, covering 2Q24, the corporate produced a complete of 207.2 MBoepd through the quarter, exceeding the high end of the guidance; of that total, 118.1 MBopd was crude oil. These operations supported the corporate’s $1.26 billion in total quarterly revenue, beating the forecast by over $308 million and growing 38% year-over-year. The corporate’s EPS got here to $4.69 by non-GAAP measures, missing expectations by 40 cents – but rising from the $3.65 reported within the prior-year period. Also of note – the corporate reported an adjusted free money flow exceeding $216 million. Chord is scheduled to release Q3 earnings tomorrow (Thursday, November 7).
UBS analyst Josh Silverstein is willing to take an upbeat view of Chord’s stock and its prospects for the near-term. The analyst writes, “Our positive outlook is supported by CHRD’s improving operational efficiency as they integrate Enerplus (ERF), a robust balance sheet supporting 75% of FCF being returned to shareholders, and attractive valuation. We see CHRD’s valuation gap as not reflecting its strong fundamentals, and pricing in a 25-30% discount to WTI. We consider that as CHRD continues executing their consolidation playbook, and generates higher FCF/BOE and returns through the adoption of simulfracs and longer laterals, the discount will narrow, with the multiple re-rating from ~3.0x to 4.0x…”
Silverstein backs up his stance on CHRD with a Buy rating, and a $168 price goal that indicates his confidence in an upside of 32.5% on the one-year horizon. (To look at Silverstein’s track record, click here.)
The UBS view here is bullish – the Street is even a bit more so. The Strong Buy consensus rating on this stock is supported by 10 Buys and a couple of Holds, while the $126.64 selling price and $186.33 average goal price together suggest an upside potential of 47% for the 12 months ahead. (See Chord’s stock forecast.)
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Disclaimer: The opinions expressed in this text are solely those of the featured analysts. The content is meant for use for informational purposes only. It is extremely essential to do your individual evaluation before making any investment.
