“Commerce with warning,” says Oppenheimer; Listed here are 2 shares that might outperform

Fed Chair Jerome Powell’s comments on the central bank’s intention to rein in inflation, even if it causes “some pain,” spooked markets on Friday. And according to Ari Wald, Head of Technical Analysis at Oppenheimer, there are other worrisome indicators.

“The S&P 500’s move away from its 200-day moving average is a downside warning as September’s seasonal season is particularly bad when the index is in decline,” Wald said.

So with September just around the corner, Wald’s advice is to exercise caution, although promising he thinks things are going well going forward. “Against near-term trading concerns,” the analyst explained, “we still believe the June retracement suggests a longer-term bottom is forming.”

With that in mind, let’s take a look at two stocks that Wald’s fellow analysts at the investment firm believe are ripe for picks, even in an environment that is challenging for investors. We ran the pair through the TipRanks database to see what the rest of Wall Street had in mind with these names. Here are the details.

The Pennant Group (PNTG)

Let’s start with home health services provider, Pennant Group. This holding company has several subsidiaries operating under its umbrella, providing all healthcare solutions for 89 home health care facilities and hospices and 48 senior living communities. These are distributed in various states in the USA, including California, Wisconsin, Arizona, Washington, Oregon, Texas and Colorado. Each Pennant company operates independently with its own management, employees and assets.

Earlier this month, Pennant released its 2Q22 report in which it met Street’s expectations; The company had revenue of $116.3 million, up 5.4% year over year and beating Street’s forecast by $4.02 million. Adj. Earnings per share of $0.14 met analysts’ target. The company also maintained its full-year guidance for 2022 for total sales of between $450 million and $460 million.

Elsewhere, Pennant has been regularly on the M&A front; After acquiring 15 companies in 2020, the company acquired 11 home health care and hospice facilities last year. There has also been some activity recently; In mid-August, the company announced that it had acquired hospice and palliative care provider Ardent Hospice and Palliative Care of Central Valley, Palm Springs and San Diego, California.

The M&A aspect partly influences Oppenheimer’s Michael Wiederhorn’s bullish attitude.

In his opening note, the 5-star analyst said, “Overall, we believe PNTG has an attractive growth opportunity due to favorable industry dynamics, bolstered by its decentralized organization, local leadership model and M&A opportunities. Additionally, given some near-term industry concerns, we believe the stock is particularly compelling at current prices. As a result, we would be long-term buyers of PNTG.”

Accordingly, Wiederhorn rates the stock as Outperform (ie, Buy), while its $22 price target suggests shares will rise 36% over the one-year period. (To see Wiederhorn’s track record, click here)

Looking at the consensus breakdown, 2 other analysts join Wiederhorn in the bull camp while two others remain on the sidelines, all giving this name a consensus rating of Moderate Buy. Assuming the average target of $19.4, the stock is poised to grow 20% in the coming months. (See Pennant Group Stock Forecast on TipRanks)

Microvast Holdings (MVST)

Now let’s turn to healthcare and enter the realm of energy storage. Microvast is a developer and manufacturer of batteries intended to power electric vehicles and stationary systems. Aiming to improve battery performance and reduce material consumption, the company touts its “state-of-the-art” cell technology and vertical integration capability; Microvast develops modules and packs and also offers battery components (cathode, anode, electrolyte and separator).

The growing need for green energy solutions is a real plus for companies like Microvast and this was reflected in its latest quarterly statement – for 2Q22.

Even when its main export hub in Shanghai was in lockdown mode in the first half of the second quarter, the company performed strongly; Revenue increased 93% year-over-year to $64.41 million. The company also reiterated its 2022 guidance for revenue growth of 35% to 45% year over year.

Margins are also increasing again after a decline in 2021; Gross profit for the second quarter was $4.8 million compared to a gross loss of $6.8 million for the same period last year, representing a gross margin increase of 27.8 percentage points from -20.3% in the second quarter. Q2 21 to 7.5% in Q2 22 equivalent.

For Oppenheimer’s Colin Rusch, Microvast’s potential is to be a “pure game” for optimizing battery materials.

“We believe that a key challenge of increasing electrification and emission reductions in the power, heat and transport sectors is the availability of battery materials,” explained the 5-star analyst. “We believe that MVST addresses this challenge in a key way: its gradient cathode technology optimizes cost/total material usage; Cell and pack know-how helps to extend service life; and the security profile of its platform helps minimize downstream applications.”

All of this forms the basis of Rusch’s Outperform (ie, Buy) rating, while its $8 price target leaves room for one-year gains of an impressive 225%. (To see Rusch’s track record, click here)

Rusch has some big expectations, but elsewhere on Wall Street things are rather quiet on the MVST front; In the last 3 months, no other analyst has engaged in ratings on this stock. (See Microvast Stock Prediction on TipRanks)

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

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