Three Stocks to Watch for the Week of October 18th, 2021

Stocks ticked higher last week and were aided by upbeat earnings and economic data.  The third-quarter earnings season officially kicked off with solid results from big banks.  This week we’ll hear from dozens of companies, including Tesla (TSLA), Netflix (NFLX), Johnson & Johnson (JNJ), and American Express (AXP).

“We’ll have a better idea once we get through all these earnings reports coming up next week,” said Paul Hickey, co-founder of Bespoke.  “That’s going to be the big tell.  So far, the initial reactions haven’t been too bad, especially given all the concerns people have had over the headwinds.  Everyone’s been so concerned about the supply chain issues and inflation, and the companies that reported have held up reasonably well.”

With a temporary resolution to the debt ceiling issue and easing infection rates, earnings are likely to drive the equity markets in the weeks to come.  As the Q3 season rolls on, our team has a few recommendations of stocks for you to watch.   

Stryker’s (SYK) medical devices range from implants used in joint replacements and spinal surgeries to surgical equipment and navigation systems.

New-patient demand was in question as long as COVID-19 infection rates were high, but with 57% of Americans fully vaccinated, infection rates in the U.S. are receding, and the rate of elective procedures has started to accelerate.

Robotic surgery has been rapidly gaining traction, owing to the precision that it offers.  Notably, the global surgical robotics market is expected to witness a CAGR of about 21% from 2021 to 2026, per a report by Express Market Research.  However, because of the pandemic, the usage of robots in other areas of healthcare also increased as they are being used to maintain social distance while ensuring continued interaction between doctors and patients.  Strong markets include the U.S., Australia, Germany, Canada, and especially China.  

Based on 29 analysts offering recommendations, 16 rate the stock a Buy.  There are 11 Hold ratings and 3 Sell ratings.  Analysts at Canaccord Genuity chime in with a Buy rating and say Stryker should be a “core position for growth-oriented investors.”  With an average price target of  $290, the upside implications justify a closer look at the stock.  

Generac (GNRC) makes energy storage systems, power generation equipment, and other power products for the light commercial, residential, and industrial markets globally. Founded in 1959, Generac was the first company to engineer affordable home standby generators.  Today, it is the leading manufacturer of home backup generators.

The company is focused on expanding market penetration for standby and clean energy solutions in the United States while establishing traction for these products globally.  Generac is currently doing business in 150 countries and is working to expand opportunities for growth by pioneering new markets.  The bottom line is that the company will profit from a number of secular global developments.  Generac management predicts a robust 40% – 45% increase in sales for 2021.

The analyst community is highly bullish on the portable generator company.  Of the 16 analysts covering this midcap stock, 14 rate it at Buy, and 2 call it a Hold.  There are currently no Sell ratings for the stock.

Last week Truist analyst Tristan Richardson initiated coverage of GNRC with a Buy rating and a $500 price target.  The analyst says Generac is a way to play multiple secular growth trends without the risk of a startup.  He expects “substantial opportunity in backup power in tandem with new product launches in clean energy markets will continue to unlock meaningful value for GNRC.”  

According to the California Air Resource Board, every 100,000 gallons of renewable natural gas supplied equates to removing 1,025 cars from the road.  Clean Energy Fuels (CLNE) is the leading provider of natural gas for transportation in the U.S., operating more than 565 stations across the country.  The company serves to reduce carbon emissions through the use of methane, a by-product of the breakdown from organic matter at waste treatment plants, landfills, and farms.    

Clean Energy delivers around 360 million gallons of renewable natural gas each year, which is a pretty good chunk of the country’s total annual production capacity of 500 million gallons. The first-quarter revenue fell, resulting in an increase in net losses.  This was primarily due to disruptions in the supply chain related to COVID-19.

This company recently signed a five-year agreement with Amazon (AMZN) to provide renewable natural gas at 27 existing fuel stations and another 19 that are still being built.  An agreement that could supply hundreds of millions of gallons of renewable natural gas alone, But that’s not all.  The e-commerce giant also plans to take up to a 20% stake in Clean Energy over the next ten years.    

As the nation’s top producer of renewable natural gas, CLNE is well aligned to benefit from the Biden administration’s plan to reduce carbon emissions in the U.S. by 50% over the next decade.  

CLNE shares have lost 24% over the past 6 months, lagging the Utilities sector’s loss of 1.8% and the S&P 500’s gain of 7.4%.  Investors will be hoping for strength from CLNE as it approaches its Q3 earnings release, which is slated for November 12th.  The company is expected to report EPS of $0.01, up 100% from the prior-year quarter.   A median price target of $13 implies a 44% upside over the next 12 months.  

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