Three Stocks to Watch for the Week of September 13th

Investors are bracing for more turbulence ahead after the worst week for U.S. equities since June.  The S&P 500 snapped its first five-day losing streak since February last week, finishing the week 1.63% lower.  The Nasdaq and the Dow also saw weekly losses, sinking 1.29% and 2.24%, respectively. 

So far, September is living up to its reputation as a bad month for stocks, but the selling hasn’t been extreme.  Persistent pandemic concerns combined with softening economic data have put equities in a defensive position.  The indicators warn of potentially more volatility on the horizon.  But as we’ve seen time and time again, bargain hunters are likely to step in and drive stocks higher. 

The corporate calendar will be uneventful this week as companies enter their so-called “quiet periods” ahead of the final two weeks of the quarter.  We will, however, get more clarity on the inflation picture.  On Tuesday, we’ll get the Consumer Price Index Report for August.  Then on Friday, The University of Michigan’s Consumer Sentiment and Expectations reports will be released.    

With current conditions in mind, our team has a few recommendations of stocks to watch as we round the corner into the final quarter of 2021.  

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Cintas (CTAS) provides corporate uniforms and apparel, as well as first aid, safety, cleaning, and restroom products and services. The company leads the market in the $25 billion uniform rental space and is poised to benefit as offices welcome back employees with a heightened focus on safety and cleanliness.  Increased emphasis on hygiene due to Covid should increase the adoption of facility services and the propensity to outsource uniforms. 

“Reopening and focus on Health, Hygiene, and Safety due to COVID and ESG has driven increased demand for Commercial Services. In particular, solid demand for cleaning/disinfecting solutions and a greater propensity to outsource facility, uniform rentals, and food services should drive solid growth for Commercial Service providers,” RBC’s Ashish Sabadra and John Mazzoni said in a report last week.

The company’s scale provides advantages in operating leverage, which should help combat inflationary pressures.  Meanwhile, potential growth opportunities in healthcare, education, and government organizations should help CTAS expand its customer base.

Of 16 polled analysts, 8 rate the stock a Buy, 6 rate it a Hold, and 2 rate it a Sell.  A median 12-month price target of $450 represents a 5.5% increase from its current price.   

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Well-known chocolate, candy, and snack manufacturer Mondelez International (MDLZ) has been gaining on robust demand in developed markets while performance in the emerging markets continues to improve.  All the while, Mondelez has been focused on lucrative acquisitions, cutting costs, and brand building through innovation.  

The oreo-maker recently acquired Chipita, a Greek company whose croissants and baked snacks helped generate $580 million in sales last year.  The company’s products are most popular in Eastern Europe but have great potential for growth around the globe, especially in emerging markets.  

The company has teamed up with MissFresh to introduce Oreo Zero.  The launch of OREO’s sugar-free Oreo Zero line on MissFresh is likely to be beneficial, thanks to MissFresh’s fast and renowned grocery delivery service and solid customer base.  This new range of sugar-free sandwich cookies is likely to cater to online customers of China well in the face of consumers’ growing health consciousness as part of which they are reducing sugar intake.  

Mondelez has been boosting its presence in emerging markets, as is evident from the addition of 80,000 new stores in China and India in Q2.  During the quarter, revenues from emerging markets increased nearly 20% to $2,293 million.  The company saw double-digit growth in India, Mexico, and Russia, as well as high-single-digit improvement in China.

Organic revenues have also benefited from efficient pricing strategies and higher volumes.  Plus, the company is currently engaged in rationalizing operational structures in an effort to cut costs.  This bodes well for the stock in the mid and long term.  

Of 23 analysts polled, 19 rate the stock a Buy, 4 rate it a Hold.  There are no Sell ratings for Mondelez. The 20 analysts offering a 12-month forecast for the stock have a median target of $71, representing a 14% upside from its current price.

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First Solar Inc. (FSLR) is a leader in the solar industry, and unlike many burgeoning solar companies, they have a rock-solid balance sheet that can handle the challenges of an economic downturn.  

Due to a stable client base, First Solar performed very well in 2020.  Despite the challenges of the pandemic, they had a backlog of orders throughout 2020, and their share price rose more than 80%.  However, the share price has dipped in 2021, which means now may be a great time to buy FSLR stock at a reduced price point. 

There is plenty of upside in the sector and plenty of room for growth.  Overall, solar energy only accounts for around 2% of the total grid usage right now.  That number is primed to go up, and First Solar is preparing for growing demand.  Recently, company execs announced plans for a third factory in Ohio that will effectively double its production capacity.  

With a current P/E ratio of just 18, FSLR stock seems like a value when compared to the industry average P/E of 47.  The 16 analysts offering 12-month price forecasts for First Solar Inc. have a median target of $101.50, representing an increase of around 8% from its current price.   

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