Three Stocks to Watch for the Week of August 22nd, 2022

Stocks sank Friday to close last week in negative territory, ending the S&P 500’s four-week winning streak after the release of minutes from the July FOMC meeting. Comments from Fed policymakers revealed that the central bank would likely continue its aggressive path of interest rate increases for the near term, despite signs of inflation cooling. With the next Federal Reserve meeting just over a month away, investors are concerned about the pace of further rate hikes. For the week, the Dow lost 0.2%, the S&P500 shed 1.2%, and the Nasdaq declined 2.6%.  

This week, Wall Street’s attention will be focused on the Rocky Mountain town of Jackson Hole, WY, where, on Thursday, the Federal Reserve will begin its annual economic policy symposium. Fed Chairman Jerome Powell is among the featured speakers expected to discuss the economy’s most pressing obstacles.  

The latest readings of the Personal Consumption Expenditures Price Index (PCE) and the University of Michigan’s Consumer Sentiment Index (MCSI), slated for Thursday and Friday, will provide a clearer picture of whether inflation has peaked and how consumers are reacting to higher prices. Companies from various sectors are expected to report earnings, including NVIDIA, Salesforce, Nordstrom, Macy’s, and Zoom. 

Our team has three recommendations this week, including a speculative growth name that’s gaining momentum on the back of strong quarterly earnings plus a fundamentally strong stock from the consumer staples category that’s currently on the move. 

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Leading manufacturer of small satellites, Terran Orbital (LLAP) provides end-to-end satellite solutions by combining satellite design, production, launch planning, mission operations, and in-orbit support to meet the needs of the most demanding military civil, and commercial customers.  

Serving primarily the United States and Allied aerospace and defense industries, Terran was recently awarded Mission of the Year by the American Institute of Aeronautics and Astronautics Small Spacecraft Technical Committee for its Cislunar Autonomous Positioning System Technology Operations and Navigation Experiment, otherwise known as CAPSTONE, in cooperation with NASA and Advanced Space. The groundbreaking lunar orbiter is set to complete its mission at an unprecedented low cost in record time.

The company is building spacecraft for other customers and working on its own system of 96 Earth imagery satellites, which co-founder and CEO Marc Bell described as “Earth observation 3.0.” The satellites combine two types of imagery collection technology, optical and synthetic aperture radar, Bell said so that Terran can “overlay the data” and provide more in-depth analysis to customers.

Terran reported record-breaking Q2 revenue results, and management expects to build on that solid momentum in the back half of the year. The company generated revenue of $21.4 million in the second quarter, indicating a 127% year-over-year increase. Net loss was also down at $32.3 million, nearly half the $71.4 million reported for the previous quarter.   

Terran’s solid prospects and existing orders make for reliable indicators of where the company is headed. As of June 30th, the company had built its pipeline to more than 140 opportunities, representing over $16 billion in value. Its backlog is up 200% over the past six months to a record $224.1 million.  

Stifel analyst Erik Rasmussen recently initiated coverage of the stock with a Buy rating and an $8 price target, citing the company’s leadership in designing and manufacturing smallsats and its technical capabilities as crucial differentiators. Rasmussen isn’t the only Wall Street pro who believes Terran is on the cusp of a tremendous and growing opportunity in the small satellite market. Of the six analysts offering recommendations for LLAP, all six rate the stock a Buy. A median price target of $10 represents an increase of 127% from its current price.

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The solar industry has had a bumpy 2022 as supply chain disruptions, rising production costs, and labor shortages have hampered the sector, but there’s no denying its long-term exponential growth. Over the last decade, solar energy has witnessed an average annual growth rate of 49%. This phenomenal growth is due partly to strong federal policies like the Solar Investment Tax Credit, which currently provides a 26% tax credit on solar investments.  

Solar power isn’t going anywhere anytime soon, so continued growth can be expected in the long term. Business Insights projects that the $163 billion global solar industry will reach $194.75 billion by 2027, exhibiting a CAGR of 6%.

Founded in 2001, Canadian Solar Inc. (CSIQ) is a leading manufacturer of solar photovoltaic modules and a provider of solar energy solutions. CSIQ has delivered around 52 GW of solar modules to thousands of customers in more than 150 countries through 2021, reaching approximately 13 million households. Canadian Solar derives roughly 47% of its revenue from Asia, 35% from the Americas, and 18% from Europe and everywhere else.

Canadian Solar is one of the most bankable companies in the solar and renewable energy industry, publicly listed on the NASDAQ since 2006. The company has the potential to advance in the upcoming months based on its continued business growth, favorable earnings, and revenue outlook.

Benefitting partially from renewed interest in renewable energy solutions, Canadian Solar posted revenue of $2.31 billion in Q2 of this year, up nearly 61% from the $1.43 billion in sales posted in the year-ago quarter. CSIQ is up 14% year to date, while the Nasdaq index is down 20% during the same period, making Canadian Solar intriguing on a relative level. Moreover, the share price remains 33% below its February 2021 peak, and now may be a good time to buy before the next leg up.  

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Leading provider of distilled branded spirits and specialty food ingredients MGP Ingredients Inc. (MGPI) logged a record-breaking 2021 and is building on that strength in 2022, supported by domestic and secular tailwinds and margin expansion.  

Many know MGP as an opportunity to invest in branded spirits. Still, an often overlooked feature of the company is its involvement in the burgeoning plant-based protein movement, a market anticipated to grow at a CAGR of 11.2% from 2020 to 2027 to reach $27.05 billion by 2027. The company launched its line of non-GMO texturized proteins Proterra in 2020 and has been strategically building the name since.  

The most recent developments are plans for a $16.7M extrusion plant expected to produce up to 10M pounds of ProTerra annually. “Achieving in-house production of our ProTerra line of products is a meaningful investment amid growing demand and increasing outsourcing costs,” said MGP’s president and CEO, David Colo. The extrusions plant isn’t the only project MGP has in the wings. The company has expansionary projects totaling approximately $33 million over the next two years.

The company recently raised its 2022 guidance. It now sees EPS of $3.95-$4.10 and revenue of $690M-$715M. “We are well positioned to execute and deliver against our long-term growth strategy in fiscal 2022. We are committed to leveraging the strong foundation we’ve established over the years to position MGP for sustainable long-term growth,” concluded Colo. 

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