🤖📈 Top Trade Ideas from July 5
Including 85% upside in Victoria's Secret, Under Armour has 132% upside, and more...
👋 Hello!
Our AI read and summarized 193 articles today from all over the internet to find the best trade ideas to help you make more money in the stock market.
What you’ll find in this email:
👙 Victoria’s Secret is deeply undervalued (85% upside)
🐻 The bearish v bullish case for Diageo
📱 [Premium] Morningstar analyst gives Under Armour 132% upside potential
🤖📈🚗📱 Much more…
💰 Today’s Featured Trade Ideas
🥇 Victoria's Secret: Deep-Value, But Not Without Risk (link)
Ticker: $VSCO | Current Price: $17.91 | Price Target: $33.20 (+85%)
👙 Apparel | 🏷️ Undervalued | 📈 Long Idea
Victoria's Secret & Co is the market leader in intimate apparel and lingerie. The company has an extensive product portfolio and operates multiple brands, creating cross-selling opportunities and operational synergies. However, since its spinoff and IPO, the company has had mixed financial performance, leading to negative market sentiment. The stock is currently undervalued by almost 70%, but there is uncertainty regarding the company's ability to meet growth and profitability targets. Victoria's Secret has a narrow economic moat based on its brand image and economies of scale. The company's extensive portfolio of brands, including \"Victoria's Secret\" and \"PINK,\" creates differentiation and reduces competition. The company operates over 1200 stores worldwide and is expanding its digital sales. Victoria's Secret has faced challenges in recent years, including a decrease in net sales and operating income. The company has significant long-term debt, which could pose cash flow issues in the future. Despite these challenges, Victoria's Secret has a three-pillar strategy focused on strengthening core products, international growth, and transformation. The stock is currently trading at a low valuation, presenting a potential value play. However, the company faces risks related to macroeconomic conditions, brand image, execution of acquisitions, and debt burden. From an ESG perspective, Victoria's Secret has a positive outlook.
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🥈 Portfolio Review - Added to Sea Limited (link)
Ticker: $SE | Current Price: $56.46 | Price Target: N/A
📦 E-commerce | 🕹️ Gaming | 🇸🇬 Singapore | 📈 Long Idea
SE's stock has seen a nearly 35% decrease since announcing earnings on May 18th. Despite this, the company reported satisfactory earnings, marking its second consecutive profitable quarter. Shopee, SE's e-commerce platform, was recognized as the top player in Southeast Asia for 2022, holding approximately 48% market share and $47.9 billion of the region's $99.5 billion e-commerce Gross Merchandise Volume (GMV). The company is ahead of Alibaba's Lazada in all Southeast Asian countries. There is the potential for significant upside and a possible re-rating of SE's stock once their Garena game stabilizes.
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🥉 Diageo: P/E at 20x Again Ahead of FY23 Results (link)
Ticker: $DEO | Current Price: $172 | Price Target: $269 (+56%)
🥤 Beverage | ✏️ Blog Post | 📈 Long Idea
Diageo, the global leader in spirits, has a bullish outlook with forecasts indicating a total return of 56% (16.3% annualized) by June 2026. Despite a potential over-earning in CY22 due to COVID-19's demand boost and a possible future impact of a U.S. recession, the company's long-term growth drivers are deemed strong. The company's focus on premium brands and resilience in the U.S. market are key factors in this positive outlook. The growth in spirits consumption during the pandemic is believed to be permanent, supporting Diageo's growth strategy. Despite the share price remaining relatively flat since January 2020, the valuation of Diageo shares is considered cheap with a P/E ratio of 20.4x CY22 EPS and a 2.5% Free Cash Flow (FCF) Yield. The company is targeting consistent organic net sales growth and sustainable organic EBIT growth. Although a U.S. recession is inevitable, it's currently not a factor affecting the company's strong position. The company's resilience in a future recession is backed by the structural drivers behind Diageo's earnings growth and the company's diversification and better inventory control.
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💰 More Trade Ideas
Core Laboratories' Performance Will Improve Throughout 2023 as International Activity Expands (link)
Ticker: $CLB | Current Price: $22.56 | Price Target: $29 (+29%)
🛢️ Oil/Gas | ⬆️ Expansion | 📝 Research Report | 📈 Long Idea
Core Laboratories is a leading provider of reservoir characterization services and has successfully expanded its business by offering fluids analysis services and developing its Production Enhancement segment. The company's innovations are driven by client guidance and requests, primarily from major oil companies. Core Labs is exploring new applications for its services, such as carbon capture and sequestration projects. The company has a strong track record of value generation and returning cash to shareholders. Bulls believe that increased investment in complex wells and reliance on Core's specialized knowledge will drive demand for the company's technology. Core's exposure to international markets will help mitigate revenue cyclicality. Bears argue that the competitive nature of the U.S. shale market may pressure the profitability of Core's production enhancement segment. Core's focus on niche services in oil and gas production may hinder long-term growth as alternative fuel sources become more viable. There is a possibility of permanently reduced capital spending from customers, leading to a smaller pool of potential revenue for Core Labs. Core Laboratories is awarded a wide economic moat, with strong returns on invested capital. The company's returns on invested capital are expected to improve as global oil and gas production activity recovers. Core Labs has a competitive advantage due to its in-house core analysis program and manufacturing of lab equipment. Core Labs has a strong reputation, expertise, and robust database that give it an advantage in bidding for contracts. Core Labs' intangible assets, such as its strong reputation and engineering expertise, have driven its position at the forefront of technological advancements in the industry. Core Labs develops new products and services in collaboration with existing clients, ensuring client adoption and meeting market demand. The production enhancement segment of Core Labs' business exhibits moaty qualities and leverages data from the reservoir description segment to develop high-tech products for well completions. Core Labs' market share in the North American shale market is estimated to be significant. Core Labs is participating in studies targeting reservoir candidates for carbon sequestration projects. Depleted oil and gas reservoirs provide cost-effective options for carbon sequestration projects, creating a new market for Core Labs' existing insights. CCS service purchases are expected to grow by 62% in the near term. Core Labs remains a formidable presence in its end markets and continues to advance its technologies to maintain a leading edge. Core Labs is expected to return to its prepandemic levels of value generation as oil and gas production increases. The global industry recovery has been bumpy but is showing a steady upward trend, especially in non-U.S. markets where 70% of Core's business resides. Increased investment in offshore production will provide opportunities for Core Labs. Core Labs' internal operational management has been impacted by the pandemic, but increased revenue, improved cost management, and expanding global production activity are expected to drive margin expansion. Core Labs is exposed to environmental, social, and governance (ESG) risk factors that could disrupt its long-term value generation. The biggest threat to Core Laboratories is decreasing demand for oil and gas over the very long term. Core Laboratories has an exemplary capital allocation rating and a strong balance sheet. The firm's outstanding debt matures in late 2023, after which it is expected to gradually increase dividend payments. Core Laboratories has a highly tenured management team that has been successful in adapting the business to align with customer demand and industry evolution. The firm's innovations are frequently developed in collaboration with clients, allowing it to maintain a leading edge in technological advancement. Core Laboratories has had spectacular successes with its large-scale investments, such as the development of the production enhancement segment and maintaining a strong market share in the U.S. shale market.
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PrairieSky Royalty (link)
Ticker: (OTC: $PREKF) | Current Price: $17.75 | Price Target: $N/A
🛢️ Oil/Gas | 💰 Dividend | ✏️ Blog Post | 📈 Long Idea
The expansion of the Trans Mountain Pipeline is expected to benefit Canadian oil producers by increasing export capacity and reducing the WCS discount. However, instead of investing directly in an oil producer, the article recommends PrairieSky Royalty Ltd as a preferred way to play the evolving situation. PrairieSky is Canada's largest private owner of mineral rights and generates revenue primarily from royalty production. The company operates with a lean team and has high operating margins. It has future optionality with undeveloped acres and is favorable in relation to inflation. PrairieSky's strategy focuses on leasing activity and organic growth of royalty production revenue. The company distributes cash flow through dividends and share repurchases. The completion of the pipeline expansion is expected to have a positive impact on PrairieSky's revenues, as its royalty acreage is concentrated in Alberta, particularly around Edmonton. The pipeline expansion may lead to a potential closing of the WCS price discount, further increasing PrairieSky's revenues. The author of the article owns a stake in PrairieSky Royalty and sees it as a long-term investment with significant upside and limited downside optionality.
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Under Armour Lacks an Edge, but the Sportswear Market Offers Growth Opportunities (link)
Ticker: $UA | Current Price: $6.68 | Price Target: $15.50 (+132%)
👕 Apparel | 🛍️ Retail | 📝 Research Report | 📈 Long Idea
Under Armour is facing challenges in building a competitive advantage and has struggled to keep up with athleisure trends. The company's product lacks differentiation and innovation, and its expansion into casual apparel is unlikely to generate significant sales due to intense competition. Under Armour has faced problems in both its direct-to-consumer and wholesale businesses. While some argue that partnerships and restructuring efforts can drive growth, others believe that inflation, slowing consumer spending, and excessive inventories are affecting the company. Under Armour's market position is weaker compared to Nike and Adidas, and it lacks brand recognition, pricing power, and marketing advantages. The company's international business has growth potential but faces strong competition and lacks strong retail partnerships. Under Armour's lack of barriers to entry and insufficient brand spend have impaired its competitive position. The company's connected fitness business has been disappointing and provides no competitive advantage. While Under Armour's North America sales have shown some improvement, its international growth is still relatively small compared to competitors. The company's fair value estimate for its shares is $15.50. Excessive inventories and weakness in physical retail are likely to weigh on Under Armour's future results. The company's free cash flow generation has been inconsistent, and its acquisitions have not added value. Overall, the author believes that Under Armour lacks a competitive moat and faces significant challenges in the industry.
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Ardmore Shipping: The 10% Dividend Yield Is Reliable (link)
Ticker: $ASC | Current Price: $12.57 | Price Target: N/A
⛴️ Shipping |💰 Dividend | ✏️ Blog Post | 📈 Long Idea
Ardmore Shipping's stock price has declined by over 30% in the past three months due to decreased MR tanker TCE rates. The company reported adjusted earnings of $43 million in Q1 2023, but the author expects lower TCE revenues and adjusted earnings in Q2. The author estimates a Q2 dividend of $0.33 per common share. The author does not anticipate Q3 results to be better than Q2, but predicts that TCE rates for MR tankers may start increasing later in the year. Russian and U.S. Gulf refined product exports are supporting TCE rates. Despite market conditions, Ardmore's strong financial position suggests its quarterly dividend will not drop below $0.30. The company's 10% dividend yield is considered reliable, and it may increase with better market conditions in Q4 2023. Ardmore's Q1 2023 financial results were weaker than Q4 2022 due to lower TCE rates. The author expects the negative effect of lower MR tanker rates to offset the positive effect of higher Handysize rates in Q2. Ardmore's fleet TCE revenue in Q2 is estimated to be between $31,500 to $33,000. The company's CEO highlighted its robust balance sheet and ability to pay an attractive quarterly dividend. Stock prices of other product tanker shipping companies have also declined. Concerns about China's economic recovery and potential financial instabilities in Western countries and OPEC+ production cuts may impact the market outlook. However, changed trading flows due to the war in Ukraine have a positive effect. TCE rates for Handysize and MR tanker vessels may not decrease significantly in the coming months, and India's refined product imports from Russia may increase. The World Bank predicts higher real GDP growth in 2024, which could drive demand for refined products. Ardmore's Q3 2023 results are not expected to be better than Q2, but Q4 2023, Q1 2024, and Q2 2024 are expected to improve, potentially leading to an increase in the quarterly dividend. Ardmore's return on assets and return on equity ratios are better than its peers, and its P/B ratio is lower. The author believes Ardmore's stock price has the potential to rise faster than International Seaways and Scorpio Tankers. Ardmore has a short percent of float of 3.57%, indicating potential for the stock price to rise. The author does not expect the stock price to decrease further after the Q2 2023 results are published. TCE rates may start increasing in Q4, leading to improved financial results for Ardmore. The author recommends buying Ardmore Shipping's stock.
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ChargePoint: Positioned For Growth In The EV Charging Market (link)
Ticker: $CHPT | Current Price: $8.91 | Price Target: $12 (+35%)
🚗 EV | ⬆️ Growth |✏️ Blog Post | 📈 Long Idea
ChargePoint Holdings, Inc. is experiencing growth prospects in the North American Level 2 commercial charging market and in Europe. Its unique business model allows for steady progress and expansion, even if electric vehicle adoption is delayed. By integrating cloud software with hardware, ChargePoint creates positive network effects and generates recurring revenue. The author expects significant growth for ChargePoint over the next 5-10 years, surpassing the expansion rate of electric vehicles. The stock is viewed as a long-term buy with a price target of $12 by the end of fiscal year 2024. ChargePoint exceeded revenue expectations in Q1 2024, driven by strong performance in its fleet and European segments. The company is cautious in operating expenses but continues to invest in important initiatives. ChargePoint's business is diversified across industries and regions, ensuring resilience. The fleet and European segments show strong fundamentals, and the company has opportunities for expansion in Europe and multi-family residential charging. ChargePoint is positioned to benefit from public EV infrastructure spending and has a strong network of partners. However, competition in the electric vehicle market poses a risk. ChargePoint's financial performance could surpass expectations if it demonstrates cost efficiency and technological leadership, but it could decline if EV sales fall short or its growth lags behind. Overall, ChargePoint has a dominant market position and is capitalizing on growing opportunities.
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🐻 Bearish v 🐂 Bullish
Company: Diageo ($DEO)
Bullish Reasons:
Positive Outlook: The company's management expressed confidence in their ability to deliver mid-single-digit growth in organic net sales for the full year. This suggests a positive outlook for the company's future performance.
Profitability Improvement: The company's operating profit margin improved by 2.1 percentage points, reflecting the benefits of cost savings and price increases. This shows the company's ability to manage costs effectively.
Broad Presence Across Categories: Diageo's broad presence across categories with both global strategic and local niche brands mitigates some of the risk to volume from shifting consumer tastes and preferences.
Bearish Reasons:
Rising Input Costs: Diageo is grappling with rising input costs, particularly for raw materials and packaging. This could put pressure on the company's margins if it is unable to pass on these costs to consumers.
Currency Headwinds: Diageo is facing significant currency headwinds, which are negatively impacting its reported results. This could continue to be a challenge if currency volatility persists
Cyclical Industry: The spirits industry is slightly more cyclical than beer, particularly in the premium segment and above. Diageo's price positioning at the high end can hurt revenue when the global economy slows