Buy stocks like Amazon, which are undervalued and underappreciated ahead of earnings, analysts say
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Investors combing for value ahead of another big week of earnings should look no further, according to analysts. There’s a whole bunch of companies that they believe are severely undervalued. CNBC Pro looked through top Wall Street research to find stocks that are underappreciated as earnings season continues. They include Amazon, Kontoor Brands, DigitalBridge , Block and WW International. Kontoor Brands UBS analyst Mauricio Serna is standing by shares of the maker of Lee and Wrangler jeans ahead of the company’s earnings report on Aug. 3. “Kontoor Brands has two widely recognized denim brands and has strengthened its position as one of the leading players in the category,” he said. Meanwhile chatter around the stock remains mostly balanced and positive, according to UBS. However, Serna warned investors to remain calm as a wholesale inventory rebalancing could cause Kontoor to lower its 2023 fiscal-year outlook when it debuts its quarterly results next week. “We thus don’t expect the event causes sentiment around KTB to change much,” he added. Shares of Kontoor are up 5% this year, but Serna sees this as an attractive entry point. The stock should outperform over the next 12 months, he said, as the denim market begins to heat up again. “We model an ~8% 5-yr. EPS CAGR and rate the stock buy as we believe this growth potential remains underappreciated,” Serna said. Block “Strong and steady” is how Bank of America analyst Jason Kupferberg described the payment company in a recent note ahead of earnings next week. The firm said it’s expecting an in-line quarterly report, but that doesn’t mean the analyst is any less bullish on the stock. “We think consensus 2Q estimates are well-calibrated,” he wrote. Kupferberg noted that even with the stock up nearly 25% this year, shares still have more room to run. “[The] recent stock price performance has been buoyed by the market’s more favorable view on macro/crypto,” he added. Still, Kupferberg wrote that shares are not getting enough credit from investors, especially with a business that has been incredibly resilient despite a rough 2022. “We believe SQ remains undervalued and business model resilience is underappreciated,” he said. Block is scheduled to report earnings on Aug. 3. DigitalBridge Shares of digital-infrastructure company DigitalBridge are up 40% in 2023 as of Friday’s close, but there may be even more appreciation to come, according to Deutsche Bank analyst Matt Niknam. “We continue to believe DBRG remains one of the most underappreciated stories among our coverage, with meaningful upside potential over time,” he wrote. The firm said DigitalBridge is flying under the radar ahead of its second-quarter earnings on Aug. 4. Investors should expect a heavy dose of artificial intelligence specifics from the company as DigitalBridge is well positioned to be a key beneficiary, the firm said. In addition, Niknam said he sees no shortage of positive catalysts for investors to anticipate Despite a choppy market, DigitalBridge is making “incremental progress” in meeting fundraising goals, the analyst noted. Further, he thinks that the company is well positioned to demonstrate that it is delivering on its financial targets. A “cleaner and leaner” story is just starting to emerge with growth prospects looking up, Niknam wrote. “DigitalBridge’s high-growth, and increasingly asset-light business model represent a unique approach to investing in digital infrastructure,” he said. Amazon – Baird, outperform rating “B2B remains one of the most significant growth opportunities in e-commerce, but still somewhat underappreciated by investors. … B2B is a multi-trillion TAM, still largely offline & where we think AI/ML can help speed the online shift & provide an advantage to technology-oriented platforms, such as AMZN. … In AMZN’s 2022 annual shareholder letter, CEO Jassy disclosed AMZN Business generated $35 billion of volume last year, & we continue to believe the category could become the single largest contributor to AMZN’s online retail segment.” DigitalBridge – Deutsche Bank, buy rating Despite a ~50% move higher year to date, we continue to believe DBRG remains one of the most underappreciated stories among our coverage, with meaningful upside potential over time. … As DBRG finalizes its de-consolidation of the OpCo (on balance sheet) business, we believe a ‘cleaner and leaner’ story may resonate better with both Financials and TMT-centric investors looking at shares. DBRG high-growth, and increasingly asset-light business model represent a unique approach to investing in digital infrastructure. WW International – Morgan Stanley, overweight rating “We see an undervalued turnaround story with thematic exposure given the combination of a reaccelerating core business in addition to faster than anticipated traction in WW’s new GLP-1 telehealth brand Sequence. A robust NT catalyst path provides opportunities for re-rating. … We are positive on the upcoming 2Q earnings print as positive core trends, early green shoots at Sequence, and potential to talk to integration all could drive upside to estimates.” Read more about this call here. Kontoor Brands – UBS, buy rating ” Kontoor Brands has two widely recognized denim brands and has strengthened its position as one of the leading players in the category. … We thus don’t expect the event causes sentiment around KTB to change much. … We model an ~8% 5-yr. EPS CAGR and rate the stock buy as we believe this growth potential remains underappreciated.” Block – Bank of America, buy rating “Expect strong and steady performance to continue. … We think consensus 2Q estimates are well-calibrated. … Recent stock price performance has been buoyed by the market’s more favorable view on macro/crypto. … We believe SQ remains undervalued and business model resilience is underappreciated. … Shares underperformed in ’22 due to macro concerns, but we believe the stock is not being given enough credit for the general resilience the business has shown to date as well as its opex discipline.”
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