29 Apr Goldman Sachs says these ‘compelling’ stocks are earnings season winners
Sifting through the flood of financial reports this week, Goldman Sachs analysts have named a slew of stocks poised for more growth ahead. Prior to these reports investors were afraid earnings would slow down, but the majority of companies are managing to post results that are better than feared. Of the 267 companies in the S & P 500 that have released earnings to date, 78% topped analyst expectations, according to Refinitiv. CNBC Pro combed through top Goldman Sachs research to find the firm’s favorite ideas coming out of quarterly reports. They include Hershey , Amazon , Planet Labs, Constellation Brands and Braze. Planet Labs The earth imaging company reported a mixed fourth-quarter report on March 29, but analyst Noah Poponok is standing by the stock. He called Planet Labs a “compelling long-term story” that investors should keep close watch on. “The company is EBITDA and cash flow negative today, but that is very clearly the result of high investment costs in marketing, R & D and capex, which make sense now in early growth stages but will not be the long-term recurring inputs,” he added. The firm said Planet’s ability to take share in the months ahead will become evident, too. Gross margins are also promising, and customer count is rising, he said. “We expect Planet to continue democratizing earth observation data as the business scales its sales efforts and builds out its data analytics user platform,” the firm said. Meanwhile, the stock is down 6.2% this year, which makes shares attractive, according to Poponak. “We believe Planet is well positioned to serve a potentially large and nascent market and remain Buy rated on the stock,” he wrote. Constellation Brands Shares of the beer and wine maker are just too attractive to ignore, the firm said. Constellation’s fiscal fourth-quarter earnings report earlier this month was impressive, said analyst Bonnie Herzog. “FQ4 results showcased [a] best-in-class performance with innovation & shelf space gains driving further momentum,” she wrote. Herzog cited numerous positive catalysts including robust business in large key markets, minimal trade down signs across its beer portfolio and a quarterly dividend increase as factors that will support the stock’s performance. This suggests that the “premiumization trends remain intact and that STZ’s brands appear well-positioned even in a recessionary environment,” Herzog said. Herzog said shares, which are down 7% this year, are largely “de-risked” and offer a prime buying opportunity for investors. “As such, we see an attractive entry point for investors especially considering its top-tier volume driven topline growth and a path to margin recovery,” she said. Braze “Long-term fundamentals are intact,” analyst Gabriella Borges said of the cloud software marketing company. Braze shares are up more than 7% this year, after coming off of a better-than-expected fiscal fourth-quarter report . Although new business growth has been light and sales cycles remain “elongated,” Borges said she’s standing by the stock. “Despite the weaker growth outlook for FY24, Braze is seeing messaging volumes and the usage of its product hold up,” she said. In addition, the company’s path to profitability has become more evident, and that should give more confidence to hesitant investors looking for a reason to accumulate shares, the firm said. Borges also called Braze, the “platform of choice for brands across a diverse set of verticals and geographies.” “We continue to believe in the quality of Braze’s offering as well as its competitive positioning in the marketplace,” she went on to say. Amazon “AWS Growth Remains Key Stock Debate; eCommerce and Overall Margin Ramp Begin To Meet Our Bullish Thesis. … AMZN’s Q1’23 earnings report produced a strong set of results with almost every Q1 operating metric beating expectations (especially when measured against persistent investor concerns around current period AWS YoY growth, the health of the Amazon consumer in a volatile macro environment & mgmt. commitment to meaningful margin expansion in North America).” Hershey “HSY reported robust 1Q results, on strong organic sales (in part due to pull forward benefit) and greater than expected gross margin expansion. Importantly, the company raised its full year outlook at the high end of prior range, with ~8% net sales growth and ~11% adj. EPS growth for the year, which follows an above-consensus initial outlook heading into the year. We are encouraged by its strong growth momentum and pace of margin recovery, and believe management’s revised outlook will likely prove conservative still and expect further rounds of upward revisions; we reiterate our Buy rating.” Planet Labs “Growth and gross margins continue to paint a compelling long-term story. … The company is EBITDA and cash flow negative today, but that is very clearly the result of high investment costs in marketing, R & D and capex, which make sense now in early growth stages but will not be the long-term recurring inputs. … We expect Planet to continue democratizing earth observation data as the business scales its sales efforts and builds out its data analytics user platform. We believe Planet is well positioned to serve a potentially large and nascent market and remain Buy rated on the stock.” Constellation Brands “FQ4 results showcased best-in-class performance with innovation & shelf space gains driving further momentum … no signs of material trade down across STZ’s beer portfolio as behavior remains most prevalent at lower price points, which suggests that premiumization trends remain intact & that STZ’s brands appear well-positioned even in a recessionary envir. … Bottom line, we think stock has been broadly de-risked with the stock pulling back considerably YTD. As such, we see attractive entry point for investors especially considering its top-tier volume driven topline growth & a path to margin recovery.” Braze “Long-term fundaments are intact. … Braze continues to be impacted by many of the trends we have been discussing for several quarters, including elongated sales cycles & weaker new business growth. … .That said, renewals and upsell activity remained relatively strong as Braze is benefiting from vendor consolidation as the next-generation customer engagement platform of choice for brands across a diverse set of verticals & geographies. … We continue to believe in the quality of Braze’s offering as well as its competitive positioning in the marketplace.”