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2 “Strong Buy” Stocks Raymond James Predicts Will Surge at Least 50%


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2 “Strong Buy” Stocks Raymond James Predicts...

This month marks an anniversary of sorts, as it was three years ago that the current bull market got started. Aside from the short, albeit deep, turndown in Feb/March of 2020, when the corona truck hit us, stock markets have been rising steadily since January 2019. And despite the pandemic, the market’s rate of increase was steeper after the short 2020 recession than before it.

In a recent note, Raymond James CIO Larry Adam says it’s time to ‘adjust our aim’ to take into account the dynamics of a bull market’s third year. He writes, “[The] returns in the third year of a bull market are historically more muted in comparison to those for the first and second…”

Even so, Adam points out that we’re still looking at ‘above-trend economic growth,’ which will be supportive of stocks. He notes that the macroeconomic backdrop may end up supporting overall EPS growth of 14%, in which case “the S&P 500 could easily reach the 5,050 milestone.” That would translate to a 9% annual gain for the index. Adam adds that stocks should remain attractively priced, even at increased valuation, given that we’re still (for now) operating in a low interest rate environment.

In a final comment on the bull market, Adam emphasizes “the importance of selectivity and identifying key long-term growth catalysts.”

The stock analysts at Raymond James have been following this advice, picking out equities which they believe will win in the current market conditions. We’ve used

First Watch Group (FWRG)

The second stock on Raymond James’ radar, First Watch, is an award-winning dining chain, serving breakfast, brunch, and lunch on a made-to-order basis. The chain uses fresh ingredients sourced daily, and offers a mixed menu of well-known favorites like pancakes, omelets, and salads next to specialty items like the Quinoa Power Bowl. The chain boasts over 430 locations in 28 states.

First Watch, based in Bradenton, Florida, has been in business since 1983, and took advantage of the rising market environment to go public this past October. The stock entered the NASDAQ index on October 1 with an initial price of $18 per share and over 10.8 million common shares made available. The offering raised over $195 million in gross proceeds.

In November, the company released its first quarterly report as a public entity, and showed strong growth in several key metrics. Same-store sales grew 46% year-over-year, and restaurant traffic was up 40%. Total revenue reached $157.4 million, for 57% yoy growth, and earnings came in at a net positive of 2 cents per share. In its forward outlook, the company is expected full-year fiscal 2021 same-store sales growth in the range of 31.5% to 33.5%, and is predicting adjusted net earnings in the range of $10.2 million to $11.2 million.

All of this adds up to an opportunity for investors, in the view of Raymond James analyst Brian Vaccaro. In his coverage of this stock, Vaccaro writes: “First Watch is a rapidly growing, full service restaurant concept with a strong track record of generating positive comps and attractive ROI’s on new unit growth that has been replicated across many markets. We believe the company is well positioned to continue gain share in the growing breakfast category, while sustaining 10%+ unit growth for the foreseeable future. We also believe the stock is reasonably valued in light of the company’s attractive growth prospects.”

To this end, Vaccaro rates FWRG an Outperform (i.e. Buy), and his $24 price target implies an upside of 58% in the next 12 months. (To watch Vaccaro’s track record, click here)

While the consensus view on FWRG is not unanimous, the 10 reviews do include 8 Buys that outweigh the 2 Holds, for a Strong Buy rating. Shares are priced at $15.18 and their $25.80 average price target suggests an upside of 69% from that level over the course of 2022. (See FWRG stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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