Three Stocks to Watch for the Week of July 5th, 2021

The stock market rally showed solid gains in the major indexes last week, fueled by strong gains by the mega cap tech names, along with big-cap chip winners such as Nvidia (NVDA).  But quite a few stocks had nasty sell-offs or reversals. 

On the plus side, some names had more-gentle pauses, forging new buy points.  The stock market rally is offering opportunities and setups, but investors have to be disciplined. 

Don’t get too concentrated in a particular stock or sector.  If you do have a big position, be careful with any adds.  Make sure to use proper buy points and keep your overall cost basis low.  Most of all, stay alert to your holdings and the overall market.  

Moving into the holiday shortened week, our team has a few recommendations for stocks to add to your watchlist.  Continue reading for the three tickers we’re watching now.

Ontario-based auto component producer Magna International Inc. (MGA) is making considerable strides in revving up vehicle electrification capabilities.  To demonstrate its EV prowess, the company has two newly released advanced electrified propulsion systems with enhanced range, improved drive dynamics and lower emissions by 38%. 

The company has just seen earnings accelerate for a third straight quarter.  They also raised guidance for the rest of 2021 as it sees stronger China sales on the horizon.  But the U.S. still remains Magna’s largest market and there is plenty happening closer to home.

The company is set to benefit as Legacy automakers like Ford (F) and General Motors (GM) are committing to heavy EV spending.  To meet growing demand, Magna says it will invest $70 million over the next five years to construct an EV battery-component plant in Michigan.  Production at the state of the art facility is set to commence in early 2022 with battery enclosures for General Motors’ new GMC Hummer EV.  

Meanwhile, there are whispers in the pipeline that the long-rumored EV from Apple (APPL) may come to life with the help of Magna.  In April, The Korea Times said LG Electronics and Magna were “very near” to signing a deal with Apple to build its initial electric cars.  There hasn’t been confirmation on that, but the prospect is pretty exciting.  

Magna share price has lost nearly 6% in the past month due to near-term challenges amid supply issues and rising prices for key manufacturing materials.  Current conditions may put pressure on gross margins in the near-term.  But these hiccups shouldn’t diminish your faith in the stock.  In fact, this may be a great opportunity to buy the dip.

Of 20 polled analysts 14 rate the stock a Buy, 5 say Hold and only one calls MGA a Sell.  The median price target of $113.50 implies a 23.75% increase over the next 12 months.  

---

---

Mid-cap Camping World Holdings (CWH) is America’s largest retailer of new and used RVs and related products and services.  Its brands consist of Camping World and Good Sams. The company is committed to building long-term value for customers and shareholders through its offering of a unique and comprehensive array of RV products and services.  CWH operates through a national network of dealerships, service centers and customer support centers along with the industry’s most extensive online presence.

The company has paid a total of $0.92 per share in the last 12 months.  Due to conservative management, the trailing 2.4% yield has been well covered by both profits and cash flow.  CWH has  a low payout ratio of just 7.4%, which suggests a broad safety net against future cuts.  In fact, the company paid out just 1.9% of its free cash flow last year, which means their payout has plenty of room for growth.  

The current consensus among 9 polled analysts is to Buy CWH stock.  The 8 analysts offering 12-month price forecasts have a median target of $58, which represents a 49.33% increase from its current price.  

CWH earnings are forecast to grow 25.29% per year for the next 3 years.  What’s more, the  current price to earnings ratio for CWH is just 7.8x.  When compared to the US Specialty Retail industry average of 13.3x, the stock looks like an extreme value at its current price.

Snap Inc. (SNAP)  has boasted that it reaches “more than 90% of 13 to 24 year olds and more than 75% of 13 to 34 year olds.”  All the while, the company’s beefed-up portfolio of offerings has attracted advertisers as more people ignore traditional banner ads.  

The company reported that its daily active users were up 22% to 280 million in the first quarter.  The ability to reach this “unduplicated and hard-to-reach audience” has attracted Wall Street’s attention as it continues to add users and monetize its ever growing platform as Facebook and other giants face scrutiny.

SNAP has climbed 190% in the past year, but it fell victim to the growth selling that began in February.  Thankfully its made a big comeback, up over 30% since mid-may.  

SNAP has climbed 190% in the past year, but it fell victim to the growth selling that began in February. Luckily, it has mounted a big comeback, up over 30% since mid-May.

The 30 analysts offering a 12-month price forecast for SNAP have a median target of $80 which represents a 16.55% increase from its current price.  The current consensus among 38 polled investment analysts is to buy SNAP stock.  There are 28 Buy recommendations, 9 recommendations to Hold and only 1 Sell recommendation for the stock. 

Investors with long-term outlooks might want to buy Snap now, given its ability to evolve its modern media platform while attracting a vital demographic in the new age of entertainment.

---

---