Earnings season is in full swing, and investors are busy parsing the reports to pinpoint compelling investments. But finding the right investment requires data – how is the stock performing, and how has it performed over time; what macroeconomic events are impacting the stock; what are Wall Street’s analysts saying about it?
In short, there’s an enormous amount of data out there to mull over and deciphering it all can be intimidating to say the least. That’s where TipRanks.com comes in. TipRanks uses natural language algorithms to sift through the market data and analyst reports on over 5,500 publicly traded stocks, to cut through the confusion and present a clear picture for investors. This allows investors to see at a glance which stocks are considered Strong Buys, which are trending up or down, and the success rate of the analysts’ recommendations.
So, let’s take a dive into the market data on three stocks that went public in the last 12 months, which the analysts see as buying propositions, and all report earnings on Monday.
Tencent Music Entertainment Group (TME)
We’ve all heard of Tencent, the $45 billion Chinese tech-holding company, with its fist in a wide range of internet-related services. Tencent is one of the world’s largest social media companies, and the absolute largest gaming company. But today, we’re talking music. Tencent Music is a spinoff of the parent company and a joint venture with Spotify. The joint company offers several music streaming apps in the Chinese market, attracting more than 700 million users and 120 million paying subscribers. TME IPO’d in December of 2018 and gained 9% in its first day of trading.
The numbers underscore an important fact about the world’s internet markets: China is underappreciated. Just because government policy keeps the Chinese market mostly closed to Western reach, it doesn’t mean that Chinese internet companies should be ignored. China is home to 1.4 billion people, about 18% of the world’s population. It’s a huge market, rapidly urbanizing and gaining wealth, with a ravenous demand for digital products.
All of this explains TME’s Q2 performance. The company added over 2.5 million users, saw revenues make a double-digit gain to $859 million, and beat the EPS forecast with 10 cents per share. It was a strong performance, and the forecast for tomorrow is in-line with it. EPS is expected to remain stable, at 9 cents (the same forecast which was beaten in Q2), while revenues are expected to rise to $909.7 million.
Analysts are impressed with Tencent Music. Bo Pei, of Oppenheimer, writes, “Despite being the largest digital music platform in China, TME is still in the early stage of monetization with a subscription paying ratio (4.8%) substantially lower than that of global peers, which provides it with plenty of growth opportunity… TME is investing to build its exclusive content library... In the long-term, we see TME as an industry integrator with clear strategic vision.” Bo gives TME a $17 price target, suggesting a 21% upside. (To watch Pei’s track record, click here)
Alex Yao, a 4-star analyst with JPMorgan, is also bullish on China’s largest music streaming company. He says looking forward, “We believe such a strong net adds momentum will persist into coming quarters as the strategy is replicable and under management control. We expect TME’s music sub net adds acceleration to ease investor concern on music monetization and it should drive share price upside potential.” His $18 price target implies room for a 28% upside to the stock. (To watch Yao’s track record, click here)
Overall, TME’s Strong Buy consensus rating is based on 3 Buys and 1 Hold given in the last three months. The stock trades for $14, making it a bargain considering the upside, and the average price target of $16.75 indicates 19% upside potential. (See Tencent Music stock analysis on TipRanks)
New Fortress Energy LLC (NFE)
In the industrialized West, we take electricity for granted. But New Fortress Energy reminds us that power is expensive, and large parts of the world do not have reliable electrical energy services. NFE aims to change that. In practice, NFE’s commitment to providing reliable energy has made the company the “go-to” player in North America’s natural gas industry. From converting power plants to run on cleaner-burning fuel, to building LNG import facilities, to growing its presence as a mid-stream player in the gas market, NFE has a well-established footprint in the natural gas industry.
While it’s a small company with a market cap of $2.8 billion, NFE is ambitious and focused on expansion. In Q2, the company secured financing for $180 million, allocated to the completion of the Jamalca CHP plant in Jamaica. The new credit deal, along with some $250 million the company has in cash-on-hand, should allow the project to finish on time. Another fuel handling facility is expected to go on-line in Puerto Rico during the fourth quarter.
Revenues in Q2 were up from $26 million to $39.8 million, although the company is still operating at a net loss. For Q3, expectations are for the loss to reach 23 cents per share. Despite the losses, future prospects for the company are bullish. BTIG analyst Gregory Lewis lays out the details: “The company has positioned itself to benefit from the on-going secular natural gas demand story which is being driven by cheap and abundant natural gas in North America, and increasing demand for reliable and cleaner power in emerging countries. At its core, NFE is an infrastructure company with a number of LNG import terminals already in the Caribbean and plans to build another four terminals around the world in the medium term.” Lewis gives NFE a $30 price target, suggesting an upside of 80%. (To watch Lewis’ track record, click here)
Lewis’ outlook on the stock is somewhat more bullish than the average. NFE has a Strong Buy consensus rating, based on 4 Buys and 1 Hold. The average price target, $22.80, implies an upside potential of 36%. (See New Fortress Energy stock analysis on TipRanks)
Village Farms International, Inc. (VFF)
With VFF, we get into the world of cannabis. Specifically, the world of newly legalized cannabis markets. Village Farms International started out as a producer of year-round, high-quality, greenhouse vegetable – tomatoes, cucumber, peppers – in the North American market. With the legalization of cannabis in Canada and hemp in the US, the company has moved into the new market, seeing it as a way to break free of the produce sector’s traditionally low margins.
Since entering the cannabis market, VFF has expanded marijuana production, and is looking at developing an annual capacity of 150,000 kilograms. This comes at the cost of reducing the legacy produce, but the company accepts that as the price of profitability. At the same time, the produce legacy has set VFF up with a network of greenhouses and experienced agriculturists.
In Q2, the results showed in the Canadian cannabis company’s margins. The cost of growing came in at just 49 cents per gram, while the company was able to sell product at $3 per gram – an 83% gain. In addition to Canadian cannabis, VFF is expanding into hemp production in the US, taking advantage of the 2018 Farm Bill that legalized hemp at the Federal level and created a market for hemp-derived CBD extracts. Village Farms expects to enter the CBD market next year.
Roth Capital analyst Scott Fortune sees the potential in VFF. He writes, “VFF's cannabis opportunity through JV Pure Sun Farms (PSF) continues to remain robust as it executes on ramping production to 150,000 kg, expanding distribution to the large provinces, and gaining market share as the low-cost leader.” Fortune’s $29 price target implies an eye-popping upside of 226%. (To watch Fortune’s track record, click here)
Bottom line – VFF is a small company, even compared to some of the other new cannabis companies. The market cap is just $437 million, but the company has the advantage of a legacy growing network from its original produce business. In the last three months, VFF has received 4 analyst reviews, and all were Buys. So, the consensus is unanimous: the stock is a Strong Buy. Shares are priced low at just $8.87, but the real story here is the upside potential: the average price target of $31.76 suggests room for a 258% upside. The whopping-high upside is typical of the new companies in the cannabis market, where the newly legal status has created wide-open avenues of opportunity. (See Village Farms stock analysis on TipRanks)