The clock is ticking down on 2020, and you know what that means: It’s time for Wall Street analysts to tempt fate, clamber out on limbs, and make predictions about what will happen in 2021.
Credit Suisse, the famous Swiss international bank, jumps on this bandwagon and tags, among others, two top picks for year-ahead gains. These are Buy-rated stocks, and Credit Suisse sees double-digit upside for each.
Coincidentally, according to TipRanks, a company that tracks and measures the performance of analysts, both tickers currently have a Strong Buy consensus rating. Let’s get started.
Monster Beverage (MNST)
The energy drink market is a popular and rapidly growing segment of the food industry, and Monster Beverage is an easily recognizable member of it. The company, which owns 7 brands in addition to its eponymous Monster Energy Drink, is based in California and boasts a 2.8% share of a crowded market. That may not seem like much, but for calendar year 2019, it was enough to bring in $4.87 billion in total revenues.
The company is on track for another strong year. Quarterly revenues in 2020 have totaled $3.4 billion so far, with $1.25 billion in the third quarter. Like revenues, earnings have gone up each quarter, from 51 cents per share in Q1 to 65 cents in Q3. Monster’s EPS has beaten the forecasts in each quarter of 2020.
Share performance has paralleled the financial results. Currently, just two weeks from years’ end, Monster’s year-to-date gain is 41%.
Covering the stock for Credit Suisse is analyst Kaumil Gajrawala, who sees the company poised for rapid growth both domestically and internationally as economies open back up.
“Monster is a bit of covid-recovery play as roughly 70% of its sales are in convenience stores, a channel heavily impacted by lack of population mobility… The international energy drinks market represents substantial growth and profit opportunity… [We note] best-in-class topline growth and ROIC profile among consumer staples, with significant international runway,” Gajrawala opined.
In line with this outlook, Gajrawala rates the stock Outperform (i.e. Buy) and his $105 price target implies a one-year upside of 17%. (To watch Gajrawala’s track record, click here)
The analyst consensus on MNST is not unanimous, but almost. The Strong Buy consensus rating is supported by 11 Buys against a single Hold. Shares sell for $89.84, and the average price target of $96.75 suggests ~8% upside from current levels. (See MNST stock analysis on TipRanks)
Cheniere Energy (LNG)
Next on the list, a Texas firm that produces liquified natural gas for the export market. Liquified gas, or LNG, is less volatile form of natural gas, making it better suited to long-distance shipment by ship or pipeline. Cheniere operates mainly on the US Gulf Coast, at Sabine Pass, Louisiana and Corpus Christi, Texas. The company’s operations include liquefaction facilities, pipelines, and export terminals.
So far, 2020 has been a difficult year for Cheniere. Gas prices – like energy prices generally – were low coming into the year, and the corona crisis wrought havoc on the industry. Demand slackened, customers had difficulty paying bill, and trade and transport systems were disrupted. As a result, Cheniere has seen revenues and earnings fall through the year. In the third quarter, the company reported a net loss, and missed the estimates on revenue and EPS. Both metrics were down year-over-year, too; revenue came in at just $1.46 billion (down 32%) and EPS loss was $1.84 per share (compared to the $1.25 loss one year ago).
At the same time, LNG shares have been rising. The company’s product is a necessity, and customers are not going to stop needing natural gas just because times are hard. The stock has fully regained its losses from the ‘corona recession’ back in February, and is now trading at the same level it was right before the stock market collapsed.
Analyst Spiro Dounis, in his note for Credit Suisse, sees Cheniere with a sound overall position and a solid prospect to continue rebounding. He bases his stance on both the company’s market niche and the future prospects of the industry.
“Cheniere is the only pure-play US LNG export stock with assets that are actually operating. With limited shale production growth exposure, Cheniere (LNG) provides differentiated model from other large midstream-oriented companies and stands to directly benefit from a rapidly improving LNG macro environment… we expect Cheniere to generate nearly $12bln in cash flow over the next 5 years… We continue to see LNG markets moving toward undersupply in 2023, providing a potential tailwind to both LNG prices and volumes,” Dounis commented.
Dounis gives LNG shares a $69 price target, indicating an 18% upside, and an Outperform (i.e. Buy) rating.
It’s clear that Wall Street agrees with Dounis on this one, as Cheniere has a unanimous Strong Buy consensus rating, based on 8 reviews. The stock’s $69.88 average price target suggests a 19% growth potential from the current trading price of $58.51.
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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.