Best stock ideas for September 14

The author is bullish on Match Group (MTCH), a leading holding company for online dating apps, with over 50% of relationships initiated on dating platforms originating from its brands. Tinder, a key revenue source for MTCH, is catching up with competitors by restructuring its pricing, introducing weekly subscriptions, and launching a super-premium tier. This move to elevate prices, especially when its competitor Bumble's average revenue per user stands 87% higher than Tinder’s, indicates a considerable upward potential. The CFO's recent remarks at the Citi conference further corroborate this potential, as Tinder expects to achieve double-digit top-line growth sooner than initially forecasted. Another brand under MTCH, Hinge, is witnessing rapid growth, with projections indicating it might account for more than 80% of MTCH's incremental revenue within five years. Hinge's limited geographic presence—currently in only 20 countries versus Tinder's 200—offers vast expansion potential. An external factor bolstering MTCH's prospects is the mounting legislative and legal pressure on Apple and Android app stores to decrease their in-app purchase fees, which currently make up almost 70% of MTCH’s COGS. A reduction in these fees could significantly enhance MTCH's margins. Despite these promising indicators, MTCH is currently priced at 14x forward earnings with an 8% FCF yield. The author projects that MTCH can potentially yield a 14% IRR and 2x MOIC over the next 5 years (base case) or a remarkable 31% IRR over five years as a bullish case..

Read the full article here. Read time: 45 min

The author has expressed bullish sentiment on British American Tobacco (BTI), asserting that its present share price is a strong risk-reward proposition when juxtaposed against other investment opportunities. While BTI faces significant challenges, such as declining smoking rates and a considerable debt burden, the author contends that its current valuation overly accounts for these risks. Despite waning smoking rates, BTI has diversified its product range, and its prominent position in oligopolistic tobacco markets provides it with immense pricing power. This position is bolstered by the relatively inelastic demand for tobacco products, ensuring consistent profitability and strong cash flows. Addressing concerns over its debt, BTI possesses around £4 billion in cash and expects to generate an additional £5+ billion in post-dividend free cash flow. Additionally, it had an untapped £5.5 billion credit facility as of June 2023, ensuring more than adequate liquidity to meet its imminent debt commitments. The author underscores the rarity of companies with BAT's stable cash flows offering a 17% FCF yield. Given BTI’s robust earnings growth, potential for multiple expansion, substantial 9% dividend yield with a conservative 60% payout ratio, and its lengthy history of consistent dividend payouts, the author posits that BTI represents a compelling investment opportunity.

Read the full article here. Read time: 2 min

The author is bullish on Sequans Communications (SQNS), a semiconductor company specializing in 5G and 4G chips for IoT devices. While SQNS initially struggled after its IPO, achieving profitability later than originally promised due to industry-specific challenges, the author believes the company is set to deliver on its potential soon. SQNS is seen as becoming a key player in the industry with its innovative, leading-edge technology. It's 5G/4G Cellular IoT market is predicted to exceed $3 billion by 2025, with a CAGR of 38%. The author projects that the stock could double in a year and reach $6-8 per share within 18 months. Despite some past setbacks, the author sees the company's future as promising, with significant growth from new customers, new markets, and launching new, higher ASP products including 5G Taurus. The company's cash position is also strong because of a recent $20m private placement and potential non-dilutive government funding if they choose to avail it.

Read the full article here. Read time: 8 min

The author believes Spirit Airlines is undervalued and worth buying. They argue the proposed merger with JetBlue has a greater than 50% chance of closing despite DOJ opposition. The author contends JetBlue can address antitrust concerns by divesting certain gates/slots and ending its Northeast Alliance with American. With Spirit trading at a large discount to the expected merger price, the author sees the deal odds as mispriced. Even if blocked, the author believes Spirit would be worth $10-14 standalone. Given the high likelihood of closing, Spirit presents good upside with limited downside. The author discloses going long Spirit shares personally. Overall, they view Spirit as significantly underpriced given the high probability of the strategic merger ultimately being approved.

Read the full article here. Read time: 12 min

The analyst remains bullish on Raytheon Technologies Corporation (RTX) despite its recent significant losses, due to an updated plan to address its 'powdered metal' issue which wiped off 24% ($34bn) of its market value since July 25. They believe that the estimated cash cost of $3bn to RTX, spread over 2023-2025, is manageable and realistic. Even if this cost doubles or triples, the long-term viability of RTX is not at stake. The resulted $34bn market capitalization decline is viewed as an overreaction, and thus, RTX is seen as undervalued. Considering RTX's FCF generation capability past 2025 and its leading position in the oligopolistic aerospace industry, the analyst maintains a Buy rating and a price target of $133 by 2026. However, they caution that the final outcomes on customer compensation from the 'powdered metal' issue are uncertain and may not be known for years.

Read the full article here. Read time: 9 min

Assertio Holdings (ASRT), a key player in the commercial pharmaceutical sector with a focus on neurology, rheumatology, and pain medication, presents a fruitful yet risky investment opportunity. The author, albeit acknowledging its historical risks, currently rates ASRT as a 'strong buy' with a price target at $5.04 by 2024. The company has successfully transitioned from a precarious financial situation to a more robust one driven by disciplined financial management, strategic acquisitions, and cash flow focus. This is highlighted by the recent acquisition of Spectrum, the positive launch trajectory and quarterly growth of ASRT drug ROLVEDON, and the surprising upside growth of SYMPAZAN. Despite Assertio's resilience in face of market competition and its strategic diversification, several risks persist - including generic competition, market and regulatory uncertainties, potential legal liabilities, product discontinuations, and execution risks. Notably, the FDA's approval of a generic indomethacin product and subsequent market competition may pose significant risk to Assertio's revenue and market share going forward. Investors considering a position in ASRT should conduct a thorough risk assessment and consider the inherent volatility in this sector.

Read the full article here (5 free per month). 8 min