Best stock ideas for September 20

The author, Sean Dunlop, is bullish on Chewy due to factors such as brand loyalty, sticky purchase habits, pet humanization, minimal cyclicality in the $137 billion U.S. pet care market. Chewy's high-focus business model provides a substantial share of online sales with strong brand perception around customer service and quality. Chewy's tactical strategy against Amazon involves emphasizing labor-intensive aspects of the business, leading to a solid customer base with robust subscription penetration. Chewy's subscription-based model (75% autoship penetration) is expected to help them retain customers over time. Bulls expect the e-commerce penetration to continue to increase in the pet care category, favoring digital native platforms like Chewy. A current concern is Chewy's overdependence on its top suppliers due to strong brand loyalty in the pet food category. The company plans to continue to broaden its monetizing efforts through the expansion of higher-margin private label product and providing multiple ranges of pet healthcare services. Chewy is expected to continue its leadership well into the future, with up to 30% online penetration in the U.S. pet care market. The future risk lies in the reluctance of veterinarians to fill scripts through its marketplace affecting growth in prescription markets. Chewy aims to expand internationally, starting with a planned Canadian market launch in 2023

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This report makes a bearish case against Tilray Brands stock. The author argues Tilray has failed to build a profitable cannabis business and is obscuring losses through dilution and questionable accounting around payments to a key supplier. The report alleges Tilray is inflating financial metrics by using stock instead of cash to pay obligations, enabling positive adjusted EBITDA and free cash flow claims that wouldn't be possible otherwise. It contends Tilray's acquisitions, like struggling craft breweries, lack strategic rationale and will further weigh on performance. The author believes Tilray is caught in an endless dilution cycle just to stay afloat and that potential cannabis rescheduling provides no real benefits. With shares overvalued relative to fundamentals, the report sees 70% downside for Tilray stock based on a sum-of-parts valuation of the underlying businesses.

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The article is bullish on TORM plc (NASDAQ:TRMD), expressing confidence in the company's financial status and future prospects. The author notes TRMD's strong commitment to dividends, having paid out $7.01 per share in the last 4 quarters, yielding 28% on the current share price. The company's Q2 2023 EBITDA was $237 million, with the capability to repay all its debt in just three quarters at current levels. The author expects the company to maintain a $1.50/share quarterly dividend given the current market conditions yielding 24%. Despite a 16% drop in Time Charter Equivalent rates for Q3 which might affect profits, the author remains optimistic for Q4. TORM's updated balance sheet, as well as the projected supply/demand picture for product tankers over the next couple of years, further indicate a healthy outlook for the company. However, risks include potential fluctuations in OPEC oil supply, a global recession reducing demand for refined oil, political issues like the EU ban on Russian oil products, and management decisions affecting dividend payouts.

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The author is bullish on Datadog (NASDAQ: DDOG), a software-as-a-service (SaaS) provider focusing on cloud application security and observability, due to the company’s impressive revenue growth since its IPO, innovative history, and reasonable valuation. Co-founded by Olivier Pomel and Alexis Le-Quoc, Datadog has amassed a significant customer base, with notable adoption of its security products. Furthermore, its gross margin is approximately 80%, with about $2.2 billion in cash, equivalents, and marketable securities. The company envisions a $62 billion total addressable market (TAM) for observability by 2026 and sees potential to capitalize on security and AI. However, the author notes potential risks, including stiff competition from tech heavyweights and potential long-term impacts of client cost-cutting. Despite immediate setbacks in growth due to client cost optimization, the author sees Datadog’s dip in valuation as an overreaction and remains confident in its long-term growth and believes its current price presents a valuable entry point for long-term investors.

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The author is bullish on Stone Co. even after a series of unfortunate events including a poor credit scoring system, a malfunctioned Brazilian collateral registry system, and a loss-making investment in Banco Inter. Despite these setbacks, the author emphasizes that the business itself was not impaired and that the company has demonstrated promising turnarounds, as evidenced by its 28% YoY revenue growth and a 477% increase in earnings. The author acknowledges risks such as inflation, high competition, and political uncertainty in Brazil but sees potential upside due to the company's strong position in the micro and small business space and its improving profit margin. The author is optimistic about the re-launch of the company's credit solutions product and expects the company to earn $250 million in 2023. The analyst believes that Stone Co. is undervalued at its current price and is trading at a discount because the market may be waiting for the company's turnaround to be more fully realized.

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The analyst presenting the stock pitch is clearly bullish on QCOM, expecting an 88% upside within a 5 year timeframe. Despite anticipating a recession of -16.4% in 2023, the analyst anticipated a rebound in growth beyond 2023, projecting a 5-year average growth of about 6.3%. Key growth drivers include Qualcomm's dominance in the premium smartphone market, its strong position in the Automotive segment, as well as its promising prospects from Wi-Fi 7 and ARM-based CPUs in the IoT segment. A major risk factor mentioned was the stiff competition from MediaTek in the smartphone processor market. The author attributed the sustainable growth of QCOM to advancements in Wi-Fi connectivity, a strong presence in the ADAS market and strategic collaborations with global automakers. The analyst expects the momentum in XR to continue due to its diverse applications in various fields such as healthcare, retail, tourism, and defense and believes that the strategic foray into ARM-based CPUs could underpin continued growth in the IoT segment. Despite the downgrade in the price target from $231.34 to $207.78, the analyst maintains a Strong Buy rating on QCOM.

Read the full article here (5 free per month). Read time: 10 min