Best stock ideas for September 26

The author is bullish on FWONK due to a consolidation breakout and strong demand for the F1 experience, especially amongst affluent consumers. Global fanfare for F1 is increasing, facilitated by popular programs like Netflix's 'Drive to Survive' and expansion initiatives in the US, like the Miami and Las Vegas Grand Prix. Notably, it's forecasted that broadcast revenue could increase significantly by '25, despite a 16.5X step-up in Average Annual Value (AAV) on the current 3-year deal with ESPN. In comparison to other sports properties, cost per viewer hour of current sports media deals shows a favourable difference for F1 ($0.89). F1's confidence in their ability to scale the sport is reflected by the short-term, comparatively lower value extension with ESPN in anticipation of a stronger negotiation position in '25. Healthy trends in F1 media revenue, driven by regional rights selling, insulate the company from cord-cutting in any specific region and affirm growth prospects. The new Concorde agreement also promises to enhance the viewing experience by increasing on-track competitiveness and parity. However, near-term downside risks persist in sponsorship revenues since they are highly correlated with the overall macro-environment. But with expiring media rights in Spain and Middle East North Africa — regions where viewership is on an uptick — concerns over their ability to drive revenue increases remain low.

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The author is initiating Upwork (NASDAQ:UPWK) with a buy, showing a bullish stance on the stock. This positive sentiment is driven by the belief that Upwork, a platform connecting businesses with freelancers, is uniquely positioned to capture a significant portion of the gig economy which is projected to grow at 16% CAGR to $873B by 2028. Although the analysts acknowledge concerns surrounding slowed growth in gross service value (GSV) and macroeconomic headwinds, they believe this risk has already been factored into the stock's current price. Management projects revenue between $665M-$675M and adjusted EBITDA between $50M-$55M in FY23, and the company's disciplined approach to operating expenses and fee structure revamp is expected to drive profitability. With the stock trading at an Enterprise Value to Sales CY2024 at 1.8x against the peer group average at 3.0x, and a P/E CY2024 multiple of 18.0 against the group's average of 42.2x, the authors argue that Upwork is currently undervalued. They recommend looking for entry points during sell-offs, with a median price target of $15 representing a 31% upside.

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In their analysis, David Toung and Andrew Lesko emphasize their bullish sentiment for Medtronic (MDT) with a target price of $110. They note the company's solid fiscal 1Q24 results and its raised FY24 guidance, suggesting healthy future growth. Medtronic's renewed focus on faster-growing businesses and promising pipeline products is seen as a positive move. Key growth drivers include successful products such as the pulsed-field catheter for cardiac ablation and the Hugo robotic system. They also highlight the attractive valuation of MDT at 15.7-times their FY24 EPS estimate, well below the med-tech stocks average of 20.5. However, they warn of potential integrational risks from acquisitions, competitive risks, and regulatory and reimbursement risks. Nonetheless, they reaffirm their BUY rating on MDT, confident in its post-pandemic growth and soon-to-be-launched products.

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The author remains bullish on TKO Group Holdings, Inc. (TKO), despite a recent dip in the stock price following an announcement of a media rights deal. The merger of the UFC and WWE under TKO promised a substantial increase in media rights fees, which was slightly dulled by a lower than expected $1.4 billion valuation for the 'Friday Night Smack Down' WWE show. Despite this, the valuation still marks a 40% increase from a previous deal's worth. TKO is seen as a premium sports and entertainment company, controlling the reach to over a billion global fans and social media followers. Post-merger, Guggenheim Securities predicts that TKO will generate $100 million in operating synergies and $200 million in revenue synergies. The dip in TKO's price to $83, coupled with $14.5 billion market cap, and an adjusted EBITDA target of $1.25 billion for 2024, puts the stock's EV at $17.5 billion. This leaves it trading at a multiple of 14x its 2024 adjusted EBITDA targets. Factors such as merger synergies and new media rights deals are expected to contribute to higher EBITDA in the future. Despite the initial disappointment with the media rights deal, Miller encourages investors to take advantage of the weakness in TKO's stock price.

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The author makes a highly bullish case for Just Eat Takeaway.com (TKWY) stock based on the overlooked value of its dominant Northern European segment. They argue TKWY's profitable operations in the Netherlands and Germany, where it holds 70-80% share, are deeply undervalued at only 10-12x EBITDA minus capex. The author believes the food delivery industry is entering a rationalization phase where unprofitable segments and markets will be exited. TKWY has already begun this process. Its remaining core markets like Northern Europe boast wide moats and have substantial room for margin expansion. Using conservative projections, the author estimates TKWY's overall EBITDA margin rising from 1% currently to 4% by 2028, driven by Northern Europe's profitability and exiting losing markets. They see TKWY's growth normalizing around 2% annually. Despite muted top-line growth, operating leverage on a streamlined business drives significant FCF and cash generation. The author values TKWY's Northern European segment at only 12x EBITDA-capex in their sum-of-parts analysis, believing it could be valued closer to 20x. Given such undervaluation, they see TKWY stock rising over 300% to €64 by 2028. Upside could be greater if top-line growth or margins exceed their conservative assumptions.

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The author is upgrading their rating on Kone to buy based on an improved profit and loss statement and lower share price. Due to its larger exposure to the potentially weak Chinese market and higher valuation relative to its competitor Otis, shares have fallen 18% year-to-date. However, EBIT rebounded 41% in H1 and is guided to 95% of 2021 level for 2023, maintenance sales continue to build, and modernization is gathering speed. The author believes Kone can return to mid-single-digit EPS growth despite a weak Chinese construction market based on estimates. Given these factors and a 22x P/E expected with the 2023 earnings, the author forecasts a total return of 47% by 2026 year-end.

Read the full article here. Read time: 7 min