The best trade ideas for September 5

Opera Limited is a company that impresses with its focus on incorporating AI into its platforms, attracting a significant user base, demonstrating notable profitability, and presenting robust growth prospects. A critical example of Opera's innovative approach is its latest Opera One Browser and the introduction of Aria – the first-ever native browser AI. Despite a sharp share price correction, the stock holds significant potential for upside, particularly considering a substantial global user base that rose to 316 million MAUs by the end of Q2 2023. Opera's Q2 earnings report was robust, beating both top and bottom line estimates. Opera even provides a dividend, indicating an expectation of strengthening profitability in the years ahead. The stock also maintains a strong buy rating on Wall Street with an average one-year price target of $20.25, implying a 40% upside. Despite potential risks, including decreasing user growth and competition from other AI-related projects, the growth prospects and profitability potential of the stock indicate considerable potential for appreciation in the future.

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Park Hotels & Resorts (PK) is predicted to see more quarters of high NOI growth as it recovers from the pandemic, targeting 2019 levels by end of 2024. The company sold all international hotels and lower-quality U.S. hotels, to focus on high-quality assets following its spinoff from Hilton in 2017. The acquisition of Chesapeake Lodging Trust and their subsequent portfolio diversification is expected to contribute to company growth. In the analysts view, several long-term challenges lay ahead for PK, including supply growth in major markets and the increasing prominence of online travel agencies and reviews, which could hinder Park's ability to raise rates. Nonetheless, Park's management aims to boost operating margins as hotel occupancy recovers post-crisis. Bullish arguments include potential prolongation of the robust hotel cycle due to accelerating economic growth, and the opportunity for company growth from initiatives to drive EBITDA on newly acquired Chesapeake portfolio. Bearish counterpoints include potential pressure on performance and valuation from new supply across Park’s core markets and rising interest rates, diminishing pricing power and profitability due to home-sharing services like Airbnb, and the inability of Park and its branded portfolio to adapt quickly to trends dictated by millennial travelers. Despite these, PK maintains an Exemplary capital allocation rating with a projected 2024 net debt/EBITDA approximating 4.5 times.

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The author argues that Texas Roadhouse (TXRH), although currently booming, faces looming challenges that could negatively impact its stock value. TXRH has indeed shown growth in sales per share, but the author attributes this to significant price increases to combat growing costs, and not to any meaningful expansion or rising demand. With labour costs set to continue escalating at least until 2024 and a probable hike in beef prices due to drought-induced scarcity, TXRH may face a crunch in gross margins. TXRH is noteworthy for having no long-term financial debt, but rising liabilities and a dwindling cash position indicate a need for improved liquidity. The company has benefited from a surge in post-pandemic dining activity as smaller competitors bow out, but these gains are potentially temporary. Forward price-to-earnings (P/E) of 22.6X suggests that investors have placed high growth expectations on TXRH. Considering this along with the tougher operational conditions expected in the near future, the author views TXRH as a short opportunity with a price target at $65, 38% lower than the current price.

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The author presents a bullish case for Volue, a software solutions company for energy markets, capitalizing on the European shift to renewable and volatile energy sources. The company’s software provides real-time data about energy consumption, production, and demand, helping users make precise decisions. Volue is also a market leader in managing systemic water infrastructure in Norway. The author expects VoIue will meet its goal of 2Billion NOK in revenue by 2025, with EBITDA margins increasing significantly. Competitor comparison and sales multiple models suggest an upside of about 94% over 2.5 years. Despite potential risks, including slower than expected growth and margin rates and a high current valuation, the author believes Volue offers a unique profit opportunity due to its strong market position, high recurring revenues, and forecasted growth, and has accordingly allocated a portion of their portfolio to Volue.

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You can currently purchase shares of a profitable, market-leading consumer staples business below 40% of (tangible) book value and below net current asset value. Unlike most net-nets, this one has compounded book value per share at nearly 10% per year for the past 20 years, and the business has gotten better over the past few years after a major competitor pulled out of the market. The stock has no sell-side coverage and has recently experienced forced selling due to its removal from an index. Despite a lack of organic growth due to market conditions and consumer shift towards fresh foods, Seneca's recent competitive position improvement due to changes at Del Monte, one of its main competitors, is highlighted. As such, despite a rough quarter fueled by increased cost pressures, Seneca is believed to have upside potential, with clear signals towards margin recovery thanks to concurrent industry-wide price increases to counteract inflation. The attractive underlying value is evidenced by the noteworthy gap between its actual share price ($48) and its estimated LIFO-adjusted book value per share (around $110), indicating that the stock is notably undervalued at the moment.

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Despite the recent scandal involving care home operators ORPEA and Korian/Clariane, LNA Santé has favorable prospects given its strong operational performance, good margin recovery post-Covid and solid cash flows. The company also has a strong balance sheet and low leverage, providing a buffer against interest rate fluctuations or lower real estate prices. Furthermore, the company is expected to benefit from a growing number of elderly population in France and the government's potential interest in collaborating with private operators to meet this increased demand. The relatively low current valuation of the stock in light of these factors, coupled with alignment of interests between the majority shareholders and other investors, presents a highly attractive opportunity for patient investors.

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