Monday's best stock ideas...

Remitly is poised to become the global leader in cross-border digital remittances. While consistently gaining market share from traditional players like Western Union and MoneyGram, the ongoing shift from cash-to-cash remittances to digital transactions provides a significant tailwind. Although the company is only recently projecting positive cash flows, scale economics for digital remittances are attractive. As their volumes grow, they will continue to renegotiate lower variable costs and spread their fixed costs over a much larger customer base. Their digital solution, infrastructure, and fraud detection capabilities are expected to maintain their best-in-class status, assisting to double their market share within three to five years. The market underestimates Remitly’s large growth potential and the stock is currently undervalued, with the potential for a 100% upside from its present levels.

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Analyst Seth Goldstein at Morningstar is bullish on Eastman Chemical, citing the company's strong specialty chemicals portfolio and promising investments in sustainable-based feedstocks including recycled chemicals and wood pulp. The firm's patented-protected specialty chemicals mainly used for automobile industry offers possible long term gain as increased electric vehicle sales will require energy-efficient windows and displays made from the chemicals. Despite concerns over the company's exposure to the volatile commodity chemical industry and its potential environmental impact due to its high-sulfur coal production, Goldstein believes that Eastman's strategic shift towards more value-added sectors and its focus on sustainability could drive future growth. Nonetheless, the analyst warns of the impacts of a potential economic slowdown on Eastman's cyclical end markets, which contribute roughly half of its total revenue. The fair value estimate is set at $130 per share.

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The author supports their bullish viewpoint on SentinelOne (S1) with an in-depth analysis of the firm's Q2 2023 performance. Despite accounting issues that led to a restatement of its ARR metrics and subsequent stock sell-off, the author insists S1 managed to rectify these concerns. Despite rumors of S1 looking to sell itself and termination of a security partnership with Wiz, the author states these were misinterpreted, and S1 remains steadfast in its growth path. The author also highlights S1's cloud business, which has maintained a growth rate of ~100% for the past few quarters, contributing significantly to a positive future outlook. S1 also addressed its ARR issues which were an accounting misunderstanding, as they've only been operating their usage-based business for a short time. The business's quarterly results showed a solid growth rate of 30%, which does not include their MSSP network customers. The Net Revenue Retention was 115% for the quarter, slightly disappointing but still extremely strong. Financially, S1 remains strong with a cash hoard of $1.1B and no debt, operating roughly at free cash flow breakeven. The author ends the pitch confident in S1's future, primarily driven by its strong cloud business growth, industry position, and strong financial standing.

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The author presents Rave Restaurant Group as a microcap turnaround play, emphasizing new leadership under CEO Brandon Solano, former key player in Domino's turnaround, and a refocused energy on growing the Pizza Inn franchise. Despite pandemic struggles, the company has seen revenue growth to $11.8 million in 2023 from $8.5 million in 2021 and for the first time in 20 years, has witnessed growth in Pizza Inn buffet locations. Buffets, particularly pizza buffets, have been experiencing resurgence post-pandemic which provides a favorable market environment for Pizza Inn, noted for its loyal fanbase. Main competitors include Pizza Ranch, CiCi’s, and Mazzio’s but these companies show little overlap with Pizza Inn locations. The management's ambition to expand the brand by 10x in the Southeast, coupled with significant Free Cash Flow margins at 20%, and no debt, sets Rave Restaurant Group up as a promising investment. However, it comes with a speculative reminder that any turnaround faces inherent risks and uncertainties.

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Analysts at Lab are positive about Lonza Group's buy value, prompted by expectations for the Capital Market Day and reconfirmed 2023 outlook. The recent depature of their CEO, Pierre-Alain Ruffieux, has shaken investor confidence, but analysts suggest this offers an attractive entry point due to potential recovery in stock price. Revisions were made to Lonza's 2023 and 2024 guidance, which increased debates on sales expectations. However, the Lab anticipates faster growth on the revenue line (12-15%) with a core EBITDA margin in the range of 32-34% by 2026, which would lead to long term EBITDA upgrades. Lonza also benefits from accelerating biologics growth, an ongoing CHF 2 billion buyback, and the possibility of a higher cumulative buyback of almost CHF 5 billion in the CMD visible period. However, risks remain, such as the delay in earnings recovery post-2024, uncertain FX volatility, development of new medicines that could impact existing sales, and the possibility of pharmaceutical conglomerates ramping up internal production.

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The author is bullish on NCAB, a global supplier of printed circuit boards. They highlight NCAB's strategic position in the high-mix, low-volume segment of the PCB market, a region characterised by higher product value, quality demand, technical complexity, and price stability. By leveraging its expertise and established relationships with top Asia-based factories, NCAB is well-positioned to provide top-tier, reliable products at a competitive price point, outshining its closest competitors: ICAPE, Fineline, and Palpilot. The author notes that an increasingly consolidated Asian market and dwindling local suppliers in Europe and North America strengthen NCAB's position. Furthermore, they believe the company's ambitious plan to double its turnover by 2026 through a balance of organic growth and external acquisitions, particularly of small- to medium-sized family-owned companies, is attainable. Although the author notes some risks regarding its track-record of M&A and management history, they view the overall risk profile as low, based on the company's history of prudent, small-scale acquisitions. They believe that with the execution of the company's strategies, it could be a 2x investment over five years. Management also displays confidence in the future of the stock by holding about 20% of the company's shares.

Read the full article here. Read time: 8 min