Today's best stock ideas (Tuesday, October 17)

The analyst from Morningstar, Seth Goldstein, maintains the $350 fair value estimate and bullish stance for Albemarle Corporation (ALB) post the company's decision to inactivate the acquisition of Liontown Resources. Despite the acquisition's potential to provide another high-quality lithium hard rock resource, its withdrawal perceivably won't impact overall shareholder value. Goldstein notes that ALB shares at their current prices are highly undervalued, implying a potential upside of above 50%, which posits the company as a top lithium pick. Albemarle reportedly plans to enhance its lithium production capacity from 200,000 metric tons in 2022 to 500,000-600,000 metric tons by 2030, driven by increasing global lithium demand tied to the rising popularity of electric vehicles. While the failed acquisition targeted the upper limit of the planned capacity reach, the projections have been revised to the lower end. Despite the arising risks, such as volatile lithium prices, new battery technologies, and political risks particularly in Chile, Goldstein stands firm with his bullish outlook for Albemarle.

Read the full article here (paywall). Read time: 10 min

NextEra Energy Partners (NYSE:NEP) has seen a significant drop in unit price from $50 in mid-September to $23 today, a decline of 54%, after announcing a curtailed distribution growth outlook. The author suggests this is an overreaction and presents NEP as an attractive high-yield investment opportunity, especially as the clean energy market expands. The company's diverse portfolio includes renewable energy assets in wind, solar, natural gas pipelines and battery storage, which generate long-term cash flows for the energy company. Despite the forecasted slower distribution growth of 5-8% annually, down from the previous estimate of 12-15%, due to higher financing costs, NEP expects to pay a $3.52 per-unit distribution which implies a lucrative 15.3% yield. The author highlights NextEra Energy Partners' potential for recovery and the valuation collapse as temporary, projecting a fair value of $31-34, presenting an upside potential of 35-48%. Despite the risks associated with the energy sector, the author argues that NEP definitely remains an attractive high-yield opportunity in the growing new energy market.

Read the full article here (5 free per month). Read time: 4 min

Analyst Stephen Biggar maintains a BUY rating on Wells Fargo & Co. (NYSE: WFC) after the company reported a 3Q23 EPS of $1.48, exceeding the consensus estimate of $1.24 and marking an increase from $1.30 a year earlier. Management now projects a 16% growth in net interest income this year, raised from the previous prediction of 14%. Wells Fargo continues to divest noncore businesses to focus on core capabilities, with initiatives in play to control costs as well. Although challenges exist due to a consent order with the Federal Reserve limiting asset growth till 2024, new CEO Charles Scharf is anticipated to navigate these regulatory issues and restore confidence in the company. Biggar forecasts a target price of $57, implying a multiple of about 12-times 2024 EPS estimate. However, potential risks include a slowdown in demand for Wells Fargo products, particularly on the consumer side, and the impacts of maturing and competitive US market where Wells Fargo operates exclusively.

Read the full article here (paywall). Read time: 5 min

The author makes a compelling case for investing in Evolution AB, a leading provider of live casino solutions to online gaming operators. They argue that Evolution's success stems from solving key problems for operators by offering a comprehensive live casino platform, recruiting skilled dealers, providing customization, maintaining a broad game portfolio, and integrating with land-based casinos. This results in economies of scale, 70% EBITDA margins, and a cash-rich balance sheet. While risks exist regarding regulation and customer concentration, Evolution holds durable competitive advantages including strong intellectual property, scalability, network effects, and high switching costs. With online gambling projected to grow at 12% annually, Evolution is poised to continue outpacing the market and widening its lead over competitors. Trading at 17x forward earnings despite 26% growth and a 70% margin, Evolution appears undervalued. Though risks remain, the author makes a compelling argument that Evolution's dominant position in a high growth market offers an attractive investment opportunity. Note: the author owns this stock.

Read the full article here. Read time: 28 min

The author is bearish on RCM Technologies due to concerns over financial accounting, corporate governance, and the business model. They believe that aggressive mark-to-model revenue recognition, deflated expenses, under-reserving for bad debts, hidden customer acquisition costs, and thin cash flow, coupled with an overleveraged nature, are negatively affecting the company's financial health. Governance issues include a high turnover in the top management and an oversized board with potentially conflicted members. Additionally, the author holds that RCM's business model is overly dependent on a high stock price to win and retain customers, thus creating a dangerous cycle. Despite outperforming the SPDR S&P Healthcare Services ETF by about 4,500bps over the past five years, the author expects RCM to start facing problems from Q3 2022, with a possible decline to lows of $7 per share.

Read the full article here. Read time: 38 min

Lindbergh SpA is a unique company offering services that provide substantial advantages to their clientele. Their offerings greatly enhance customer productivity while simultaneously reducing environmental impact. Lindbergh stands out in the in-night in-boot delivery service market due to their proprietary technology platform. This technology not only enhances their core services but also allows them to offer complementary ones that further boost the efficiency of technicians. The company boasts a high-standing and loyal client portfolio that includes multinational giants such as Jungheinrich, Kion, Linde, Toyota, Kone, RICOH, and Still. Financially, Lindbergh is an illiquid micro-cap with a remarkable 67% insider ownership. Their financial performance in the first half of 2023 has been stellar with revenues rising by 19.5%, EBIT by 39.4%, and net profit seeing a 40% increase. The successful and quicker-than-anticipated turnaround of their French subsidiary is expected to further amplify overall margins in the upcoming years. As of 2023, Lindbergh's EV/EBIT stands at 10.3x and its P/E at 11.6x.

Read the full article here. Read time: 16 min