🤖📈 Top Trade Ideas for July 14

The investment case for PayPal predicts a return to 10% EPS growth and a recovery in its P/E multiple. This growth is expected to be driven by the e-commerce market and an increase in EBIT margin, including cost cuts. With the share price at $72.39, forecasts suggest a 77% total return (33% annualized) by the end of 2025, due to Non-GAAP EPS growing to $6 and a P/E re-rating. However, as a turnaround situation, PayPal carries higher risks. A recent management presentation highlighted a strategy focused on improving market share, and an agreement with KKR will provide a €3bn loan to fund its Buy Now Pay Later loans in key European countries. Q2 2023 results are expected to be poor, as the turnaround efforts will need time to produce a meaningful impact, but PayPal expects to increase its 2023 share purchases from by $1bn to $5bn.

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Verizon is a leader in 5G home internet and has extensive coverage in major cities. The wide value spread between growth and value stocks makes Verizon an attractive cheap value stock. Telecom cash flows, including Verizon's, have historically performed well in recessions. Verizon has pricing power over third-party MVNOs and prioritizes its own subscribers for data speeds. The company is well-positioned to capitalize on the growth of the Metaverse. Verizon has industry-leading financial fortitude and is recession resilient compared to other tech companies. Lower interest rates are positive for Verizon, and its dividend is attractive and well covered by free cash flow. The author estimates potential outsized returns for Verizon in the decade ahead. Potential risks include losing customers to T-Mobile, higher interest rates, inability to raise prices, and a decrease in free cash flow leading to a dividend cut and debt repayment. Despite the risks, the author believes Verizon's value proposition is solid and expects it to outperform in a recession. The author has a Strong-Buy rating on Verizon and believes it is undervalued with potential for market outperformance.

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Valens is a semiconductor company focused on high-speed video and audio connectivity. They have high-profile design wins in the automotive industry and potential for further wins. Valens has an established audio-video semiconductor business with well-known customers and saw attractive growth rates last year. Their overall gross margins are over 60% and their shares are undervalued due to their high net cash position. Valens is under the radar and has limited analyst coverage and institutional involvement. The risk-reward profile is appealing, with potential for revenue growth and multiple re-rating. Their connectivity chips are designed for high-speed data transfer in vehicles and they are collaborating with Intel and other companies to address the demand for camera and radar sensors. Valens' technology solutions are expected to drive the autonomous market. They are expecting automotive design wins for their latest chip and have the potential to capture a significant portion of the connectivity chip market. Valens differentiates itself with its digital technology and scalability. They also have a strong presence in the audio-video semiconductors industry. Valens has a strong financial position and expects to break-even and achieve cash flow profitability in the near future. They have outlined goals for 2026, including revenue and margin targets. The shares are considered attractively valued with more expected upside than downside.

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