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Buy These 2 Stocks at Discounted Prices — They Have Over 70% Upside, Says Oppenheimer

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This past month has seen the bears come out, as the market has entered a correction. The NASDAQ is down 13% since the start of 2022, a loss that has actually erased its 12-month gain. The S&P 500 hasn’t dipped quite that far yet, but is still down 8% year-to-date. The drop has had investors questioning whether or not the previous year’s sustained bull run has ended.

Looking at the macro situation from Oppenheimer, chief investment strategist John Stoltzfus would advise investors not to turn pessimistic quite yet. Stoltzfus believes that the coming months are likely to bring us relief from both the pandemic and the supply chain crisis. Looking ahead, Stoltzfus says, “It would appear to us to be time for writing shopping lists of fundamentally sound stocks, sectors and thematic investment ideas that might ‘have gotten away from us’ in last year’s market upswings…”

The stock analysts from Oppenheimer are following Stoltzfus’ lead, and picking out the stocks they see gaining as we march further into 2022. They see the current correction as a chance to buy at a discount, in preparation for better times ahead. Using TipRanks’ database, we’ve located two of those Oppenheimer picks, which the firm expects to surge by 70% or better.

Hertz Global (HTZ)

We’ll start with one of the world’s most recognized brands, Hertz. The car rental giant operates the Hertz, Dollar, and Thrifty rental companies, and boasts a worldwide reach – more than 10,000 locations in 145 countries on 6 continents.

There was a weakness, however, that the COVID pandemic exposed. Hertz depends on a customer base that’s in transit – and the pandemic shut down travel, slamming the company and drastically reducing the value of its chief asset, its extensive car fleet. At the same time, Hertz’s creditors called in their loans, which had been secured by those very car fleets. The combination was too much, and Hertz entered bankruptcy proceedings in May of 2020. After more than a year of litigation and restructuring, the company emerged in July 2021 in a strong position, having discharged $5 billion in debt and secured $5.9 billion in new capital.

A look at the last quarterly report, for 3Q21, shows the extent of the company’s turned fortunes. The top line revenue, of $2.2 billion, was up 19% year-over-year, while adjusted diluted EPS, at $1.20, was enormously improved from the 3Q20 EPS loss of 44 cents. The company had $2.7 billion in unrestricted cash as of September 30, 2021. The company will report its Q4 results toward the end of February.

In addition to sound financials, Hertz has also been moving to align its business with modern trends. The company is partnering with the used vehicle e-commerce company Carvana to streamline its used car disposition channels. The partnership will see Hertz sell used fleet vehicles through Carvana, to benefit both companies. Also, Hertz is working with Uber and Tesla on a project to electrify its rental fleet, and will be making up to 50,000 Tesla vehicles available to customers who rent through Uber’s network.

And last, Hertz has made a move that should please investors. The company announced in November that it has approved a share repurchase program of up to $2 billion.

In short, Hertz has emerged from bankruptcy with solid plan to move forward, and the ability to execute on it. Nevertheless, the stock is down 48% from the peak it reached in November of last year.

However, Oppenheimer’s Ian Zaffino sees Hertz in solid position, and poised for takeoff.

“With a meaningfully improved cost structure, an under-levered balance sheet and newfound competitive discipline, we believe Hertz is an interesting post-bankruptcy equity. The company has the potential to roughly double its pre-COVID EBITDA margins, even as auto production and the operating environment normalize.”

He went on to add that “Hertz has been highly forward-looking, as it positions itself for the future of the rental industry. It recently announced agreements with Tesla, Carvana, and Uber. The Tesla deal has the potential to be margin accretive, especially if EVs prove to have better economics. Further, the Carvana partnership expands Hertz’s disposition channel and could add $50M+ to EBITDA.”

To this end, Zaffino puts an Outperform (i.e. Buy) rating on the stock, not surprising in light of his comments, and his $31 price target implies an upside of 72% for the year ahead. (To watch Zaffino’s track record, click here.)

Overall, Hertz shares get a Moderate Buy rating from the analyst consensus on Wall Street. The stock has 6 recent analyst reviews, breaking down to 4 Buys and 2 Holds. The average price target of $30 implies a one-year upside of ~66% from the current share price of $18.01. (See Hertz stock forecast on TipRanks)

Vacasa (VCSA)

The second Oppenheimer pick we’ll look at is Vacasa, another company that has benefited greatly from the reopening of the economy and the gradual scaling back of COVID restrictions. Vacasa, based in Portland, Oregon, is a vacation management company, connecting vacationers with places to stay. The company operates in 34 US states, plus the countries of Canada, Mexico, Belize, and Costa Rica. It’s homes, totaling more than 35,000, have picked up nearly 300,000 5-star reviews, and Vacasa boasts that it facilitates vacation stays for more than 3 million guests annually.

This company went public just this past December, through a SPAC transaction with TPG Pace Solutions Corporation. The deal saw the VCSA ticker start trading on December 7, and brought the company over $340 million in new capital.

From one perspective, this company went public at just the right time. Customer behavior trends have shifted favorably in recent months, as people are finding that they can travel and have the funds to do so. The company released its 3Q21 results a few weeks before completing the SPAC transaction, and showed record revenue of $330 million. That was a 77% gain year-over-year, and beat the company’s quarterly revenue target by 28%. The company sold over 1.8 million vacation nights in Q3, well above the 1.1 million sold in the year-ago quarter. Looking forward, Vacasa raised its full-year 2021 revenue guidance by more than $100 million, to the range of $872 million to $877 million.

A look at the company’s stock price chart may seem worrisome at first glance. The stock is down ~40% since going public. However, Oppenheimer analyst Jed Kelly does not see reason to worry, and in fact, believes that Vacasa is in the process of becoming the leader in its market.

“VCSA is leveraging its positioning as the largest vacation rental management platform in the US to increase its scale advantages and acquire outsized inventory share as consumer preference for the segment grows. We see this dynamic facilitating VCSA’s evolution into a national hospitality brand and generating upward revisions to LT estimates. Additionally, we expect a robust demand environment continuing in ’22,” Kelly noted.

“We see more liquidity (6/5/22 lockup), and strong execution enabling VCSA to close the valuation gap with its online travel peers,” the analyst summed up.

Kelly thinks the stock has some way to go, and by some way, we mean 96% of upside. Those are the returns investors are looking at, should the stock make it all the way to Kelly’s $12 price target. No need to add, the analyst’s rating is a Buy. (To watch Kelly’s track record, click here)

All in all, Vacasa currently holds a Moderate Buy rating from Wall Street’s analysts; in its short time as a public company, it has picked up 4 Buy reviews against 2 Holds. The stock is selling for $6.10 and has a bullish 103% upside potential based on the $12.40 average price target. (See VCSA stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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