Editorial StaffIs it time for the bears to finally come out of hibernation? Not so fast, says Goldman Sachs. Volatility has ruled the Street recently, leading some to conclude that those with a more pessimistic outlook had been vindicated, but the firm believes stocks can still climb higher.
According to Goldman Sachs’ head of U.S. equity strategy, David Kostin, the S&P 500 could hit 5,100 by next year. This would reflect gains of 10% should the index ultimately reach this target.
“If you’re looking for a good hedge on inflation, the equity market is certainly one area to focus on,” Kostin opined.
Given Kostin’s outlook, we wanted to check out three stocks scoring major praise from Goldman Sachs. Not only have they been given a Buy rating, but the firm’s analysts also see at least 100% upside potential on tap for each. Using TipRanks’ database, we found out that all three tickers have gotten a thumbs up from analysts at other firms as well. Let’s take a closer look.
ReNew Energy Global (RNW)
Let’s start on the Indian subcontinent, a region that is frequently overlooked but shouldn’t be. India has nearly 1.4 billion people, an economy that is emerging into first-class status, and boasts both and expanding middle class and expanding modern industries from autos to tech. ReNew Energy is the country’s largest renewable energy provider, counting by power generation capacity. ReNew has over 10.3 GW of clean energy generation online or committed, and is looking to expand. The company generates its power from wind and solar farms, and from one hydropower plant.
This year’s rising markets have prompted a wave of new public offerings, through both traditional IPOs and through SPAC transactions. ReNew took the latter route; in August, the company entered business combination with RMG Acquisition Corporation II. Approval came from RMG’s shareholders on August 16, and the RNW ticker started trading on August 23. The move was notable because it made ReNew one of India’s fist billion-dollar unicorns on the US markets. The company currently has a market cap of $3.19 billion.
In November, ReNew released its first quarterly financials as a public company. Total revenue for Q2 FY22 was reported at $287 million (taking into account exchange rates at the time, and conversion from Indian rupees), which was up an impressive 44% yoy. Quarterly earnings were positive, at 15 cents per share.
With ReNew shares changing hands for $8 apiece, Goldman Sachs analyst Vinit Joshi sees an attractive entry point for investors.
“We think the share price is discounting a combination of India renewable installations significantly below government targets, elevated receivable days as well as a higher cost of debt. We see favorable risk reward with 27% downside in our bear case and 195% upside in our bull case scenario. We see catalysts such as (1) new project completion and wins, (2) declining interest cost, (3) working capital release, (4) vertical integration and (5) potential Electricity Amendment Bill to drive the share price in the medium term. Risks include higher interest rates, fiercer competition, lower TAM/market share, unfavorable regulations, higher equipment cost, INR depreciation,” Joshi opined.
In light of these comments, Joshi sets a Buy rating with a $17 price target to indicate ~114% upside in the year ahead.
This stock hasn’t been public very long, but in that time it has picked up 3 Wall Street reviews – and they are all unanimous, that it’s one to Buy, making a Strong Buy consensus rating. At $14.30, the average price target brings the upside potential to ~80%.
Source: Yahoo Finance
