Have the markets reached the exuberant stage? Bullish sentiment has been the order of the day for some time and the S&P 500 is currently at 4,455, up 16% year-to-date.
The index has already surpassed the year-end target of 4,400 set by Larry Adam, Raymond James' chief investment officer. This success is a kind of justification for Adam. He contradicted the prevailing sentiment at the start of the year which, as you recall, was downright bearish due to the poor environment in 2022. Despite this, Adam maintained his positive outlook. Now, with everyone getting back on the bullish bandwagon and relative strength indicators entering “overbought territory,” Adam believes it's time to play the countertrend again.
“These technical indicators, and the fact that other Wall Street firms have been raising their year-end price targets for the S&P 500 in recent weeks, suggested that much of the good news was already priced in – suggesting that the Market has gotten into a more vulnerable, vulnerable position.” to disappointment,” he explained.
Don't be too alarmed, however, as Adam's caution only applies to the short-term future. “Longer term,” he continues, “we remain bullish and expect the S&P 500 to rise to at least 4,600 over the next 12 months on macro tailwinds (ie Fed completes tightening cycle, falling interest rates are resilient) . margins and record cashes on the sidelines) provide a more supportive environment for stocks.”
Meanwhile, analysts at Raymond James have been busy presenting investors with the stocks that are well-positioned for the year ahead, flagging two names they view as “strong buys.” We ran these tickers through the TipRanks database to find out what the rest of Wall Street's corps of analysts thought of them. Let's look at the details.
EngageSmart, Inc. (ESMT)
We start with EngageSmart, a company specializing in providing bespoke customer engagement software and integrated payment solutions. With a customer base of over 3,000 companies and 108,000 health and wellness professionals, EngageSmart delivers customized Software-as-a-Service (SaaS) solutions to various industries. Originally founded in 2009 as Invoice Cloud, the company was rebranded in 2020 and is called EngageSmart. The Company's primary focus is to serve large and untapped markets that are increasingly reliant on software and payment technologies, particularly in non-cyclical sectors.
EngageSmart operates through two distinct segments: SMB Solutions, which offers comprehensive practice management solutions for the health and wellness industry, and Enterprise Solutions, which offers vertical engagement services for electronic bill payment and integrated payments in various sectors such as government, utilities, financial services, etc . health care and charitable donations.
EngageSmart has been a public entity for less than two years, but over the period revenue has steadily improved sequentially. The most recent 23Q1 report was no different. Revenue increased 31.2% year-over-year to $88.4 million, also exceeding the prior quarter's figure of $83.9 million. Additionally, the figure was $1.73 million above consensus. Bottom line earnings per share of $0.02 were in line with analyst forecasts. The total number of customers increased by 23% to 108,200 compared to 87,800,000 at the end of the first quarter of 2022.
EngageSmart's prospects have caught the attention of Raymond James analyst John Davis, who makes a strong bullish case.
“We believe EngageSmart has a clear growth plan over a number of years thanks to the convergence of software and payments in its core areas,” said Davis. “More importantly, the company has a significant first-mover advantage in both the SMB and enterprise space, enabling it to continue to capture market share from legacy players/processes. More importantly, we believe that given the tailwinds in both SMEs (pricing + new specialties) and corporates (bill pay 2.0), there is a compelling bull case that could lead to a significant increase in numbers (high NRR of 120 + new mid-teen wins).”
Those comments bolster Davis' strong buy rating, while his $25 price target leaves room for a 35% 12-month yield. (To view Davis' track record, click here)
Turning now to the rest of the street, where ESMT currently holds a Strong Buy consensus rating based on 7 buy and 1 hold. With an average price target of $22.86, analysts are forecasting a 23% gain for the coming months. (See ESMT stock forecast)
The Allstate Corporation (ALL)
Now let's move from the software to one of the largest publicly traded personal insurers in the US. Allstate is an established and well-known insurance company with a history dating back to 1931. Over the years it has grown to become one of the country's largest and most recognized insurers. Allstate offers a full line of insurance products and services, including auto, home, rental, life and business insurance, designed to meet the diverse needs of individuals and businesses.
It is a significant operation with 54,700 employees, a market cap of $29 billion and 2022 revenues of $51 billion. Judging by its performance in the first quarter of this year, the company is on track to achieve this number to surpass. Revenue for the first quarter was $13.79 billion, up 11.8% year over year and beating the consensus estimate by $110 million. However, the company didn't fare as well at the other end of the spectrum; adj. Earnings per share came in at -$1.30, well below the -$1.01 analysts were expecting.
The quarter's performance reflects the company's focus for the past few years on growth at the expense of profitability. Another recent focus has been investing in technology and digital know-how to improve operations and meet the changing needs of its clientele. The company has developed a number of digital tools and platforms.
This is a point picked up by Raymond James' Charles Peters, who highlights the progress made here. The 5-Star Analyst writes, “Allstate is at the forefront of and committed to insurance's digital transformation. The company follows the concept of an integrated digital company. In this regard, Allstate highlights its QuickFoto claims app, which settles about 75% of the company's drivable claims in one day. Allstate is also able to realize significant pricing benefits and report significantly lower accident rates with the launch of its Drivewise app.”
To that end, Peters rates Allstate stock as a “strong buy,” while its price target of $155 suggests upside potential of 40% in the coming year. (To view Peters' track record, click here)
Elsewhere down the road, the stock is posting another 6 buys, 5 break points, and 1 sell, all resulting in a Moderate Buy consensus rating. Assuming an average target of $131.08, investors will be sitting on about a 19% return a year from now. (See Allstate Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.