Weaker-than-expected labor market data, uncertainty surrounding the Fed’s potential tapering, and rising inflation have caused the benchmark indices to edge lower of late. However, with the third-quarter earnings season kicking off this week, investors are hopeful. Also, according to veteran chart analyst Larry Williams, the stock market is expected to move higher in late October.
Given this, we think investing in stocks that are overlooked by many investors but have the potential to deliver solid returns in the near term could be ideal bets now.
Underscoring this point, Wall Street analysts are optimistic about the upside potential of under-the-radar stocks Cazoo Group Ltd (CZOO), 23andMe Holding Co. (ME), and Sharecare, Inc. (SHCR) because of their sound fundamentals.
Cazoo Group Ltd (CZOO)
Headquartered in London, U.K., CZOO is an online car retailer company. The company offers a range of sport utility vehicles (SUVs) and hatchbacks, including various electric and hybrid vehicles. It also provides car care services, such as extended warranty and paint and fabric protection. Audi, BMW, Ford, Land Rover, Mercedes-Benz, Nissan, Volkswagen, Skoda, and Fiat are the brands sold by CZOO.
Last month, CZOO acquired U.K. vehicle preparation, logistics, and storage business, SMH Fleet Solutions (SMH). The acquisition should allow CZOO to solve reconditioning, storing, and delivery problems. Also, it would help to de-risk the company’s future growth by doubling the number of vehicle preparation sites and significantly enhancing its team of vehicle preparation and logistics staff.
For six months ended June 30, 2021, ZDGE’s revenue increased 529% year-over-year to £248 million ($286.94 million). The company’s gross profit came in at £11 million ($12.73 million), compared to a gross loss of £1 million ($1.16 million) in the prior-year quarter. Its cash and cash equivalents amounted to £60 million ($69.42 million) during this period. Also, the company’s revenue under its retail segment grew 462.2% from the year-ago value to £208 million ($240.66 million).
The only Wall Street providing a rating for the stock has rated it Buy. The price target represents a 68.3% potential gain.
23andMe Holding Co. (ME)
ME is a consumer genetics and research company that offers direct-to-consumer genetic testing and personalized information about genetic health risks, ancestry, and traits. Consumer & Research Services; and Therapeutics are the segments under which the Mountain View, Calif., company operates. In addition, the company provides personal genome services and solutions, including oncology, immunology, neurology, metabolic and cardiovascular diseases.
In June, ME and a special purpose acquisition company sponsored by Virgin Group, VG Acquisition Corp. (VGAC), completed a business combination. The capital from this transaction should be used to invest in the company’s unique genetic and phenotypic database to help accelerate personalized healthcare at scale.
During its fiscal first quarter, ended June 30, 2021, ME’s revenue increased 23.3% year-over-year to $59.24 million. The company’s gross profit grew 36.5% from its year-ago value to $30.7 million. Its interest income came in at $44,000 during this period. Also, the company’s cash rose 172.6% from $282.49 million as of March 31, 2021, to $769.94 million as of June 30, 2021
A $315.47 million consensus revenue estimate for its fiscal period ending March 2023 represents an increase of 22.6% year-over-year. Also, the company’s EPS is estimated to grow 25.3% for the fiscal period ending March 2023.
The two Wall Street analysts that have provided ratings for the stock rated it Buy. The average analyst price target represents a 66% potential gain.
Sharecare, Inc. (SHCR)
Founded in 2009, SHCR in Atlanta, Ga., is a digital healthcare platform company. The company’s Sharecare data-driven virtual health platform consists of doctors, health plans, employers, health management tools, information, and communities. It also develops and tests programs, such as diabetes, smoking, financial stress, and COVID-19.
This month, SHCR launched Unwinding by Sharecare, which is an evidence-based mental well-being app. This app has been designed to help users better understand how their minds work, reduce stress, and build healthier habits. The app consists of masterclasses, stress reduction tools, and other materials that teach people practical ways to use mindful awareness.
SHCR’s revenue increased 25.9% year-over-year to $98.46 million for the second quarter, ended June 30, 2021. The company’s loss from operations decreased 20.1% from its year-ago value to $4.4 million. Its interest income rose 31.3% from the prior-year quarter to $21,000. Also, the company’s cash and cash equivalents grew 89.5% from $22.6 million as of December 31, 2020, to $42.84 million as of June 30, 2021.
For its fiscal year 2022, SHCR’s revenue is estimated to be $553.21 million, representing 33.9% year-over-year growth. Analysts expect SHCR’s EPS to increase 100% next year. Its stock surged 9.9% in price over the past month.
The two Wall Street analysts that have provided ratings for the stock have rated it Buy. The average analyst price target represents a 73.2% potential upside.
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CZOO shares were trading at $7.17 per share on Thursday afternoon, up $0.02 (+0.28%). Year-to-date, CZOO has declined -39.24%, versus a 19.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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