A single upgrade is rarely enough to move a stock price, but a series of upgrades often are. That’s why we like to screen for the most upgraded stocks; what we’ve found today is fascinating.
Ollies Bargain Outlet Holdings (NASDAQ:OLLI), FedEx (NYSE:FDX), and Devon Energy (NYSE:DVN) are the three most upgraded stocks in June 2022 and all are set up for gains in the 2nd half. While none share the same industry or sector, they are all benefiting from secular trends that point to success not just in the second but into 2023 and beyond.
1. Ollie’s Bargain Outlet
This is not the first time we’ve called out Ollie’s Bargain Outlet this year, and it likely won’t be the last. The company is set up to benefit from retail trends in so many ways it is hard to count them all. However, the number 1# and number #2 are the expectations consumers will trade down to lower price-point shopping like Ollie’s and the growing potential for outsized deals later in the year.
Target was the first to indicate bloating inventory, and we think it won’t be the last. This means Ollie’s will not only have lower price point offerings for consumers but ample opportunities to fill the shelves and lure shoppers into the stores.
Shares of Ollie’s slumped in the wake of its 2Q report, but the analyst community targeted that move. The stock has received eight commentaries, including three upgrades, one initiated target at $70, and 7 price target increases.
The activity has the Marketbeat.com consensus rating up in the three and 1-month comparison, and it will trend higher over the 2nd half. As it is now, the consensus rating is in-line with the price action, but the bias is upward. Not only are the bulk of new ratings above the consensus target, but the high price target of $98 implies at least a 50% upside remains for investors.
2. Devon Energy
With oil prices as high as they are, it’s no wonder the energy sector continues to be upgraded. However, the most upgraded energy stock over the past month is a little heard name with a considerable yield; Devon Energy is an independent oil exploration and production company with wells across the US. The stock pays about 8.8% in yield, which is a growing distribution we’re talking about. The company has increased the payout for the last five years and pays out only 55% of earnings, so there is room for additional increases, not counting the windfall profits we expect to see this year and next.
As for the analysts, 8 of the 14 covering the stock have issued reports since the last earnings release, and most are bullish. The list includes one downgrade to Accumulate compared to the Moderate Buy indicated by the Marketbeat.com consensus, but the rest are bullish. The remaining seven all include a price target increase that amounts to a consensus of $94 or about 50% above the broader consensus of $63.50, and we think more increases are on the way.
3. FedEx
FedEx issued a mixed earnings report that came with some very robust guidance. The guidance, however, was met with some skepticism from the analyst's community but took that with a grain of salt. While most analysts see risk in the outlook, they also think the stock is a buy and are raising their price targets. The stock has received eight shoutouts since the Q2 report was released, including one initiated coverage that includes a price target 7.5% above the consensus. The other seven amount to a target of $302 or about 25% above the current action.
