Carvana (CVNA), Alphabet (GOOGL), Walmart (WMT) and RingCentral (RNG) Find Their Place in Jefferies' Franchise Pick List

January 29, 2021 9:50 AM EST
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Price: $273.20 -1.97%

Rating Summary:
    20 Buy, 14 Hold, 1 Sell

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Analysts at Jefferies updated their “Franchise Picks” list to add 13 names and remove 8 stocks. They note that the Franchise Picks list has outperformed the SPX by ~900bps on a total return basis as of December 31, 2020.

At the moment, the Franchise Pick list consists of: BFAM, BIO, BX, CVNA, CVS, EXR, FCX, GILD, GNTX, GOOGL, HAE, HUN, KMT, MCHP, NICE, OC, PFSI, PG, RNG, SIX, TDG, TJX, WAL and WMT.

As far as particular stocks are concerned, Carvana (NASDAQ: CVNA) has been added to the list as their analyst John Colantuoni believes the company offers “a rare opportunity to participate in the early stages of a secular shift to e-commerce (~1% penetration today) within a massive $550B market for used cars.”

“We think CVNA's competitive advantage over traditional dealers will grow as it gains scale, as ~30K of centralized inventory allows it to offer significantly more selection than physical dealerships. In addition, CVNA's e-commerce site/app and self-service tool provides a superior consumer experience while reducing costs by avoiding the need for salespeople and prime real estate, providing flexibility to offer lower prices while still achieving attractive economics,” he wrote in today’s note.

Alphabet (NASDAQ: GOOGL) remains on the list on the back of the attractive valuation, and secular growth trends in the digital advertising market.

“Balance sheet is healthy with gross cash balance of $133bn and $25bn of share buyback authorization remaining. GOOGL remains well-positioned to monetize secular shifts to online content and commerce, which are being accelerated by Covid-19,” analyst Brent Thill said.

Gilead (NASDAQ: GILD) also saw its “Buy” rating reiterated, but it requires time and patience. RingCentral (NYSE: RNG) has a price target of $450.00 per share confirmed as the company is seen as “one of the biggest beneficiaries of the migration from on-prem to cloud-based unified communications solutions.”

“The company’s products are best-in-class, which drove initial customer adoption. The competitive advantage that will allow RNG to grow at high rates for years to come is the carefully crafted partner-led go-to-market strategy. RNG’s partnerships with AVYA, Alcatel, and Atos changed the industry landscape and structurally advantages RNG vs. other UCaaS providers,” Samad Samana wrote.

Walmart is also added to the list due to its scale and proximity to customers, giving it a distinct advantage as omni-channel, accessibility & convenience, and social services grow in importance.

“We believe WMT is strategically investing and partnering to build out a compelling ecosystem anchored in a robust digital infrastructure (WMT+, Walmart Media Group, Marketplace, Same-day Fulfillment) and amplified by leadership in Grocery and the co’s EDLP philosophy. Core retail scale & performance powers the potential for adjacent opportunities (Healthcare, Fin Services, etc), enhancing the economic value of the system,” analyst Stephanie Wissink said.

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