Get Defensive With These Three Upgrades

July 06, 2022 at 03:00 AM EDT

Not All Stocks Are Getting Downgraded In Q3

Oh, the times, they are a-changing. Not only is the outlook for S&P 500 earnings growth diminishing but the analyst are becoming more defensive by the day. The latest round of commentaries contains no few downgrades and price target reductions but there are some rays of light for investors. Among the latest upgrades are three stocks that we consider to be well-positioned for the times including Dollar General, Crox, and Antero Resources.

Dollar General Commands Another Upgrade

Dollar General (NYSE: DG) has been marching higher under the influence of results and analyst sentiment and that trend is not ending. The company just received the 2nd of two upgrades within a two-week timespan that have the Marketbeat.com consensus sentiment and price target trending higher. The latest comes from Cleveland Research which upgraded to Buy from Neutral without setting a price target. In the eyes of the firm, market share gains are accelerating and should be compounded by resilient margins over the next few quarters. Convenient store locations and easing supply chain issues are also noted as drivers of strength.

The new Buy rating compares favorably to the Marketbeat.com consensus of Moderate Buy but did nothing to improve the price target. The consensus price target of $245 assumes the stock is already fairly valued but we think it is trailing the market. The consensus price target is edging higher in the 12, 3, and 1-month comparisons despite consistent growth and outperformance. Looking at the chart, the stock may have some trouble moving above the $250 resistance target but we see it falling by the end of the quarter. Dollar General will next report earnings on August 25th.

Get Defensive With These Three Upgrades

Crocs Snaps Up An Upgrade

Crocs (NASDAQ: CROX) just snapped up the first analyst upgrade since the last earnings report was released in early May. This is surprising given the fact the Q1 results outpaced consensus on the top and bottom lines and the guidance was raised, but who are we to criticize? The takeaway is that Loop Capital upgraded the stock to Buy from Hold and assigned a $75 price target compared to the $134 Marketbeat.com consensus. In the eyes of Loop Capital, the company’s valuation is attractive following a steep sell-off and the channel checks are promising.

The Marketbeat.com consensus price target is down about $20 from the peak set this year but it is still up strongly from last year and the downtrend appears to be over. The takeaway here is the new $75 target is about 50% above the current price action and even the low price target offers some upside to investors. The company will next report the first week of August and is expected to post a strong 46% sequential increase in revenue driven by acquisitions and organic sales gains.

Get Defensive With These Three Upgrades

Antero Resources Pumps Up An Upgrade

Between the high price of oil and the recent pullback in energy stocks, it is no surprise that energy operators, especially independent drillers like Antero Resources (NYSE: AR), are getting upgraded. The latest comes from Truist Financial which upgraded the stock to Buy from Neutral. The upgrade compares favorably to the consensus of Moderate Buy and has the rating edging higher. The upgrade also comes with a price target of $50 which is $5 above the analyst average target and assumes about 60% of upside is available. Turning to the chart, the price action in Antero Resources has pulled back nearly 40% since hitting its peak earlier this year. The price action is now testing for support along the 150-day EMA where we are expecting a rebound to begin.
Get Defensive With These Three Upgrades