Hello, Fools. I’m back to highlight three stocks that have recently received “buy” ratings from Bay Street. While we should always take professional opinions with a hefty dose of skepticism, they can often be a source of solid opportunities.
Remember: it’s the investment thesis and logic behind the rating — not the rating itself — that is important to us investors.
Without further ado, let’s get to it.
Growing like a weed
Leading off our list is marijuana company HEXO (TSX:HEXO), which CIBC World Markets initiated with an “outperform” rating on Wednesday. Along with the bullish rating, CIBC analyst John Zamparo planted a price target of $8.50 on the stock, representing about 8% worth of upside from where it sits now.
While the cannabis industry is still in its infancy and fraught with risk, Zamparo believes that Hexo offers investors a “greater element of safety” in the space. He cites HEXO’s deal with Quebec’s wholesale buyer, its partnership with Molson Coors, and innovative product design as clear differentiators.
Even with a balance sheet and management team that doesn’t match some other rivals, Zambrano thinks the risk/reward trade-off is attractive.
HEXO shares are already up about 65% so far in 2019.
Next up we have plane and train manufacturer Bombardier (TSX:BBD.B), which was upgraded by UBS to “buy” from “neutral” late last week. Along with the upgrade, UBS analyst Myles Walton raised his price target to $3.80 per share (from $2.90), roughly 40% worth of upside from where it sits now.
Walton’s upgrade was in response to Bombardier’s quarterly results last week when the company posted Q4 adjusted EPS of $0.05 on a revenue decline of 6.7%.
While those aren’t exactly blowout numbers, Walton thinks the stock rallied due to the “absence of a big negative” as opposed to anything particularly positive. Given Bombardier’s current valuation — PEG ratio of 0.3 — Walton believes that theme could continue in 2019.
Even after the recent pop, Bombardier shares are down about 50% from their 52-week highs.
Yellow light special
Rounding out our list is digital media company Yellow Pages (TSX:Y), which was upgraded by National Bank to “outperform” from “sector perform” last week. Along with the downgrade, National Bank raised its price target on the stock to $8.50 (from $8), representing about 40% worth of upside from where it sits now.
The upgrade comes after Yellow Pages’s improved Q4 results. For the quarter, earnings clocked in at $40 million versus a loss of $584.6 million in the year-ago period. More importantly, adjusted operating margin improved 740 basis points to 33%, while operating cash flow jumped 74%.
“This reflects the continued alignment of our spending to the reality of our revenues and the shedding of unprofitable and non-synergistic business,” said Yellow Pages CEO David Eckert.
The stock remains down 43% over the past six months.
The bottom line
There you have it, Fools: three new Bay Street “buy” stocks worth checking out.
As always, they aren’t formal recommendations. Just think of them as a starting point for more research. The track record of professional analysts is fickle, so plenty of your own homework is required.
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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Molson Coors Brewing.