July 27, 2022, XPO Logistics, Inc. (NYSE:XPO) and Palantir Technologies Inc. (NYSE:PLTR)
This logistics giant and enterprise/government data software provider are beaten-down and ready to reverse as the best stocks to buy now.
As investors braced for the Fed’s rate decision and tomorrow’s GDP (July 28, 2022) announcement, markets fell. On Tuesday (July 26, 2022), the Dow Jones fell 228.50 points (0.71%), the S&P 500 dipped 1.15%, and the Nasdaq dropped 1.87%. Yet the beaten-down XPO Logistics, Inc. (NYSE:XPO) and Palantir Technologies Inc. (NYSE:PLTR) look like the best stocks to buy now.
XPO Logistics is one of the best stocks to buy now because it’s a deeply undervalued transport giant with fundamentals to blunt economic carnage. When diesel prices surged, it still managed to report record revenues and grow its EPS. As diesel prices cool and the Company undergoes initiatives while preparing for its August 4, 2022 earnings, analysts see an upside. All 18 analysts who gave it 12-month price targets in the last 3 months unanimously rate it a BUY with an average 43.77% upside.
Then there’s the Peter Thiel-backed Palantir Technologies Inc. After rocketing 400+% to record highs following its October 2020 IPO, it currently sits below $10 a share. With renewed momentum since bottoming at $6.44 in May, it again looks like one of the best stocks to buy now. It’s cheap, could have a 100+% upside, and most importantly, fantastic growth potential with sticky military contracts. With industry-leading enterprise and government data analytics, full-stack interoperability, and military-grade security, the Ukraine War has caused western militaries to flock to it. For instance, in June, the U.S. army awarded it a 14-month $36 million contract for its Tactical Intelligence Targeting Access Node (TITAN) project, the first A.I. and Machine Learning-enabled Intelligence ground station.
Although this remains an unpredictable time economically, these beaten-down names carry significant upside as the best stocks to buy now.
XPO Logistics, Inc. (NYSE:XPO)
Oppenheimer sees better times ahead and a 60+% upside for this prominent logistics name.
XPO Logistics is a Connecticut-based trucking and transport company. It is a significant freight haulage operator with two business segments- LTL (less-than-truckload freight) and Brokerage and Other Services.
Its LTL business is the core of the Company’s operations and works throughout the entire globe. It’s its transport brokerage segment, though, that is the center of its growth plans. As it aims to streamline its operations, it’s spinning it off as its own public entity, RXO, by the fourth quarter.
As XPO aims to rebrand as a pure-play trucking business, the Company is one of the best stocks to buy now for several reasons. It trades at a steep discount, boasts fundamentals that have proved resilient despite surging diesel costs and supply chain issues, and has unanimous significant analyst upside.
XPO Shook Off Soaring Gas Prices to Record All-Time High Revenues With Outstanding Growth Prospects
XPO will report its Q2 numbers on August 4, 2022, but based on how it did in Q1 when gas prices saw their initial spike, good things could come.
Quarterly revenue, first and foremost, grew 16% year-over-year and hit a company record of $3.47 billion. Diluted EPS also rose $0.56 year-over-year to hit $4.23.
But this may only be the beginning for XPO. Consider that its earnings are expected to grow by 2.51% in the coming year. Or how its net income is forecast to grow by 98.5% and average 19.6% over the next five fiscal years.
What makes XPO’s growth prospects even more attractive, though, are its strong fundamentals and deep value.
XPO’s Fundamentals and Mouth-Watering Discount Point to a Very Buyable Stock
We aren’t the only ones who see XPO as one of the best stocks to buy now. Just ask Oppenheimer analyst Scott Schneeberger. He sees XPO at an attractive entry point ahead of its August 4, 2022, Q2 earnings announcement, the potential sale of its European Transportation business, and the successful spin-off of RXO in Q4.
With the stock trading -33.67% below its highs and the following multiples, he’s not lying about this being an attractive entry point.
- Trailing P/E ratio of 3x
- Forward P/E ratio of 9x
- PEG Ratio of 01
- Price-to-Book Ratio of 7x
- Forward price-to-sales 5x
- Trailing price-to-sales 5x
Moreover, its valuation indicates a strong free cash flow yield of 6.1%.
Ignore for a second also that this stock fell onto some hard times when diesel prices spiked. The fact remains that prices are cooling, and this stock is a long-term outperformer and always seems to bounce back. This latest decline pales compared to some of XPO’s stock’s rough times.
It gets better from here, too. XPO is additionally a candidate as the best stock to buy now because of its strong fundamentals. Its 7 out of 9 Piotroski Score indicates healthy Liquid Balance Sheets, Profitability, and Operating Efficiency. The Company’s 34.7% ROCE is also outstanding, and its 19.0% gross margin means solid profitability.
The Unanimous Consensus is in- XPO is a STRONG BUY With a 43+% Upside
Based on data from Tipranks, the jury is in. XPO is a unanimous STRONG BUY based on 18 out of 18 analysts who rated XPO a BUY and gave a 12-month price target in the last 3 months. Its high price target currently sits at $92.00, its low at $52.00, and its average at $75.94. The average price target represents a 43.77% upside from July 26, 2022’s close of $52.82.
Oppenheimer, however, sees even more upside. Its $87.00 price target from May 12, 2022, a 64.71% upside from July 26, 2022’s close. Why are they so high on XPO? A few reasons.
- XPO’s North American LTL profitability initiatives are on-track
- XPO’s North American Truck Brokerage business has historically outperformed the overall industry. This is also the foundation of its pending RXO spin-off.
- An attractive entry point with economic uncertainty priced mainly into its current valuation.
- Significant upside potential upon execution of its objectives.
XPO’s year-to-date low and high are $45.09 and $79.63, respectively.
Palantir Technologies Inc. (NYSE:PLTR)
This data analytics innovator sees renewed momentum with a potential 100+% upside.
Enterprise and government data analytics services provider Palantir Technologies was once one of the hottest names on the stock market after going public in October 2020. With the backing of Peter Thiel, a celebrated investor who co-founded PayPal and was Facebook’s first outside investor, the stock took full advantage of H2 2022’s wild west-like bull run. Shortly after going public, the stock traded as low as $8.90 a share and promptly surged over 400% to an all-time high of $45.00.
Today it trades -79.11% lower and under $10 a share.
However, since touching an all-time low of $6.44 in May 2022, the stock is in the midst of a massive 45.96% rally.
Based on several catalysts and growth prospects, chances are that this stock currently sits at a mouth-watering discount with an over 100% upside.
Raymond James, after all, clearly sees its upside as one of the best stocks to buy now.
Growing Revenues, Surging Demand From Geopolitics, and Sticky Contracts Point To Immense Upside
Despite Palantir’s Peloton-like plunge since reaching record highs, the reality on the ground tells you that this is one of the best stocks to buy now. Palantir has grown at a breakneck pace and could continue to do so.
Penciled in to report Q2 2022 earnings on August 8, 2022, its Q1 earnings depicted a growing company despite its stock’s plunge. Although EPS missed consensus estimates, revenue grew 30.8% YoY to $446.31 million and beat consensus estimates of $443.51 million. Commercial revenues rose 54% last quarter, as well, and added 40 new customers representing 86% client growth.
Moreover, according to CEO Alex Karp, the Company is uniquely positioned to weather the inflation storm. That’s because Palantir was built to have a solid free cash flow coupled with growth. Nevertheless, the Company is currently growing at an expected 30% revenue CAGR through 2025.
But this may only be the start. Palantir has won successful contracts with the U.S. Army, Department of Defense, and Space Systems. Remember- Palantir, back in October, also won a monstrous $823 million contract from U.S. army intelligence.
Thanks to the Russia-Ukraine War, which looks more like a long-term war of attrition by the day, Palantir’s seeing renewed demand for its A.I. software from western militaries. Palantir last month made some waves after the U.S. military awarded it a 14-month $36 million contract for its Tactical Intelligence Targeting Access Node (TITAN) project. This project could be transformational as the first A.I. and Machine Learning-enabled Intelligence ground station.
Additionally, Palantir has helped refugee relief operations and World Food Programs. So no matter which way you look at it, Palantir is one of the best stocks to buy now because it has real-life events driving long-term demand.
It shouldn’t be surprising then that Palantir could see its earnings grow 85.71% in the coming year. Or that it could see its net income explode by 170.6% and average 66.8% over the next five fiscal years.
Its Business Model Has Fundamental Strength
Palantir operates with a substantial 78.2% gross margin and continues charging forward with its three platforms- Palantir Gotham, Palantir Metropolis, and Palantir Foundry.
Palantir Gotham is why the U.S. army awarded Palantir $823 million. Counter-terrorism officials have used this service in droves because of its ability to help defense decision-making and support international intelligence.
Palantir Metropolis is a platform used by hedge funds, banks, and financial services firms.
But Palantir Foundry could be where much of the Company’s long-term growth lies. Foundry offers everything from data integration to applications that can power decision-making in hours. It’s mainly been used for services such as A.I. and machine learning, Anti Money Laundering, Edge A.I., Energy, Healthcare R&D, Supply Chain, and Retail. The Company aims to build this into the next Amazon AWS with a “land and expand” model.” That means the goal is to win contracts and branch out into more applications and opportunities.
With a total addressable market of over $120 billion, and revolutionary solutions, it’s no wonder why Palantir has been described as a “cultural unicorn” and one of the best stocks to buy now.
A Recent Raymond James Price Target Sees Over 100% of Upside
Let’s get overall analyst sentiment out of the way first. 12 Wall Street analysts offered 12-month price targets for PLTR in the last 3 months, with the average price target of $11.80 representing a 25.53% upside from July 26, 2022’s $9.40 closing price.
While PLTR has a $6.00 low price target, let’s do a bit of a deeper dive on its street-high $20.00, which Raymond James just initiated with a STRONG BUY rating last week (July 21, 2022).
We’re not crazy, calling Palantir one of the best stocks to buy now. This price target represents a 112.77% upside from July 26, 2022’s close, and there are several reasons why they are swinging for the fences.
Raymond James sees an attractive risk/reward for Palantir with the amount it’s fallen from its peak. Especially when you consider these four things:
- ~30% growth rate
- Gross margin structure with escalating contribution margins
- Balanced commercial and government customer mix
- Strong financial model
PLTR’s year-to-date low and high are $6.44 and $19.00, respectively.