June 30, 2022- Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) and Devon Energy (NYSE: DVN)
Two of June’s most upgraded stocks offer unique opportunities as the best stocks to buy now.
Stocks have been relatively tame with light trading due to the 4th of July weekend. On Wednesday (June 29, 2022), stocks were little changed and closed mixed. As June comes to a close, Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) and Devon Energy (NYSE: DVN) were two of the most upgraded stocks and sit as some of the best stocks to buy now.
Ollie’s Bargain Outlet continues outperforming the market with mounting catalysts. While the broader market slogs in or around bear market territory, Ollie’s keeps charging forward. With consumers looking to combat inflation with lower-price-point shopping and outsized deals, the stock touched YTD high days ago and may just be getting started. Perhaps that’s why analysts are upgrading it in droves, including 3 upgrades, 1 initiated target at $70, and 7 price target increases.
Second is Devon Energy, a little-known energy stock that analysts couldn’t love more. As energy costs continue soaring, with oil possibly reaching as high as $200 a barrel, it’s no wonder why Devon was not only one of the most upgraded energy stocks in June but one of the most upgraded stocks, period. Please keep your eyes on this stock due to its substantial dividend, mounting catalysts, and wells across the U.S. Its recent $103 price target from Truist could send the stock price nearly doubling.
So without further ado, here is why Ollie’s and Devon are two of the best stocks to buy now.
Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI)
With desperate consumers looking for bargain deals, this discount retailer trades near its highs with potentially 29.31% of room to run.
The landscape for retailers is not pleasant right now. Supply chain woes, out-of-control inflation, and excessive inventory levels give everyone migraines.
It has gotten so bad that retailers like Target, Walmart, Gap, and American Eagle are considering paying customers not to return items.
Enter Ollie’s Bargain Outlet Holdings, Inc.
Ollie’s is a discount wholesaler of brand-name merchandise from any industry or sector you could think of. As of March 23, 2022, it operated 436 stores in 29 states throughout the United States. With consumers looking to cut costs with lower price-point shopping and outsized deals with overstocked inventory from stores like Target, the likelihood that Ollie will have full shelves at dirt-cheap prices is undeniable.
Perhaps that’s why management has been aggressively buying back shares, with the stock trading near its 2022 highs and skyrocketing over the last month.
Despite Underwhelming Earnings, Ollie’s Has Bullish Fundamentals and Technicals
Ollie’s may have missed on its Q2 earnings and guidance. However, the macro-level catalysts, fundamental indicators, and technical signals paint a far different picture.
The macro catalysts we discussed with consumers looking for bargains and retailers looking to offload overstocked inventory. Check.
The Company has solid margins and growth projections including a
So fundamentals, check.
Then, based on the stock’s recent performance, Barchart spots several bullish technical signals and scores the stock a 72% BUY based on the following.
- 20-Day Moving Average
- 20 – 50 Day MACD Oscillator
- 20 – 100 Day MACD Oscillator
- 20 – 200 Day MACD Oscillator
- 50-Day Moving Average
- 50 – 100 Day MACD Oscillator
- 50 – 150 Day MACD Oscillator
- 100-Day Moving Average
- 150-Day Moving Average
- 200-Day Moving Average
So technical indicators, check.
OLLI Recently Touched its 2022 Highs and Has Gotten Countless Upgrades Since Late-May
Since May 20, 2022, Ollie’s has been a favorite of analysts. It’s received 7 price target increases, 1 initiated $70 price target, and 3 upgrades. The most notable upgrades included the following:
- Goldman Sachs from SELL to NEUTRAL
- Wells Fargo $70 price target
- Piper Sandler $78.00 price target
- Royal Bank of Canada from SECTOR PERFORM to OUTPERFORM and $47.00 to $65.00
- Craig Hallum from HOLD to BUY and $43.00 to $75.00
- Bank of America from UNDERPERFORM to BUY and $30.00 to $75.00
In total, 12 Wall Street analysts over the last 3 months offered a 12-month price target for OLLI. Its street-high forecast is $78.00, while its low is $40.00, and the average is $62.50. Its average price represents a 3.61% upside from its June 29, 2022, close of $60.32, while its street high represents a 29.31% upside.
OLLI’s year-to-date low and high are $37.67 and $64.43, respectively.
Devon Energy (NYSE: DVN)
As energy prices continue surging, this American oil explorer and producer could see its stock nearly double with an 84.52% upside.
By almost any metric, Devon Energy is one of the best stocks to buy now. It is a prominent player in the oil, gas & consumable fuels industry, and despite its 31% year-to-date gains, it remains significantly undervalued.
Moreover, it offers investors a mouth-watering dividend yield that’s increased for 5 consecutive years.
The real telling sign that this domestic energy producer could be ready to skyrocket along with energy prices is its eye-popping analyst activity this past month, receiving 7 price target hikes displaying an upside as high as 84.52%.
Doing a deeper dive into this stock makes it look like one of the best stocks to buy now and one of the best stocks to buy for the long term.
Demand for Domestic Energy Advantageously Positions Devon With Its Latest Acquisition
Devon Energy is an independent oil exploration and production company with wells across the U.S. Although U.S. gas prices have somewhat tumbled over the last two weeks, they still sit very close to record highs. It’s not like domestic energy demand is going anywhere, either.
Look at what’s happened to regular unleaded prices, for instance.
Source: AAA
Even more disturbing is what’s happened to diesel prices. Diesel costs could have wide-ranging consequences for the economy.
Source: AAA
So even though the Biden administration continues its crusade for clean energy and refuses to increase domestic oil drilling, Devon Energy is positioning itself as the solution.
Its latest acquisition reflects this.
On June 8, 2022, Devon Energy announced its acquisition of RimRock Oil and Gas. RimRock is located in the heart of the Williston Basin and will bolster Devon’s already strong operations in the basin. The transaction adds a contiguous position of 38,000 net acres (88% working interest), directly offsetting and overlapping Devon’s existing position.
Furthermore, RimRock’s first-quarter production was approximately 15,000 Boe per day (78% oil). Volumes are also expected to increase to an average of 20,000 Boe per day over the next year.
With the transaction expected to close in Q3 2022, Devon could see even more upside potential for its stock price, operations, and, most importantly, dividend. Due to the accretive nature of this transaction to free cash flow, Devon’s board plans on approving a 13% dividend hike.
Mind-Blowing Earnings Growth That May Only Be Starting
Devon’s Q1 earnings report came in about as good as possible. Outside of marking the fourth consecutive quarter of beating estimates, it marked enormous year-over-year growth.
On the bottom line, analysts expected Devon Energy’s EPS to more than triple year-over-year to $1.75. Devon reported $1.88.
On the top line, revenue nearly doubled year-over-year from $2.050 billion to $3.812 billion.
Furthermore, free cash flow reached a quarterly record of $1.3 billion, or 3.4% of Devon’s (DVN) current market cap.
With earnings like this, it’s probably not surprising that DVN’s revenue could see a 14.7% 5-year CAGR. Or see its net income grow by 100.2% and average 14.6% over the next five fiscal years.
Strong Earnings Should Continue Devon’s Dividend Growth Strategy
Its dividend alone makes DVN one of the best stocks to buy now.
We mentioned earlier that the recent RimRock acquisition would spearhead a 13% increase to its quarterly dividend.
Yet, this acquisition announcement came roughly a month after the Company’s Q1 earnings, where it bumped its dividend by 27% to $1.27 while expanding its share buyback program by 25%.
That is just how this Company rolls.
Its 6.6% dividend yield is impressive enough. But with potential growth of 740.9% at a 52.4% 5-year CAGR, watch out.
After all, as we mentioned, the Company increased its dividend for 5 consecutive years.
Beyond the Dividend, the Stock Offers Outstanding Fundamentals and Returns at a Shocking Discount
The DVN stock has offered investors an outstanding return both in the short-term and long-term. Short-term, the stock is up over 31% year-to-date. Long-term, the stock has gained 128% in five years.
Perhaps strong fundamentals and strategic operations are why the stock’s performed this way. Besides its dividend payments, Devon’s cash flows can sufficiently cover interest payments.
Moreover, the stock has a nearly perfect 8 out of 9 Piotroski Score, meaning it has healthy Liquid Balance Sheets, Profitability, and Operating Efficiency.
Additionally, the Company boasts impressive margins signaling outstanding profitability, operational efficiency, and more, such as its
But, forget about the strong dividend, stable fundamentals, and strong returns, especially in the short term. Devon’s recent pullback has it trading at a surprisingly mouth-watering discount. The stock has a trailing 10.4x P/E ratio, 6.4x forward P/E ratio, and 0.02 PEG ratio.
Several Technicals Signal a BUY, Too
The stock has the dividend, the fundamentals, the returns, the catalysts, and the cheap valuation. The technicals also signal some BUY indicators.
As if you needed another reason why DVN is one of the best stocks to buy now.
According to BarChart, the stock is a BUY based on its short, medium, and long-term MACD Oscillators and its 200-day moving average.
Bullish Analyst Activity and Rising Energy Costs Point to DVN Nearly Doubling By 84.52%
18 Wall Street analysts in total, over the last 3 months, offered a 12-month price target for DVN at a high of $103.00, a low of $62.00, and an average of $82.56. The average represents a 47.90% upside from June 29, 2022’s $55.82 close.
However, based on all the price targets and upgrades the stock received throughout June, this average price target is now obsolete.
Consider the following upgrades:
- Barclays from $73.00 to $90.00
- Mizuho a BUY and from $92.00 to $94.00
- Stifel Nicolaus from $88.00 to $93.00
- Raymond James from $90.00 to $102.00
- Credit Suisse Group an OUTPERFORM and from $75.00 to $82.00
- Truist Financial a BUY and from $100.00 to $103.00
- Piper Sandler an OVERWEIGHT and from $89.00 to $94.00
With oil prices potentially touching $200 with the G7’s plan to cap Russian prices, the chance for this stock to nearly double 84.52% to Truist’s street-high $103 target is very realistic.
DVN’s year-to-date low and high are $42.87 and $79.40, respectively.
