September 2, 2022, Signet Jewelers Limited (NYSE:SIG) and Pure Storage, Inc. (NYSE:PSTG)
Despite selling off following decent earnings, these two companies have considerable upside as the best stocks to buy now.
As recession risks mount, the market is amid a harsh reality check. August ended the month down with a four-day losing streak. September, though, kicked off with stocks closing well off their lows. The Dow Jones jumped 150 points (0.46%), and the S&P 500 gained 0.30%. The Nasdaq fell 0.30% but closed significantly higher than its session lows of nearly 2%. Signet Jewelers Limited (NYSE:SIG) and Pure Storage, Inc. (NYSE:PSTG) were big market movers following solid earnings. However, after initially rallying, they sharply sold off and closed at even more buyable levels than before. They have a genuine opportunity in this environment as the best stocks to buy now.
Signet is a stock in a brutal downturn. Much of it is overblown. The stock tanked 12+% following its latest earnings announcement, despite reporting a decent quarter and maintaining guidance. In fact, the stock initially popped 4% premarket. Signet has excellent fundamentals, cheap multiples, and a potential 62+% upside based on Finbox’s Fair Value calculation. It’s simply one of the best stocks to buy now because the risk/reward is too enticing.
For similar reasons, the data storage technology provider, Pure Storage, is also one of the best stocks to buy now. It also unreasonably fell following solid earnings. Moreover, while many of its competitors reported mixed quarters, PSTG didn’t. The stock still trades at a discount despite its roughly 29% rally since its May lows and could have another 66+% of upside based on a post-earnings price target bump from Northland Securities.
While there are legitimate concerns about the market, the cases for these two companies being the best stocks to buy now look just as legitimate.
Signet Jewelers Limited (NYSE:SIG)
After tanking following reasonably solid earnings, this prominent jewelry retailer trades at a mouth-watering discount and a potential 62+% upside.
Signet Jewelers is a prominent diamond jewelry retailer that operates roughly 2,854 stores and kiosks across North America and internationally.
While the Company has rock-solid fundamentals and a more affluent customer base less affected by inflation, SIG’s stock has seen considerable pressure throughout the year. Currently, it trades almost 42% below its 2022 highs. It also fell nearly 20% in the last week and closed over 12% lower following a reasonably decent earnings announcement Thursday (September 1, 2022).
A deep discount like this is undoubtedly a shocker for a well-run enterprise like Signet. The chance to snag one of the best stocks to buy now on the cheap is too enticing to overlook.
After Initially Jumping Following Earnings, SIG Sharply Declined to an Enticing Buy Level
Signet Jewelers’ Q2 bottom and top line figures beat estimates. EPS came in at $2.68 EPS beat estimates by 3.57%, while revenue came in at $1.75 billion and beat estimates by 0.15%. Signet also reaffirmed its full-year guidance; initially, the stock jumped 4% in premarket trading.
However, the bears suddenly beat out the bulls and focused on a bigger-than-expected drop in same-store sales. The stock promptly closed over 12% lower on the day (September 1, 2022).
We aren’t the only ones who see this as a buying opportunity. There’s a reason why management is aggressively buying back shares.
Furthermore, Signet’s affluent customer base is less affected by inflation and could blunt any negative economic impacts on the Company.
So while the same-store sales decline isn’t ideal, the stock’s deep descent is likely overblown, and an opportunity to snag one of the best stocks to buy now at an even better bargain than before.
Profoundly Undervalued With Solid Financials
SIG’s 8 out of 9 Piotroski Score is nearly perfect and indicates healthy Liquid Balance Sheets, Profitability, and Operating Efficiency.
Its margins are also solid across the board and explain the reasoning behind this score.
Signet’s cash flows can also sufficiently cover interest payments, and its 27.0% free cash flow yield further illustrates why Signet is one of the best stocks to buy now.
But what if we said you could get these great fundamentals at serious value? Following the stock’s recent downturn, SIG’s already attractive multiples look even more mouth-watering.
So although the stock is going through a rough time, there’s nowhere else to go but up. Overall short interest in Signet has decreased by 15.65% during the last month, indicating that sentiment is improving as the bulls push to squeeze out the bears.
SIG Could Explode 62+%
Analyst activity has been relatively quiet for Signet lately. Only 5 Wall Street analysts offered 12-month price targets in the last 3 months. However, the stock could have a significant upside based on its price targets. SIG currently has a high price target of $105.00, a low of $65.00, and an average of $79.20. The average price target represents a 37.74% upside from September 1, 2022’s closing price of $57.50.
Yet based on Finbox’s Fair Value model, the stock’s real upside could be almost 15% higher than this! Based on its proprietary metrics, the financial research portal gives the stock a $93.52 price target, representing a 62.64% upside.
SIG’s year-to-date low and high are $48.30 and $84.80, respectively.
Pure Storage, Inc. (NYSE:PSTG)
Earnings dwarfing competitors, triple-digit net income growth potential, and a possible 66+% upside have this data storage giant looking like the best stock to buy now.
Pure Storage is one of the world’s leading providers of data storage technologies. While many competitors have treaded water, PSTG has been a relatively strong performer this summer, rising almost 29% since its $21.89 lows on May 24, 2022.
Moreover, while many of its peers reported so-so earnings, PSTG ran laps around them in its September 1, 2022 earnings announcement.
Perhaps that’s why a whopping 8 analysts upgraded their PSTG price targets following earnings, including Northland Securities’ $47.00 forecast representing a 66+% upside.
PSTG’s Earnings Crushed its Competitors and Could Have More Room to Run
According to Verified Market Research, the Next-Generation Data Storage Market size had a roughly $58.40 Billion valuation in 2021. By 2030, the sector could boom at an 8.2% CAGR and become a $128.94 Billion industry.
Before Pure Storage closed down following its earnings (September 1, 2022), it rallied 5.7% in premarket trading. That’s because its earnings were upbeat and considerably better than its competitors’ mixed results.
EPS surged 128.57% year-over-year to $0.32 and crushed analyst forecasts by $0.10. Revenue also came in at $646.80 million, beating consensus estimates of $636.06 million and marking a 30.2% year-over-year increase.
Chances are, earnings for PSTG could continue to crush the competition. Revenue could soar at a 24.2% 5-year CAGR, while net income has a chance to balloon 339.6% over the next 12 months and average 104.2% growth over the next five fiscal years.
A Healthy Balance Sheet, Strong Gross Margin, and Efficient Cash Flows
Many of PSTG’s margins won’t be enough to satisfy the pickiest fundamental investor. Yet it still operates with a healthy 67.7% gross margin and more cash than debt on its balance sheet.
A STRONG BUY That Northland Securities Sees Running 66+%
Tipranks rates PSTG a STRONG BUY because 11 out of 14 Wall Street analysts who offered 12-month price targets in the last 3 months rated it as such. PSTG has a street-high price target of $47.00, a low of $33.00, and an average of $39.23. The average price target represents a 38.97% upside from its September 1, 2022, closing price of $28.23.
Additionally, despite PSTG’s post-earnings decline, many analysts didn’t take the bait. Following its earnings announcement (September 1, 2022), 8 analysts boosted their price targets. Northland Securities was responsible for the street-high $47.00 price, representing a 66.49% upside.
The others who boosted their coverage included:
- Credit Suisse Group- $44.00
- Raymond James, Barclays-$42.00
- KeyCorp- $39.00
- Lake Street Capital- $38.00
- Morgan Stanley, Wedbush- $35.00
PSTG’s year-to-date low and high are $21.89 and $36.71, respectively.