The S&P 500 currently sits 14% below its all-time high of 4,793, which was reached at the end of 2021. However, if the Bank of America prediction is to play out, new highs will be achieved early next year. .
Stephen Suttemeyer, technical research analyst at Bank of America, points to specific bullish indications that the S&P 500 could rise to 4900 by next March. This represents a potential upside of approximately 19% from current levels.
Suttmeier’s signals are about supply, or the level of participation in the upward swings among the underlying stocks that make up the markets.
“Breakups upwards of the weekly global declining line for the indices of 73 countries tend to provide a signal of continuing bullish trend for US and global equity markets,” Suttmeyer explained, pointing to some recent examples that support his case.
Meanwhile, analysts at Bank of America have an idea of which stocks are well-positioned to benefit from the expected rally. We ran a couple of their recent recommendations through TipRanks platform to get a fuller picture. Here is what we found.
Cogent Communications (CCOI)
We’ll start with Cogent Communications, a US-based ISP that’s been operating on the international scene. Founded in 1999, Cogent quickly developed a reputation for growth through acquisition – more than a dozen such moves in just its first 5 years of operation – as well as for getting out of the financially troubled internet companies it bought.
The company has, in the past few months, returned to those roots with the purchase of Sprint Wireline from T-Mobile. The deal—which included a $1 purchase price (you read that correctly) and mutual transfers of working capital between the companies—brings Sprint’s long-haul US fiber-optic network and associated customer base into Cogent’s stable.
Today, Cogent primarily provides Internet access and data transmission over a sophisticated fiber optic network that reaches across North and South America, Europe, Asia, Africa and Australia. The company operates more than 61,200 miles of intercity fiber and another 42,400 miles of metro fiber; This network serves more than 219 markets and connects to thousands of other networks around the world.
Cogent’s business was generally profitable. In the first quarter of this year, the company reported services revenue of $153.6 million, up 1% quarter-over-quarter and 3% year-over-year — though it didn’t anticipate an analyst forecast of around $200,000. . On earnings, Cogent reported earnings per share of 13 cents, down from estimates of 1 percent.
Although revenue and profits In the absence of expectations for the first quarter, Cogent still has confidence to increase its quarterly earnings in its second-quarter announcement. The company boasts that this is the 43rd consecutive increase in div payments. At the current declared rate of 93.5 cents per common share, the dividend is paid annually at $3.74 and gives a high yield of 5.7%.
Analyst David Barden, who covers this stock for Bank of America, approved the acquisition of Sprint for the following reasons: first, the generation of new free cash flow (FCF) generated by the acquisition of Sprint Wireline; second, the related increase in earnings before interest, taxes, depreciation, and amortization (EBITDA); And thirdly, the emergence of new vectors of sales growth. Combined, these factors represent a new and underrepresented opportunity for the stock
Covering this stock for Bank of America, analyst David Bardeen favors the Sprint acquisition for several reasons. First, it brings in the new free cash flow (FCF). Second, it contributes to the accumulation of EBITDA. And third, it introduces new drivers of sales growth that are not currently represented in inventory.
Barden goes on to outline Cogent’s path forward, stating: “We expect CCOI mgmt to quickly leverage its existing platform and sales force to achieve synergies and turn the acquired business from losses to profit. In all, we expect the combined business to exceed the current annual run rate of CHF50-60 million.” Belgian at >$150m in 2024.”
Summarizing, Barden gives CCOI shares a Buy rating, with a price target of $85 indicating a potential one-year gain of approximately 33%. (To see Barden’s track record, click here)
Zooming out a bit, we found that Cogent stock gets a Medium Buy rating from Wall Street analysts, based on 9 reviews that include 5 Buys and 4 Holds. The shares are trading for $64.03 with an average price target of $73.75, implying an upside of 15% in the next 12 months. (be seen CCOI stock forecast)
Interdigital (IDCC)
Next up is InterDigital, another networking and connectivity technology company. Specifically, InterDigital is focused on the research and development of new technology for wireless and video-related technologies. The company aims to solve pressing technical challenges in the networking industry, through solutions to increase broadband efficiency, deliver better video, and improve multimedia user experience.
InterDigital has licensing agreements with leading wireless carriers and technology companies around the world, and those agreements can sometimes end up in court. In recent months, the company has made positive judgments in two major cases, involving Lenovo and Samsung.
In Lenovo, a licensing dispute, a UK court issued a judgment ordering Lenovo to pay $138.7 million in licensing fees to InterDigital, and must pay “in full” for previous sales dating back to 2007. Samsung’s case did not reach court, but both sides did. an agreement. The recent conclusion of this binding arbitration helped propel InterDigital’s 1Q23 revenues to more than $200 million.
And that brings us to the company’s most recent quarterly financial results. The enhanced top line came in at $202.37 million, up nearly 100% year-over-year and beating expectations by more than $101 million. Quarterly EPS was reported at $3.58, well ahead of last year’s 58 cents, and $2.99 ahead of expectations. We need to reiterate that this performance was, in large part, due to the receipt of court and arbitration awards. The company’s recurring revenue in the first quarter was $101.6 million, up 2% year-over-year.
InterDigital used its first-quarter windfall gain, in part, to accelerate its capital buyback/repurchase program. The company increased its repurchase authorization during the quarter, to a total of $400 million, and repurchased 2.7 million shares.
All of this caught the attention of Tal Liani, who covers IDCC for Bank of America. Lianna explained his stance on the stock, noting: “Optimistic with a mid-term perspective and a strong management team, we point to the potential upside of Samsung’s revenue contributions and Lenovo as another key driver. InterDigital is currently in binding arbitration with Samsung and recently received a positive judgment in a case Lenovo The company is already acknowledging this revenue, albeit at a conservative level, and could see some uptick once the issues are finalized…. Additionally, we’re seeing stocks pick up from continued growth beyond wireless to CE, IoT, Autos, and we’re noticing re- Buying strong stocks increases the attractiveness of the stock…”
Liani’s opinion of the IDCC has changed dramatically. It recently did a double-upgrade on the stock, from a low to a buy, and a price target of $105 (up from $55) suggests a 23% upside in the one-year time horizon. (To watch Liani’s track record, click here)
IDCC has slipped under the radar of most analysts. The Moderate Buy consensus for the stock is based on only two recent ratings – but both are Buy. With shares trading at $82.87, the average price target of $109.50 implies room for a 32% upside. (be seen IDCC stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.