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Investors seeking stocks with growth potential have plenty of options, according to analysts. Several Wall Street firms said this week there’s a number of companies that are starting to gather momentum and investors should buy the shares now. CNBC Pro combed through top research to find stocks best positioned for multiyear growth. They include Sprout Social, Westrock Coffee , Bloom Energy, Macy’s and Entegris. Entegris BMO Capital Markets initiated coverage of Entegris, a materials and solutions provider for the semiconductor industry, earlier this week. Analyst Bhavesh Lodaya slapped an outperform rating on the stock, saying the firm sees a “multi-year runway of outperformance for this unique player.” “The semis industry [is] on the cusp of its next cyclical upturn which combined with ENTG’s own organic growth drivers provides its investors with an attractive avenue to get exposure to the theme,” the analyst said. In addition, shares are up 57% this year. However, Lodaya said there is plenty more room to run for Entegris shares. The company’s business model is robust, he noted. While 2023 has been a challenge, Lodaya said investors will be rewarded in the second half. “A multi-year growth story & we’re just getting started,” the analyst said. Sprout Social “We’d stay the course,” Canaccord Genuity analyst David Hynes Jr. said in a recent note to investors of the social media management software company. The analyst recently came away from meetings with Sprout management feeling more certain on the stock and the team leading the charge. “In times of turmoil, or in this case business evolution, you need steady hands at the helm, and if things go as planned, this is a characteristic for which we think Sprout will eventually be rewarded,” he said. The firm acknowledged questions remain including competition, pricing and perhaps most importantly the impact of artificial intelligence. Still, Hynes said something special is brewing and that margin expansion is “more likely than not.” “If that’s the case, we see the firm’s current valuation as at least sustainable, if not with bias to the upside as conviction builds in the multiyear growth story,” he wrote. Shares are down 21% in 2023. Westrock Coffee Shares of the Little Rock, Arkansas-based coffee company are severely “undervalued,” according to Stifel analyst Matthew Smith. The stock is down 16% this year, but Smith said he sees a major buying opportunity despite the recent volatility. Like many other companies, Westrock has been dealing with supply chain challenges and the long-awaited arrival of a new production facility to come online. “This facility should unlock a significant amount of growth in the fast growing subcategories of extracts and single-cup coffee,” Smith said. The analyst said that the manufacturing facility may create an inflection point for the stock. At that point, international growth can begin with Westrock gaining share. Still, investors will need to be patient until that happens as growth is likely to be limited for the foreseeable future, he wrote. “We see a multi-year growth opportunity for Westrock driven by market share gains across the category and particularly in higher margin areas of the category,” Smith said. Macy’s — JPMorgan, overweight rating “We see Macy’s at a model inflection point to accelerated multi-year growth supported by a number of growth vectors & a sustained low-double-digit EBITDA margin, after executing against the pillars of the 2020 Polaris Strategy including operational discipline, merchandising changes leveraging technology investments and field leadership, brick/mortar store base right-sized, and balance sheet clean at ~2x adjusted debt to EBITDAR leverage.” Entegris — BMO Capital Markets, outperform rating “A Multi-Year Growth Story & We’re Just Getting Started. … While the stock has had a strong run off its bottom, we see a multi-year runway of outperformance for this unique player. … The semis industry [is] on the cusp of its next cyclical upturn which combined with ENTG’s own organic growth drivers provides its investors with an attractive avenue to get exposure to the theme.” Bloom Energy — Morgan Stanley, overweight rating “Bloom hosted an investor conference where it reiterated its near term and long-term financial plan and highlighted the unique characteristics of its product offering. We are reiterating our OW-rating and $30 price target, offering 102% upside. In our view, the strong multi-year growth tailwinds within BE’s fuel cell and electrolyzer business, achievable near-term margin improvement, & strong balance sheet position is not properly reflected in its current valuation, with the stock trading at a ~40% discount to hydrogen peers on 2025 revenue and ~30% discount to a broader set of clean tech peers on 2025 EBITDA.” Westrock Coffee — Stifel, buy rating “The shares screen as undervalued. … We see a multi-year growth opportunity for Westrock driven by market share gains across the category and particularly in higher margin areas of the category. … In the short-term, the company’s growth will be limited by its capacity until the new Conway, AR facility is up and ready in 2024. This facility should unlock a significant amount of growth in the fast growing subcategories of extracts and single-cup coffee.” Sprout Social — Canaccord, buy rating “We’d stay the course. … In times of turmoil, or in this case business evolution, you need steady hands at the helm, and if things go as planned, this is a characteristic for which we think Sprout will eventually be rewarded. … Our view is that the odds that Sprout delivers on its multi-year path of 30%+ growth and 100-300 bps of margin expansion are more likely than not. If that’s the case, we see the firm’s current valuation as at least sustainable, if not with bias to the upside as conviction builds in the multiyear growth story.”
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