With the presidential election season, a major source of uncertainty has been raised, creating an ideal opportunity for investors to evaluate their stock portfolios as market conditions change.
In this environment, Goldman Sachs analysts evaluate individual stocks, determining the best position to develop in a growth-oriented market.
We have used the TipRanks database to pull the details on the two names that Goldman analysts have selected. Looking at the broader view, both are rated buys and show good upside potential. Let’s take a closer look.
KinderCare Learning Company(KLC)
The first stock we’ll look at, KinderCare, is a profitable early childhood education company. It was founded in 1969, and from its current base in Portland, Oregon the company oversees a network of educational centers that span 40 countries and can serve up to 200,000 children. This network includes 1,500 early childhood education centers, as well as before and after school programs at more than 900 additional sites. In addition, KinderCare operates Crème Schools, a network of premium early education centers that offer parents and students a variety of themed classes and an engaging learning environment. The company’s program is aimed at children from 6 weeks to 12 years of age.
KinderCare has been in business for 55 years, but only opened to the public earlier this year. The company entered the public trading market through an IPO in October. Shares, under the new ticker KLC, opened at $27 per share (after IPO pricing at $24 per share), with 24 million shares available. KinderCare raised $576 million in gross proceeds from the offering, which closed on October 10. The company currently has a market cap of $3.12 billion.
Now that KinderCare is a public company, the company must release a public income statement. The first of these is scheduled for November 20 and will cover 3Q24. Analysts expected the company to report a top line of $669.45 million, along with moderate earnings loss of 2 cents per share.
While we wait to see the results, we can check with Goldman analyst George Tong, who expects big things from this recent stock; when explaining KinderCare’s future prospects: “We believe KLC is differentiated through its focus on community-based childcare centers, which have leaned towards the new work-from-home dynamics to push the center’s occupancy rate to 71%, more than before the COVID-19 level. 69%. The company’s unique targeting of customers across all income demographics adds to its addressable market and provides access to a stable and growing stream of government childcare. We expect this driver of employment growth to combine with tuition increases, employer-sponsored and Champions before- and after-school sites, new middle openings and acquisitions to drive a healthy 6-9% long-term revenue growth. Meanwhile, the increase in the middle occupancy rate to 80% should result in an expansion of the EBITDA margin into the mid-teens from the operating impact, contribute to the attractive value of the stock.
Tong initiated coverage of KLC with a Buy rating, and a price target of $41 points to a one-year gain of 49%. (To watch Tong’s track record, click here)
In a short time in the market, KLC has picked up 8 analyst reviews – and this includes 5 Buys and 3 Hold to Moderate Buy consensus rating. The stock trades for $27.28 and the $34 average price target represents a 24.5% upside over a one-year horizon. (See Stock forecast from KLC.)
LivaNova(LIVN)
Say ‘biotech,’ and most of us will immediately focus on the pharmaceutical industry. But biotechnology involves more than just the research of new drugs – a large part is the development and introduction of new medical devices. LivaNova plays an important role in the medical device niche, especially in the field of neuromodulation.
The company is popular with the public for its VNS (vagus nerve stimulation) product, used in the treatment of epilepsy. This often dangerous central nervous system condition is usually treated with medication – but for some patients, epilepsy is drug-resistant. VNS devices operate through direct stimulation of the nervous system, providing electrical stimulation when a seizure is imminent. The system consists of an implanted device that can monitor brain activity and provide the necessary stimulation via the vagus nerve. The device is implanted in the upper chest, like a pacemaker, and has been shown to be effective for more than 20 years. LivaNova is a leader in VNS technology and device development.
In addition to using VNS to treat drug-resistant epilepsy, LivaNova is also a pioneer in using the technology to treat depression. Chronic depression is notoriously difficult to treat, and many patients will go through multiple drug regimens — only to find none help. LivaNova’s VNS implant works to deliver mild electrical stimulation to the brain via the vagus nerve – which connects to the area of ​​the brain that controls mood. Stimulation devices have shown potential in this indication.
VNS device treatment, an important part of LivaNova’s business, has been used in more than 100,000 patients, including more than 30,000 children. The safety and efficacy of the treatment has been repeatedly demonstrated over the past 25 years. That said, this treatment is usually used in patients whose conditions have proven resistant to more traditional therapies.
In addition to the VNS segment, LivaNova also manufactures and markets the Essenz Perfusion System, a heart-lung machine designed to maintain the circulatory and pulmonary function of surgical patients during surgery. The machine system is designed for ease of use and redundant backup, with controls for various functions separated to avoid confusion. The Essenz engine is cutting-edge technology, and builds on LivaNova’s history of reliability.
In its last reported quarter, 3Q24, LivaNova generated revenue of $318.1 million, up more than 11% year over year. Of this total, $172.2 million was generated on the cardiopulmonary side, while $139.9 million came from the neuromodulation side. $6 million in revenue is listed as ‘other.’ The company’s bottom line was non-GAAP EPS of 90 cents per share, up from 73 cents per share in the year-ago period.
Closing this stock for GS, analyst David Roman noted that the company has had problems in its overall stock performance this year. He said of LivaNova, “LIVN shares have struggled to find superior timing, as strategic changes in the business and pipeline setbacks have put downward pressure on earnings and the stock’s P/E multiple. As the business generates consistent results and a margin profile increasingly, we think this period of poor performance is down to the rearview mirror.
Roman is optimistic for the long term, adding, “Going forward, we see LivaNova’s core business generating approximately 5% top-line growth from a stable market and de novo neuromodulation implants as well as bolus growth from product cycle upgrades recognized in cardiopulmonary (52% of More revenue growth is likely from discrete pipeline initiatives and holdings above consensus forecasts. Continued top-line growth, better mix, and more targeted P&L management should drive EPS growth. which is greater (~14% per GSe until 2027).
Measuring his attitude, Goldman analysts placed a Buy rating on LIVN shares, and he added a price target of $65, suggesting a one-year upside of 25.5%. (To watch Roman’s track record, click here)
The Street’s broad view is even more bullish, setting a Strong Buy consensus rating here based on 7 reviews that include 6 for Buy against just one Hold. The stock’s trading price of $51.81 and average price target of $70 combine to give it a 35% upside potential for the next year. (See LIVN stock forecast)
To find great ideas for trading stocks at attractive valuations, visit TipRanks’s Best Stocks to Buy, a tool that unifies all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are those of the featured analyst. The content is used for informational purposes only. It is very important to do your own analysis before making an investment.
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