On Goldman Sachs’ list of global convictions – the crème de la crème of its buy-listed stock picks – there are a number of stocks with high profit margins and serious upside potential, the bank says. of investment. Gross margin – the percentage of revenue remaining after taking into account the cost of goods sold – is a closely watched measure of profitability. It can be used to determine a firm’s pricing power (its ability to maintain or raise prices without hurting demand), which makes it especially important in today’s inflationary environment. Here are four stocks on Goldman’s conviction list that have a gross margin of more than 50% and upside potential of more than 70% for their stock prices, according to the bank: Activision Blizzard Goldman said Nov. 3 that the titan video game Activision Blizzard’s “earning power remains intact” despite delays to the launch of two of its upcoming video games. Analyst Michael Ng added that the company should benefit from the launch of Call of Duty: Vanguard, the biggest content update for Call of Duty: Warzone to date, and the modern expansion for World of Warcraft. Other positives cited by the analyst include the launch of Diablo Immortal, continued momentum for Hearthstone, and testing of new Warcraft mobile games. Goldman estimates the company’s gross margin at 75.3% for the year and assigned a price target of $111 per share, up about 70% from its closing price of about $65 on December 23. Taiwan Semiconductor Manufacturing Company (TSMC) Goldman analyst Bruce Lu noted Oct. 14 that Taiwan Semiconductor Manufacturing Company had raised its forecast for the long-term gross margin target to “50% and above.” The bank expects the business to achieve higher profitability and “even better margin prospects” through higher pricing for the bulk of its customers in 2022. Goldman estimates its gross margin at 51.5 % This year. He has a price target of T$1,028 on the stock – an implied upside of 70% from its closing price of T$606 on December 23. Jeisys Medical South Korean medical device maker Jeisys Medical also appeared on the screen in Goldman’s sentencing. list stocks with high margins and upside potential. The company posted “robust earnings growth” for the third quarter ending in September, analyst Sangsoo Kim said Nov. 11. The healthy growth in key device sales also reflects the company’s “fast pace” of growth in the nascent stage of product growth cycles, he added. Kim believes the market is not fully aware of Jeisys’ multiple long-term growth opportunities. The bank forecast compound revenue and profit growth of 36% and 64% over a three-year period. Goldman puts the company’s gross margin at 69.7% for the year and has a price target of 19,200 Korean won ($16.18) on the stock. Shares of the company closed at 7,770 Korean won on Dec. 23, representing a potential upside of 147%. Jiumaojiu Hong Kong-listed Jiumaojiu is the only one of the four Chinese restaurant chains covered by Goldman to be rated “buy” by the bank. Goldman analyst Michelle Cheng noted the resilience of the company’s profitability in a Dec. 6 note amid multiple headwinds. The bank is “positive” about the company’s multi-brand strategy, as well as the benefit of gaining market share in the fast-growing Chinese sauerkraut segment in which its Tai Er brand operates. The bank expects the company to open 1,247 Tai Er stores by 2026. Goldman estimates the company’s gross margin at 62.8% for the year and has a price target of HK$31 Kong ($3.97) on the stock, which closed at around HK$13 on Dec. 23 – an implied rise of 136%.
Brendan McDermid | Reuters
On Goldman Sachs’ list of global convictions – the crème de la crème of its buy-listed stock picks – there are a number of stocks with high profit margins and serious upside potential, the bank says. of investment.