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The case incidence of coronavirus is rising, raising fears that the initial economic reopenings were too much, too soon, and too fast. Adding to the nervous outlook, the White House has let it be known that it will seek a cap on future economic stimulus packages at $1 trillion. Considering that the last round of stimulus was upwards of $3 trillion, seeking to cap it at one-third that amount – at least party in the name of deficit control – sounds like a case of closing the barn door after the horses have bolted. It’s one more signal in a growing round of confusion.

At least some signals, however, are coming through loud and clear. Another signal is coming through from Wall Street’s analysts: There are still plenty of stocks to buy, with strong prospects to survive the corona crisis – and to do it with plenty of upside share potential.

We’ve used the TipRanks database to pull the details on three of these lesser-known, buy-rated stocks. Let’s find out what the analysts have to say about them.

Azek Company, Inc. (AZEK)

We’ll start with a company in the construction industry. Azek inhabits a niche that is going to do well as ‘social distancing’ becomes the norm. The company makes decking, patio, and outdoor products. With summer here, and indoor gatherings highly proscribed, the company took a calculated risk.

Azek went public in mid-June. The IPO was a big one, raising over $765 million despite the pandemic, and shares have gained in the weeks since. AZEK is up 15% since starting on the NYSE exchange. While the stock is impressive, there are some cautionary signs. Azek is highly leveraged, with over $1.2 billion in debt, nearly 25% of the company’s $4.5 billion total market cap. It’s clear that Azek is betting heavy on several factors: the V-shaped recovery, people’s desire to get together – safely, and that backyard recreational activities will be a winner this year.

Is that a good bet? Analyst Alex Rygiel of B. Riley FBR clearly thinks so. The analyst writes of Azek, “…we believe AZEK could experience industry-leading margin expansion over the next three years. We also believe the recent COVID-19 environment with stay-at-home and social distancing orders could create a tailwind for AZEK and the overall decking industry as more homeowners looks to expand their livable space outdoors and with the possible suburbanization of the population.”

Against this backdrop, Rygiel initiated coverage on AZEK shares with a Buy rating and a $38 price target, which implies room for 22% upside growth this year. (To watch Rygiel’s track record, click here)

Overall, AZEK gets a Moderate Buy from the Wall Street analyst consensus. The stock has received 15 reviews in recent weeks, breaking down 10 to 5 in Buys versus Holds. Shares are currently trading for $31.1, and the average price target of $35.50 suggests a 14% one-year upside potential. (See Azek stock analysis on TipRanks)

Ambarella (AMBA)

Now we move to the tech industry, where Ambarella is a small-cap design company in the semiconductor chip sector’s fabless segment. That’s a fancy way of saying that the company designs its chips, makes the prototypes, and farms out the mass production. Ambarella focuses on video compression, computer vision processors, and video compression – all important uses as companies and workers move heavily toward telecommuting. Ambarella’s chips also have applications in the video security monitoring and autonomous vehicle niches.

Ambarella saw sluggish earnings in 1H20, as the COVID-19 pandemic impacted supply chains, manufacturing facilities, and sales. That said, the company has found some tailwinds. Video AI and computer vision are growing segments, and the company has a solid position in both.

While earnings were down, revenues in Q1 beat the forecast, coming in at $54.6 million. Ambarella also has plenty of liquidity to combat the pandemic’s economic impact; the company finished Q1 with $411 million in cash on hand, up from $405 million at the end of 2019, and the free cash flow generated a healthy $7.6 million.

It’s the sector outlook, however, that attracted attention form Needham’s Quinn Bolton. The 5-star analyst, rated #8 overall in TipRanks’ database, likes what he sees in Ambarella, and upgraded his stance to Buy based on the strength of the Computer Vision segment.

“…we believe CV design activity remains robust. Professional security camera design wins represent the first wave of the CV production ramp and should drive CV revenue to ~10% of revenue in FY21 (CY20). The second CV wave, driven by the consumer security camera market, is expected to start in CY21 while the third CV wave, driven by Auto applications, is expected in CY22 and beyond,” Bolton commented.

Bolton backs his new Buy rating with $55 price target, indicating a 14% upside potential in the next 12 months. (To watch Bolton’s track record, click here)

Overall, the analyst consensus on AMBA is a Moderate Buy, based on a mix of reviews: 5 Buys, 4 Holds, and a single Sell. The shares have an average price target of $57.78, which implies a healthy 20% upside from the current trading price of $48.21. (See Ambarella stock analysis on TipRanks)

Arthur J. Gallagher & Company (AJG)

Last on our list is an $18 billion global insurance broker and risk management firm, Arthur J. Gallagher. The company, based in the Chicago area, has a worldwide presence and is notable for being selected nine years running as one of the world’s most ethical companies.

As an insurance company, with a reputation for ethical behavior, Gallagher was particularly well-positioned to gain during the coronavirus pandemic scare. The company saw Q1 earnings of $1.83 per share, well above the $1.74 expectation, and also up 215% sequentially.

Deutsche Bank’s Phil Stefano sees AJG in position to continue growing, and upgrades his rating on the stock to a Buy. Supporting this, he writes, “We believe our margin expectation for Brokerage drives our Street high EPS estimates for the remainder of 2020 and 2021, with investors not fully appreciating the magnitude of the expense benefit impact to margins.”

Stefano’s price target backs up his Buy rating; at $120, it implies a 21% upside potential for the stock. (To watch Stefano’s track record, click here)

All in all, AJG has eight recent stock reviews, including 6 Buys and 2 Holds, giving the stock a consensus rating of Strong Buy. The stock is selling for $99.14, and the average price target of $108.38 indicates a possible 9% upside this year. (See AJG stock-price forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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Investors weren't exactly thrilled this week when dry bulk shipper Seanergy Maritime (SHIP) announced a deal to expand its cargo fleet by 10% by buying an 11th ship -- the soon-to-be-renamed M/V Goodship, a 177,536-ton deadweight Capesize cargo hauler that was built 15 years ago.

Priced at $11.4 million, the Goodship is expected to boost annual revenues at Seanergy by as much as $3.4 million annually (at current charter rates of $30,000 a day, and forward contract rates of $22,000 a day). Regardless, investors blanched at the cost of the deal -- or perhaps at the age of the ship -- and sent Seanergy stock tumbling 6% on Tuesday.

On Thursday, Maxim analyst Tate Sullivan responded to Seanergy's announcement by downgrading Seanergy stock.

As Sullivan explains in his note, Seanergy was already on record planning to use its estimated $40.9 million cash war chest to "capitalize on attractive opportunities at historically low asset values." The company's decision to spend its money on the 15-year-old M/V Goodship, however, was an acquisition of "an older ship than we expected," and a bit of a disappointment inasmuch as "older ships may have more unplanned downtime than newer ships" -- and thus contribute less to hoped-for revenue gains.

Nor is the Goodship purchase the only thing that has Sullivan worrying this week. On the one hand, yes, day rates on Capesize dry bulk vessels are looking shipshape these days. The $30,000 day rate Seanergy mentioned in its press release, for example, is about 3.5 times higher than the $8,481 a day charter rate that similar-sized ships were fetching as recently as Q1 2020.

On the other hand, though, Sullivan doesn't believe that these rich rates will last forever. To the contrary, because of the toll COVID-19 has taken, and is taking, and will take on global commerce, Sullivan predicts that "time charter equivalent," or "TCE" rates will tumble to about $18,652 a day in 2021, worse than the $20,961 a day that the analyst had previously forecast. As a result, the $43.2 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) that Seanergy may make in 2021, while certainly better than the $26.9 million that the analyst expects the company to earn in 2020, will also be less than the $44.9 million in EBITDA the analyst previously forecast for 2021.

Between the volatility in charter rates, the risk of COVID contracting demand for shipping, and the potential for Seanergy to continue to spend down its cash reserves (and Sullivan's worry that Seanergy might not spend the money buying the right ships), Sullivan is taking a more cautious approach to the stock, and retreating to port for awhile, to see which way the winds decide to blow.

Sullivan has decided to downgrade Seanergy stock from "buy" to "hold," and to entirely withdraw his prior price target of $4.80 a share for the stock.

Looking at the consensus breakdown, only one other analyst has thrown an opinion into the mix. Noble Financial's Poe Fratt rates SHIP a Buy, along with an $8.00 price target.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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