5 Top Picks For January

Based on the latest share prices and the respective one-year price targets, the list of top five equity investment opportunities represents an average upside potential of ~22 percent, Imperial Capital’s Michael Derchin said in a report. All the stocks have Outperform ratings.

1. Ascent Capital

Analyst Jeff Kessler assigned a price target of $21 on Ascent Capital Group Inc ASCMA. He believes Ascent Capital continues to be operationally strong.

During its latest earnings conference, management reiterated that the company was not witnessing any slowdown due to cable or telecommunication companies entering the security space.

Management should be able to reduce the current attrition rate to below 13 percent by the second half of 2018, Kessler mentioned. He added, “We believe the company is likely to see continued increases in the take rates of wireless interactive services and ARPU. Self-generated leads by the dealer base have not been adversely affected as a result of the national media advertising from the competition.”

The company believes that the rebranding from Monitronics to MONI could highlight the leadership of the business in the smart home space.

2. Eldorado Resorts

Analyst Gregg Klein assigned a price target of $21 on Eldorado Resorts Inc ERI.

The company’s strong earnings growth since its acquisition of 50 percent of the Silver Legacy and the Circus Circus in Reno is “an excellent sign” for the upcoming acquisition of Isle of Capri Casinos, which is expected to close in Q2 2017, Klein mentioned.

“The company’s leverage remains low and we expect it to steadily deleverage following the ISLE acquisition through strong free cash flow,” the analyst commented. He added that Eldorado Resorts’ shares were trading at a lower multiple compared to peers and that the multiple should improve in 2017.

3. JetBlue Airways

Derchin assigned a price target of $31 on JetBlue Airways Corporation JBLU, saying the company has strong growth prospects.

JetBlue projected a 1.0–2.0 percent decline in RASM in Q4 2016, mainly due to stronger bookings. Management also provided details of its 2017 business plans, with a focus on the growth of the company’s core markets as well as the new initiatives for cost controls, which are expected to generate savings of $250–$300 million by 2020, Derchin stated.

4. MINDBODY

Analyst George Kelly assigned a price target of $25 on MINDBODY Inc MB. He mentioned that while the company’s valuation was currently below peers, it was poised to increase in 2017 due to accelerating revenue growth and positive EBITDA, which is likely to begin in Q1 of the year.

There could be upside to the current expectations from the “newly launched initiatives such as a marketing product and partner network. “Longer-term, we believe MB has the opportunity to earn a greater share of the $8.3 billion in transaction volume that flows through its platform,” Kelly added.

5. Varonis Systems

Analyst Michael Kim assigned a price target of $35 on Varonis Systems Inc VRNS. He believes the company possesses “early leadership in the data governance market” and seems to be benefiting from “expansion awareness of the need to rapidly detect abnormal user behavior and usual interactions to protect data and control access.”

Varonis Systems generated 34 percent year-over-year license revenue growth in Q3 2016, reflecting “strong demand for protection against critical risks such as ransomware and insider threats,” Kim said.

“We look for potential upside from expanding adoption of multiple products in the company’s security bundle, especially by larger organizations, with significant opportunities for add-on sales across various platforms,” the analyst wrote. He added that management’s guidance for Q4 2016 could prove conservative in view of Varonis Systems’ expanding pipeline and higher sales productivity.