The stock market has been trending higher, with the major indices recording notable gains. Year-to-date, the S&P 500 Index ($SPX), Nasdaq Composite ($NASX), and Dow Jones Industrial Average ($DOWI) have increased by 20.2%, 20.5%, and 11.3%, respectively. This bullish momentum is largely driven by growing investor confidence, fueled by optimism around artificial intelligence (AI) technology and cooling inflation.
Adding to the optimism, the Federal Reserve recently implemented a substantial 50-basis point cut in its benchmark lending rate. This move, which lowers borrowing costs, is expected to further stimulate economic activity, boost company profits, and increase consumer spending. Historically, such rate cuts have often resulted in higher stock prices, making the stock market more appealing to investors seeking growth opportunities.
Among the stocks poised to benefit from these favorable conditions, two standouts are MicroStrategy (MSTR) and Tidewater (TDW). These stocks have garnered unanimous “Strong Buy” ratings from analysts, highlighting their robust long-term growth potential. These companies are positioned to capitalize on favorable market conditions, making them compelling choices for investment.
Let’s explore why MSTR and TDW are two top-rated stocks worth considering at current levels.
#1. Microstrategy (MSTR)
MicroStrategy (MSTR), known for its AI-powered analytics and business intelligence software, has evolved into a unique company, combining technology with a strong Bitcoin (BTCUSD) investment strategy. Its software business generates significant cash flows, which, along with funds from equity and debt financing, are used to build its substantial Bitcoin holdings.
MSTR stock has outperformed the broader market considerably, with a year-to-date increase of 145.4%.
While software remains the core of MicroStrategy’s operations, the company has expanded into Bitcoin development. It’s actively creating Bitcoin-based applications, including those utilizing the Lightning Network and other blockchain technologies. These initiatives not only strengthen the Bitcoin ecosystem, but also have the potential to open new revenue streams for the company.
MicroStrategy’s software business continues to thrive, serving as its primary revenue generator. The company’s shift towards cloud offerings is fueling robust growth in its subscription services, driven by both existing customers transitioning to the cloud and new customer acquisitions. High customer renewal rates and strong subscription billings further highlight the health of its core business.
MicroStrategy is among the leading companies in terms of Bitcoin holdings, with approximately 226,500 Bitcoins in its portfolio. The company views Bitcoin as a valuable long-term asset, noting its limited supply. If Bitcoin adoption increases globally, MicroStrategy could see significant appreciation in the value of its holdings.
Wall Street analysts remain optimistic about MicroStrategy’s future, with all eight experts in coverage giving the stock a “Strong Buy” rating. Further, analysts’ average price target of $198.88 suggests a potential 28.6% upside from its current levels.
#2. Tidewater (TDW)
Tidewater (TDW) is a key player in the offshore oil and gas industry, owning and operating the largest fleet of Offshore Support Vessels (OSVs) worldwide. With a healthy international presence and a blue-chip customer base, Tidewater is well-positioned for growth. The company’s acquisition of 37 vessels from Solstad Offshore has further cemented its leadership in the market, providing a solid foundation for future expansion.
Over the past few years, Tidewater has focused on upgrading its fleet by selling off older, smaller vessels and acquiring newer, more advanced ones. This strategy positions the company to benefit from the improvement in the offshore oil and gas segment. With a healthier market cycle on the horizon, Tidewater is poised to command higher day rates, boost margins, and significantly increase cash flow.
Tidewater is also likely to benefit from the limited activity in new vessel construction and growing demand for OSVs. This creates favorable supply-demand dynamics, particularly over the medium to long term.
During the company’s Q2 earnings call, management highlighted that chartering activity for its Platform Supply Vessels (PSVs) and Anchor Handling Towing Supply Vessels (AHTS) is on the rise, especially in the Europe, Mediterranean, and Asia-Pacific regions. With preparations underway for increased activity through 2024 and 2025, tight vessel supply is expected to support strong day rates.
Tidewater will likely capitalize on this supply-constrained environment, driving earnings and generating robust free cash flow.
Wall Street analysts are optimistic about the energy company’s future, as reflected in their unanimous “Strong Buy” rating. The average price target for Tidewater is $105.67, implying 44% upside potential from current levels.
Conclusion
MicroStrategy and Tidewater stand out as two top-rated stocks with strong upside potential. Both companies have solid businesses and the ability to capitalize on favorable industry trends. For investors seeking “Strong Buy”-rated stocks with long-term growth potential, MSTR and TDW are worthy of consideration.
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
