November 3 is fast-approaching, and Wall Street is bracing for a Biden win. But what would a Democrat-controlled White House mean for the markets?Even though some investors think a Biden presidency would be detrimental to stocks and put pressure on the markets, Marko Kolanovic, the global head of macro quantitative and derivatives strategy at J.P. Morgan, begs to differ. In a recent note to clients, he writes that regardless of the election’s outcome, its conclusion will remove significant uncertainty.Additionally, the strategist believes the release of a COVID-19 vaccine as well as the reopening of the economy could serve as catalysts that spur a rotation into value stocks. “We think those two catalysts will be catalysts for value, and we think it's going to have legs… The decline of COVID should be a powerful catalyst for value,” Kolanovic commented.Taking Kolanovic’s outlook to heart, J.P. Morgan analysts are offering up concrete recommendations, pointing to three names that look especially compelling. As the firm’s analysts are forecasting at least 30% upside potential for each, we used TipRanks’ database to dig a bit deeper.Sapiens International (SPNS)First up we have Sapiens International, which provides software to the reinsurance, property and casualty, as well as the life and annuity insurance spaces. Based on its solid standing in the industry, J.P. Morgan has high hopes for this tech name.Writing for the firm, 5-star analyst Sterling Auty told clients, “Sapiens has carved out a lucrative segment of the insurance market, where it provides software and services to carriers ranging from the largest reinsurance companies down to tier 4-5 P&C carriers globally. The work that it has done to broaden the product portfolio over the last three years is paying off, and we expect a revenue mix shift toward more consistent and profitable subscription revenue. If this shift materializes, we would expect to see multiple expansion that delivers share price outperformance.”Unlike some of its competitors, SPNS works with P&C insurance companies while also focusing on life, annuity and reinsurance carriers. According to Auty, this increases the total addressable market to approximately $40 billion, compared to roughly $20 billion for P&C software providers.“The insurance vertical, and in particular P&C insurance, we believe, is the most attractive vertical segment for software providers based on the very high customer retention rates that create significant lifetime customer value,” Auty explained.It should be noted that instead of targeting the largest carriers in every region, the company is looking for where the appropriate openings are, market-by-market. On top of this, offering software, cloud solutions and “all of the needed services to create a turnkey single source vendor has helped Sapiens establish the beachhead in segments of the overall market,” in Auty’s opinion.When it comes to its financial position, from 2015-2019, revenue gained 16%, with it also ramping up in 2019 and 1H20. “We believe the intelligent segmentation of the market is going to allow Sapiens to increase the percentage of revenue coming from subscription software, making growth more durable and profitable moving forward,” Auty mentioned.In line with his optimistic approach, Auty kicked off his coverage by assigning an Overweight rating and $40 price target. This target brings the upside potential to 41%. (To watch Auty’s track record, click here)Turning to the rest of the Street, 2 Buys and 1 Hold were published in the last three months. So, SPNS is a Moderate Buy. The $37 average price target puts the upside potential at 30%. (See SPNS stock analysis on TipRanks)Academy Sports and Outdoors (ASO)Sporting goods and recreation retailer Academy Sports and Outdoors only recently IPO’d, but it has already attracted significant attention from the Street. J.P. Morgan is among those pounding the table on this name.Making its public market debut on October 1, shares were priced at $13, landing below the initial public offering range of between $15-$17. ASO raised a total of $203 million, 19% less than originally expected.Although this was not the ideal outcome, J.P. Morgan’s Christopher Horvers told clients, “In 2H20, we expect the combination of strong underlying trends and expected debt pay-down will light the path to the ASO turnaround story and drive upward revisions.”The 5-star analyst argues that the company should continue to benefit from “outdoor sports/healthy living engagement in a COVID-19 world,” with it enacting other initiatives to drive a turnaround. These initiatives, deemed “retail 101,” include assortment localization, merchandise planning, pricing and promotion, as well as space productivity efforts, and are “harmonizing with strides in customer engagement and share gains from the mall,” in Horvers’ opinion. On top of this, he believes that as ASO expands its e-commerce presence, it could see 150-200 basis points of comp tailwind per year.Going forward, Horvers anticipates a 100-basis point gross margin opportunity thanks to improved merchandising and inventory management. In addition, as ASO improves DC allocation, reorganizes the workforce, optimizes shipping and implements cross-dock, there could be another 100 basis points of gross margin tailwinds, according to the analyst. Currently, only 22% of the product is cross-docked.What’s more, ASO is set to pay down $600 million-plus of debt in Q4 and refinance its term loan, which Horvers notes will reduce interest expense and push it below 4x gross adjusted leverage. In terms of the valuation, ASO is currently trading at only 4.6x the analyst’s 2021 EV/EBITDA estimate, making it attractive.Everything that ASO has going for it convinced Horvers to initiate coverage with an Overweight rating. In addition to the call, he set a $21 price target, suggesting 41% upside potential. (To watch Horvers’ track record, click here)Are other analysts in agreement? They are. Only Buy ratings, 7 to be exact, have been issued in the last three months. Therefore, the message is clear: ASO is a Strong Buy. Given the $19.58 average price target, shares could surge 32% in the next year. (See ASO stock analysis on TipRanks)Mission Produce (AVO)As an advanced avocado network, Mission Produce is one of the top players in the avocado game, with it sourcing, producing and distributing fresh avocados to customers in over 25 countries. Like ASO, this name also recently began trading on the public market, and has scored a thumbs up from J.P. Morgan.Covering the stock for the firm, analyst Thomas Palmer wrote in a recent note to clients, “We see a long runway of EBITDA growth ahead, driven primarily by distribution-driven volume and a higher percentage of avocados sourced from company-owned farms (which carry significantly higher margins than third-party sourcing).”Part of the analyst’s bullish thesis is related to the fact that AVO is a “worldwide leader in avocado distribution,” with it distributing 596 million pounds of avocados in the four quarters ended July 2020 and averaging 12.5% volume growth over the past ten years, versus the industry’s 9%. Additionally, the company boasts margin-accretive farming operations in Peru that supplied 11% of its avocado distribution volume in FY19.Palmer also points out that U.S. Hass avocado consumption has increased at an 8% CAGR over the past decade, according to the Hass Avocado Board. This growth has been brought on by both USDA dietary guidelines, which encourage the consumption of good fats and fiber, and demographic trends.On top of this, Palmer believes volume growth could drive EBITDA expansion. “AVO’s volume growth over the past decade has been driven by its industry-leading (and expanding) network of distribution and ripening centers and its diverse sourcing model (two countries of origin at all times of the year),” he stated.To this end, Palmer estimates that for distribution, high single-digit volume growth, roughly 8-10% per year, and a stable gross profit per pound are on tap. As for company-owned farms, he expects production to increase by 22% in FY20 and 12% in FY21 and FY22, due to improved yields. “Per our model, Mission-farmed avocados generate four times higher gross profit per pound than externally sourced avocados,” he added.When it comes to the valuation, Palmer also likes what he’s seeing. “We think the current valuation of less than 9x FY22E EV/EBITDA presents a compelling entry point, especially when considering its valuation excludes (a) the value of AVO’s equity investment earnings (which are profitable), and (b) investments in farming operations that will not contribute to earnings for several years,” he explained.It should come as no surprise, then, that Palmer joined the bulls. In addition to initiating coverage with an Overweight rating, he put an $18 price target on the stock. Investors could be pocketing a gain of 36%, should this target be met in the twelve months ahead. (To watch Palmer’s track record, click here)Judging by the consensus breakdown, opinions are anything but mixed. With 5 Buys and no Holds or Sells assigned in the last three months, the word on the Street is that AVO is a Strong Buy. At $17.40, the average price target implies 32% upside potential. (See AVO stock analysis 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.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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