Barbie maker Mattel, Inc (NASDAQ:MAT), elf Beauty Inc (NYSE:ELF), Dutch Bros Inc (NYSE:BROS), AST SpaceMobile Inc (NASDAQ:ASTS), and Calvin Klein owner PVH Corp. (NYSE:PVH) were among 40 stock pick ideas in the mid-cap and small-cap space for 2005 from UBS.
Analysts at the Swiss bank were asked to suggested their best stock ideas among North American stocks valued under $10 billion market cap.
Of the 40 SMID-cap ideas, the average forecast return to the target price was 40%.
UBS flagged to its clients that SMID stocks prices have been under pressure due to rate uncertainty as they are typically more exposed to interest rates, with 46% of debt is floating for SMID versus 10% for large cap, plus regulatory reform and promised tariffs from the incoming Trump administration.
“Some of this uncertainty is priced into SMID caps as they trade one standard deviation below their ten-year average on a P/E basis,” said the note.
“Given the uncertain rate and policy backdrop, stock selection and strong fundamentals are critical.”
Some of the highest forecasted returns, of between 70% and 90% based on the target price and expected dividends, were flagged at biotech and health-related companies.
Three of the highest were Legend Biotech Corporation (NASDAQ:LEGN) (an early commercial biotech developing its Carvykti blood cancer drug that has shown best in class efficacy and has a co-development and co-commercialization agreement with Johnson & Johnson (NYSE:JNJ), and “we believe competitive concerns are overdone”), Surgery Partners Inc (operator of ambulatory surgery centers and surgical hospitals “not being given full credit for the sustainability of organic growth”) and BridgeBio Pharma Inc (a clinical-stage biotech focused on the development of therapeutics for genetic diseases, with “three upcoming pivotal readouts”).
As for Barbie maker Mattel, Inc (NASDAQ:MAT), US toy sales fell last year and Trump-related tariff worries are an overhang on the price as the toy industry has more than 80% exposure to China. But Mattel has less than 50% manufactured there and UBS analysts see further measures to reduce further exposure to China. For Mattel, less than 50% of global product is manufactured in China, but “we could see a more diversified portfolio out of Q4 and a nimble supply chain that navigated [a tough Christmas comparison period from the Barbie movie the year before] better than the market was expecting”.
In the thriving cosmetics industry, elf Beauty Inc (NYSE:ELF) is expected to make continued share gains in the core mass color cosmetics category, bolstered by “best-in-class innovation”, multi-year international expansion and “the necessary levers to drive profit growth”.
For Dutch Bros Inc (NYSE:BROS), the operator and franchisor of drive-thru shops selling “unique” cold & hot beverages “should maintain industry leading unit growth over the coming years” and the shares “represent a particularly attractive buying opportunity”.
In the space technology sector, AST SpaceMobile Inc (NASDAQ:ASTS) is a satellite communications company building a space-based cellular broadband network designed to work with everyday smartphones and provide coverage when out of range of terrestrial networks, with its first five commercial satellites launched in September and more coming in March and April. “While still a high-risk, high-reward type investment, we believe ASTS' broad list of partners lends credibility to its technology/funding path and we see further catalysts over the next twelve months,” analysts said.
As for Calvin Kelin and Tommy Hilfiger brand owner PVH Corp. (NYSE:PVH), analysts think it “has the brand strength and balance sheet to drive earnings growth over the long term, despite multiple macro headwinds”, with fashion industry research showing that its two main brands have a strong demand through the wholesale market.