Evercore ISI says scoop up these tax loss ‘leftovers’ that are trading cheaply at year-end

Published Mon, Nov 27 202311:09 AM ESTUpdated Mon, Nov 27 202311:55 AM EST

One investor's trash may be another's treasure, according to Evercore ISI. Analyst Julian Emanuel said investors should consider snapping up stocks that Evercore ISI calls "tax loss targets." That refers to securities that have set new lows since Oct. 27 — when small-cap stocks fell below their 2022 bear market low — despite having attractive valuations and growth profiles. Such stocks are being sold by investors looking to realize their losses and cut their 2023 tax bill before year-end. But that could also mean now is the right time to buy, especially if the stocks can rebound after trading at cheap levels. While there may not be as large of a basket as last year's, Emanuel said there's still a solid group for 2023, pointing to candidates such as Pfizer , Aptiv and Match Group as standouts on this year's list. "While December 2023 is not likely to have the 'fireworks' of a year ago, there will be no shortage of 'tax loss leftovers' from which to choose," he told clients. The 2023 list has a "pent up supply" of stocks that were unable to recover from their 2022 peaks, Emanuel said. CNBC Pro compiled the standouts and a handful of other names from Evercore ISI's list of tax-loss leftovers below: Pfizer has struggled as the Covid-19 pandemic has receded, with the stock down more than 40% in 2023. Late last month, the pharmaceutical company reported a wider loss per share for the third quarter than analysts expected, while revenue was also lower than what Wall Street anticipated. Yet, Wall Street sees a turnaround ahead for Pfizer. The average analyst has a buy rating and price target implying upside of about 32%, according to LSEG, formerly known as Refinitiv. Meanwhile, auto parts maker Aptiv has shed more than 10% in share value this year. The average analyst has a buy rating on the stock with a price target reflecting upside of nearly 39%, per LSEG. Piper Sandler upgraded shares to neutral from underweight earlier this month after Aptiv's post-earnings sell-off. The company beat consensus earnings and sales estimates of analysts polled by FactSet, while offering full-year guidance that only matched expectations. "We think it's time to temper our bearishness," said analyst Alexander Potter. "We still doubt Aptiv's ability to achieve long-term operating margin guidance of ~17%, but we also think investors are fretting too much about a delay in electric vehicle launch activity. Our estimates are moving downward to reflect a slower EV ramp, but not by enough to justify staying Underweight." Dating app stock Match has tumbled more than 22% this year. Analysts polled by LSEG are similarly optimistic looking ahead, with an average rating of buy and consensus price targets showing shares could climb nearly 33%. Match surpassed analysts' sales and earnings estimates when reporting its latest results late last month. But the owner of dating apps Tinder and OkCupid offered weak current-quarter revenue guidance, citing risk to revenue generated in Israel and other international weakness. Emanuel also listed Corteva as another potential leftover to buy. The agriculture stock has floundered in 2023 as the crop protection business has faced challenges, according to one analyst. Shares are down more than 20% on the year. But Wall Street is bullish when evaluating what the next 12 months should look like. In addition to holding an average buy rating, analysts polled by LSEG forecast a price target implying Corteva could rally nearly 26% over the next year. — CNBC's Michael Bloom contributed to this report.